Recession Restores Confidence in Student Housing

Last year, distance learning stunted student housing activity—but the economic recession is restoring confidence in the asset class. Recessions historically drive student housing demand as more young people elect to continue with school rather than entering the workforce. As schools reopen, student housing demand is returning and restoring confidence in the asset class.

Pierce Education Properties is one investor that is bullish on the asset class. The company never lost confidence in student housing, despite the market disruption. Last year, the firm acquired $100 million in student housing assets, and it plans to remain a net buyer again in 2021. “The pandemic has reinforced the recession-resistant nature of the asset class and has also demonstrated that student housing can succeed even when feeder universities are imperiled,” Frederick W. Pierce, president and CEO, tells GlobeSt.com. “While overall university enrollments were down 2.5% in academic year 2020-21 according to National Student Clearinghouse, enrollments at four-year public universities were level.”

This year, the firm will focus on core, core-plus and value-add student housing properties near top tier universities. Specifically, it will focus on properties with 20,000 or more undergraduates with a Power Five football conference or Group of Five football conference. “The only operators who were hit hard during the pandemic either had properties at second tier universities where enrollments continue to decline or had on-campus student housing where they were forced by universities to release students from housing contracts and send them home or reduce occupancy in AY 2020-21,” he says. “Off-campus student housing did not release residents from leases and the performance was consistently strong irrespective of course delivery method by the university.”

While recessions are typically a driver of student housing activity, this recession is unlike others. Remote work models are being adopted in offices, and it stands to reason that distance learning could also become more common, but Pierce doesn’t expect it. “While most every university in America pivoted from in-person to 100% on-line course delivery following declaration of the pandemic in Spring 2020, according to an ongoing poll by The Chronicle of Higher Education virtually every university that has declared course delivery intentions for AY 2021-22 has indicated courses will be substantially in person,” says Pierce. “Notably, the universities who were the most closed-down in AY 2020-21 were amongst the first to declare plans for substantially in-person course delivery this fall. This is driven by the fact that students want in-person course delivery.”

An April 2020 survey by SimpsonScarborough underscored those trends, showing that 63% of college students say online instruction is worse than in-person instruction and only 5% believe it is better. “Higher education is also about the entire college in-person experience and not just course delivery,” says Pierce. “College students want to live and be at school.”