Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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CCIM.COM September | October 2017 31 Spaces Images 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. 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 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." 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, GIC Canada Pension Scion Group Harrison Street Mapletree GSA Group Brookfield Campus Advantage Temasek Saban Capital 2.59 1.94 1.85 1.28 0.71 0.64 0.63 0.62 0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 $2.84 Top Global Investors $ billions Source: Real Capital Analytics investment data from January 2016 to March 2017