Commercial Investment Real Estate September/October 2017 | Page 33
Big
investors continue to find
higher return on investment in student housing
than multifamily or office properties. For example,
Singapore’s sovereign wealth fund recorded $16.2
billion of student housing purchases in 2016 and an
additional $3.3 billion of transactions in Q1 2017,
according to Real Capital Analytics.
“Student housing is a whole different world than
residences for families or seniors,” says Will Baker,
senior vice president and managing director at
Walker & Dunlop in Birmingham, Ala. “We look
at each college campus individually and evaluate
the trends, such as enrollment growth, competition
for student housing on- and off-campus, and which
students are required to live on campus.”
Currently, Baker foresees favorable conditions
for financing student housing. In 2016, Walker
& Dunlop lent $1.6 billion for student housing
developments.
However, he expects a decrease in supply after
2017, based on more restrictive construction financ-
ing terms. While Baker doesn’t believe student hous-
ing is recession-proof, he calls it “recession resistant.”
Attracted by student housing’s stability, other
top global investors in student housing include
GIC, Canada Pension, Scion Group, and Campus
Advantage. Nationally, higher numbers of interna-
tional students flowing into U.S. colleges continue
to fuel optimism. Students from China and India
top the list, according to Oxford Economics.
next level of growth will be for more moderately
priced student housing, according to Sonny Gins-
berg, co-founder of Ginsberg Jacobs LLC in Chi-
cago. “There’s room for growth in next 20 percent
of student housing,” he says. “The saturation level
differs in this space for students with more limited
housing budgets.”
Top Global Investors
$ billions
$2.84
GIC
2.59
Canada Pension
1.94
Scion Group
1.85
Harrison Street
1.28
Mapletree
0.71
GSA Group
Brookfield 0.64
Campus Advantage 0.63
Temasek 0.62
0.5
Saban Capital
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Source: Real Capital Analytics investment data from January 2016 to March 2017
Sunbelt Rising
Nationally, most new units are springing up off-
campus, in mixed-use development high rises with
retail on the ground level. The most desirable loca-
tions are close enough for students to walk to cam-
pus or commute quickly by light rail.
Boosts in student enrollment drive student hous-
ing, with the heaviest activity in the Sunbelt states,
according to Scott Streiff, executive vice president
at JLL Capital Markets in St. Paul, Minn. “During
the last 20 years, the Sunbelt states have built triple
the number of new student housing units compared
to the rest of the U.S.,” says Streiff, who specializes
in multifamily and student housing.
Streiff points to data from AxioMetrics that show
about 450,000 student housing units have been con-
structed in the south and southeastern U.S. during
the past two decades. Securing second place, the
Midwest boasts 150,000 new student housing units.
While most construction has been in high-ame-
nity student housing during the past five years, the
CCIM.COM
The cycle for high-amenity student housing has
been hot for several years. Signaling a slight slow-
down, underwriting for loans is getting tighter, and
new construction requires more equity now than a
few years ago, says Ginsberg, who represents lenders
in student housing and also conducts retail leasing
for CA Ventures.
Small Investors Beware
While cities like Boston and Chicago are home to
multiple universities, secondary and tertiary mar-
kets serve as hubs for most campuses and experi-
ence higher demand for student housing.
“College towns have become tech centers and
have turned into year-round communities in smaller
markets, especially in the Midwest,” Ginsberg says.
While student housing holds continued luster
for investors, it is not easy money, according to
Jim Tansey, CCIM, managing broker of Lock-
ard Commercial in Coralville, Iowa. Currently,
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