Developer Core Spaces is betting big on off-campus student housing, with plans for nearly 10,000 beds in three U.S. markets serving as the latest sign that national demand for the property type is recovering from a pandemic-era downturn.

Student housing needs have been steadily increasing in the wake of campus shutdowns that lasted from the 2020 spring semester through the fall of 2021, according to a report from lending giant Fannie Mae.

While pre-leasing rates and some other indicators edged lower over the 2023-2024 school year compared to the end of the 2022-2023 term, the performance of student housing is running above historical averages, Fannie Mae said. At the same time, student housing development, after adding nearly 60,000 beds in 2016, totaled less than 40,000 beds for three consecutive school years. At the end of the school year last month, Fannie Mae estimated there were just 32,000 new beds and by 2025 expects that number to fall to nearly 26,000.

Student housing has caught the eye of investors, with KKR agreeing to buy a 19-property portfolio from Blackstone for $1.64 billion in April. This month, Landmark Properties and Peninsula U.S. acquired a 67-acre site for an 826-bed development in Columbia, South Carolina. That deal followed Landmark's purchase of Pointe on Rio in June, a 321-bed complex blocks from the University of Texas. Pope & Land Real Estate registered a June purchase of 330 beds in Midtown Atlanta near Georgia Tech.

“Investors see the stability of student housing as an excellent placement alternative to traditional multifamily properties," said Jay Lybik, national director of multifamily analytics at CoStar. That multifamily instability stems in part because of oversupply across Sun Belt markets, he said.

Amid this backdrop, Core Spaces has been developing off-campus student housing at a steady pace, in hopes that the past slowing in the creation of student housing will get leasing rates to eventually climb back up. The company is embarking on some new projects that are expected to bring its total beds under development to roughly 9,800 in Tampa, Florida; Madison, Wisconsin; and Knoxville, Tennessee.

The company’s Tampa project, in collaboration with RD Management, is expected to include 3,000 beds along with 150 traditional apartments and 10,000 square feet of retail space. Construction on the first phase of development is expected to begin in the fall with completion scheduled for 2027.

The new beds will be added to the existing Core Spaces portfolio in Tampa that includes 890 student beds from a 2022 project and the management of two other properties with a combined 1,700 beds. In Madison, where the company hopes to develop more than 7,000 beds, Core Spaces expects to complete three projects totaling nearly 4,000 student beds with completion dates ranging from 2026 to 2028.

Plans for its West Johnson & North Bassett Street project call for a 12-story tower in downtown Madison that would include 235 units with 910 student beds, along with 20,000 square feet of retail space. Also in Madison, the 15-story West Johnson & North Broom Street is expected to open 474 units and include 1,723 beds along with about 4,000 square feet of retail space.

Core Spaces’ third project in Madison, North Frances and West Johnson, is expected to rise 15 stories and include 392 units with 1,330 beds.

"With UW-Madison's enrollment on the rise, there's a pressing need for more housing,” Austin Pagnotta, director of acquisitions at Core Spaces, said in a statement. “We saw an opportunity to not only meet this demand by bringing thousands of new beds to the market but also to provide high-quality, centrally located housing that seamlessly integrates with Madison's local fabric."

The trio of projects adds to Core Spaces’ existing portfolio in Madison that includes Oliv Madison, which completed construction in June.

Core Spaces is developing another 2,800 beds in Knoxville with its partner Schenk Realty along Cumberland Avenue. That project is expected to include two 10-story towers along with an additional 7-story building and an estimated 30,000 square feet of retail space.

These projects will join other Core Spaces student housing developments announced in June, including a luxury high-rise in Ann Arbor, Michigan, that is expected to include 639 beds across 202 units near the University of Michigan. Core Spaces already owns or operates nearly 39,000 student beds across its portfolio and has a pipeline of projects in various stages of development totaling an additional 43,000 beds.

Given the supply and demand imbalance in student housing cited by Fannie Mae, analysts expect the sector to outperform traditional multifamily properties. According to a report from real estate advisory firm Walker & Dunlop, among the top 20 universities by student housing inventory, schools average 1.34 students for every current bed available, providing opportunities for premium rents, the firm said.

"Every student housing market is different, but the trend coming out of COVID is stronger enrollment growth" at the biggest universities than at "smaller liberal arts schools, coupled with a significant pullback in supply since 2020," Will Baker, senior managing director at Walker & Dunlop, told CoStar News. "Part of the reason was difficulty capitalizing deals coming out of COVID, but also a result of a general pullback in supply in most markets in the years leading up to COVID after a gluttony of supply hit most markets between 2014 and 2019."

In the markets where Core Spaces plans its newest developments, universities tend to outperform that average. At the University of Tennessee, Knoxville, Walker & Dunlop measured 1.79 students per bed. The University of Wisconsin at Madison measured 1.38 students per bed, according to the study. And the University of Tampa registered 1.52 full-time enrollees per bed.

The student-to-bed ratio at the University of Michigan was the greatest among these markets at 1.99, or nearly twice as many students per bed.

Walker & Dunlop pinned much of the increased demand for student housing on increased enrollment numbers at some of the largest schools in the country. Also contributing to the rise is a realization among colleges and universities that premier off-campus student housing that often includes high-end amenities is a competitive advantage for recruiting programs as students seek to integrate campus life into their housing options.