There is an increasing demand for student housing, and inventory is not remotely keeping pace. That means that there is an incredible opportunity for investors to fill the gap. Students need to live somewhere, and if there is not enough room in the college dorms, they are going to be forced to seek housing off-campus. Investing in college town real estate has historically been a winning investment, and with demand at an all time high, things should only get better. For more on this, continue reading the following article from National Real Estate Investor.
A lot more college students and just a few more beds in college dormitories adds up to a huge shortage of student housing, according to “Surging Student Populations Stress On-Campus Housing,” a new white paper.
“States aren’t keeping up with building housing for the students that they’ve got,” says Jim Arbury, vice president of student housing for the National Student Housing Council, a part of the Washington D.C.-based trade group, the National Multi Housing Council (NMHC). “That presents a huge opportunity for private developers.”
The report counts the number of students enrolled at colleges and universities for the 2009-2010 academic year state by state. NMHC compares that number to the number of dormitory beds available, the number of students enrolled ten years ago and the percent of student that used to live on campus ten years ago. Based on those numbers NMHC figures that almost every state in the U.S. is short thousands of dormitory beds.
How long will this situation last? If a developer starts to build a new student housing property today, will students be lining up to move in two or three years from now, when the property is finally finished? Arbury points out the state budgets for education—and dormitory construction—are shrinking, not growing. That means little new supply of student housing, while demand continues to be very, very strong.
Claim up to $26,000 per W2 Employee
- Billions of dollars in funding available
- Funds are available to U.S. Businesses NOW
- This is not a loan. These tax credits do not need to be repaid
Strong demographics
“All of the numbers show growth in enrollment,” says Arbury. Every state posted larger total numbers of students enrolled in colleges and universities at the start of the 2009-2010 academic year compared to 1999-2000. That’s only going to continue—more than 3 million high school students are expected to graduate every year until the 2018-2019 academic year.
Colleges are building dormitories—but not quickly enough to fill the demand. Nationally, the number of students who lived in on-campus dorms grew 21.4 percent from 2000 to 2010. According to a survey published in the May 2010 issue of Living on Campus, a special report from College Planning & Management magazine, 42 percent of campus housing officers said they had too little residence hall space.
Looking to the future, 30 percent of respondents to the NMHC survey currently had projects underway to increase the number of beds on campus, while an additional 26 percent said there were plans in the works to grow on-campus bed counts within the following five years. “However, budgeting constraints continue to be a major hurdle in pushing new construction and renovation projects forward,” according to the report.
“Clearly universities have not kept up,” says Arbury. “There are a number of states where there is a big gap.” He expects that gap to continue to widen in the coming years.
Market by market
There are a few exceptions—schools that are keeping up with demand for on-campus housing. Take California, where enrollment increased by almost 40 percent over the 10 years covered by the report. The number of dormitory beds available also increased sharply from about 127,000 in 1999-2000 to 173,000 10 years later. That makes California one of a handful of states where schools could continue to house the same proportion of student on campus as they did in the late 1990s. A few other populous states with big schools, such as Massachusetts and Florida, also kept up with the demand for housing on-campus even as their enrollment swelled.
But most states fell far behind, leaving off-campus housing properties to take up the slack. That includes major states like Texas, where dormitories were 15,000 beds short of NMHC’s projected demand, or the District of Columbia, where schools were 28,000 beds short, according to the report. That’s means thousands of students above the usual proportion had to find housing off-campus.
When developers and investors consider student housing, they must pay close attention to their particular market to make sure they choose a school with strong demand and little supply in the pipeline. These student housing markets are also very small geographically. Students often want to live within easy walking distance of campus, so it’s easy to miss the market by just a few blocks.
“Every school is unique,” says Arbury.
This article was republished with permission from National Real Estate Investor.
