Demographics Means Student Housing Will Remain A Solid Bet

Despite tepid growth at best in average enrollment figures for post-secondary schools, the US institutional student housing market is poised to remain a steady option for real estate investors, according to a new report from the National Multifamily Housing Council. 

NMHC estimates the student housing market will grow from 8.5 million beds last year to 9.2 million by 2031, accounting for an average annual increase of 0.8% per year, while enrollment in post-secondary schools will increase annually by 1.1% on average. Most of that growth, according to NMHC, will occur in public four-year universities.  Demand in public four-year universities will likely be concentrated on the undergraduate side, while private colleges will see demand focus on graduate student housing.

“Even in the face of a more challenging demographic environment, there will still be pockets of opportunity for the more discerning investor,” the report notes. 

NMHC predicts that undergraduate beds at public four-year institutions will increase by 448,000 from 2020 through 2031, while beds for graduate students will increase by about 112,000. At private four‐year universities, NMHC predicts demand for new beds will primarily come from graduate programs, which will call for another 96,000 beds. At public two‐year universities, “which have experienced more volatile growth than their four‐year counterparts,” NMHC expects a need for another 79,000 beds during that time period. 

Texas is likely to lead college-aged population growth, with Nevada and Washington lagging far behind. Conversely, the college-aged population in New England continues to decline, “which means high quality schools in this region will need to continue to draw from a wide geographic area, and lower quality schools in the region may struggle with a shrinking population,” the report states. Hispanic students are also predicted to account for two‐thirds of enrollment growth through 2031. 

Institutional student housing operators are also likely to benefit from a predicted surge in post‐baccalaureate enrollment. In the near term, off‐campus properties with better bed‐bath parity and single occupancy rooms, will continue to enjoy booming demand as colleges de-densify on-campus housing.