Overbuilding may still be challenging the performance of traditional multifamily properties, but the student housing sector is thriving as full-time student enrollment at tier-one, four-year schools uses up more of the inventory of beds.
Among the top 20 universities by inventory, schools average 1.34 students for every bed, indicating a shortage in student housing and a justification for premium pricing, according to a study from commercial real estate finance firm Walker and Dunlop, leading to strong rent growth in the past three years.
Driving the trend has been an increase in enrollment at some of the largest schools in the country.
Though smaller schools, including community colleges and trade schools, have struggled to recover after COVID-19 pandemic shutdowns and are experiencing headline-grabbing declines in enrollment, Walker and Dunlop said large top-tier universities have seen tremendous growth in matriculation and new freshman applications, including a return of international students.
These factors have bolstered rent growth in the sector, even at the three universities among the top 20 where supply outpaces enrollment. At the University of Florida, the most supplied school in the nation, rents have grown 2.4% over the past year, according to CoStar data, even with an enrollment-to-beds ratio of 0.87.
At Georgia Tech, which had the lowest enrollment-to-beds ratio at 0.61, rents have risen 1.2% over the same time. And at Florida State University, where beds outnumber students by a ratio of 0.85, rents have grown 4.5% on a yearly basis.
Despite the positive performance, Walker and Dunlop noted that student housing has not been immune to the macroeconomic factors that have affected commercial real estate writ large. Transaction volume is down, dropping 71 percent in 2023 to $5.7 billion, with most transactions financed by private capital or loans that carried personal guarantees.