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Global Student Housing Market: Industry Overview & Analysis
Student Housing News

Global Student Housing Market: Industry Overview & Analysis

Student Housing Market: Industry Overview

Student Housing News

Apr 18, 2024
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Apr 18, 2024

The student housing market has rapidly evolved and experienced significant growth owing to a high investment influx from key players operating in the industry. The United Kingdom (UK), the United States of America (US) and Australia have constantly attracted a diverse pool of students from across the world. This has been possible with the introduction of integrated academic courses and enhanced standards of educational institutions for higher education.

As governments worldwide intensify their efforts to attract international students, a notable surge in the number of students relocating to global education hubs has been observed, increasing the overall demand for student housing. This comprehensive blog aims to analyse the student housing market and provide readers with an overview of this market. Get an in-depth view into growth factors, major property players, portfolio acquisitions and high-demand markets for student housing.

Student Housing Market Analysis & Overview

The demand for student housing has continued to outstrip the supply, thereby making this sector the most in-demand commercial real estate asset class. The global student housing market size was valued at $11 billion in 2021 and is projected to reach a valuation of $18.71 billion by 2032 at a CAGR of 4.95%, according to Business Research Insights.

Traditionally, student housing existed quite differently as compared to today. Due to low mobility rates and flexibility, student living was limited to boarding homes, university accommodations, room rentals or staying with a relative. With the rise in student demand, more convenient housing options were introduced.

As the trend of migrating to different countries like the UK, US, Australia, etc., for higher education picked up the pace, this industry began to develop, giving rise to various property types. These include purpose-built student accommodations (PBSA), Houses in Multiple Occupations (HMO) or Multifamily, Build-to-Rent (BTR) and University Accommodations. The popular student living types relevant in this realm today are as follows:

  1. Purpose-Built Student Accommodation: These are modern residences specifically designed to meet the needs of students, offering high-end amenities like study areas and communal spaces.
  2. House in Multiple Occupation (HMO) or Multifamily Homes: These are shared houses or apartment buildings where multiple tenants rent individual rooms, often popular among students and young professionals due to their affordability.
  3. Build-to-Rent: Specifically constructed to rent, these residential properties provide tenants with long-term, high-quality housing options and amenities like on-site management and maintenance.
  4. University accommodations: These are housing options provided directly by universities, ranging from dormitories to on-campus apartments. These are convenient stays, fostering a strong sense of community among students.

Global Key Student Housing Players

The global student housing market has been shaped by various property operators, developers, universities, and government institutions. The major student housing operators including American Campus Communities (US), Greystar (US, UK), Unite Students (US), and Scape (Aus) are among the top global players, offering quality housing and leading innovation in this sector. With collaborative efforts, approximately 61,386 beds were added globally in 214 new PBSA building projects across 121 cities in 2023 (Source: BONARD).

Property operators around the world adjust rental prices as per the dynamic student demand. While this may appear volatile from a bird's eye view, it helps maintain revenue levels stable. This flexibility is particularly advantageous for the student housing market from an industry lens, especially allowing operators the chance to capture higher occupancies.

Student Housing Operators & Developers in the UK

Key players in the UK student housing market include Unite Group, IQ Student Accommodation, GIC and Greystar. These key student housing developers and owners collaborate to form various joint ventures, enabling investors to access a lucrative market that is open to scalability. The UK Greystar currently maintains an international student portfolio comprising 50,000 beds across the UK and Europe.

Student Housing Operators & Developers in the USA

The biggest US student housing operators, American Campus Communities, The Scion Group, Greystar Student Living, Cardinal Group, Harrison Street, and Asset Living, offer on-campus and off-campus accommodations for students in this country.

In the US, the top five active student housing developers currently include Landmark Properties, Core Spaces, Peninsula Investments, Harrison Street, and Subtext, projected to add a combined portfolio of 113,118 beds by 2026. Whereas, the top 25 developers aim to provide 251,921 beds during the same period, according to Student Housing Business.

Student Housing Operators & Developers in Australia

Campus Living Villages, UniLodge, Scape, Yugo, Iglu and others are the major players in the student housing market. According to Beyond Beds, there are currently 60,000 on-campus beds in 42 universities across the country. On the other hand, major PBSA players, along with some regional owners, manage approximately 90,000 beds in Australia. With a majority of beds, totalling 540,000 situated off-campus, international students from various source countries make up the majority occupancy share in these accommodations.

Government Influence & Regulatory Bodies

Regulations are essential for upholding the safety and quality standards of the student housing market as a whole. They assist in ensuring the safety of tenants by landlords providing suitable living conditions. Following these rules gives both students and landlords clarity on their rights and responsibilities, further easing operations and shaping the student housing market.

The UK regulatory landscape has continued to monitor the safety of all residential structures taller than 11 meters, including student accommodations, which has gradually evolved over the years. For instance, the introduction of policy changes to legislation in the Fire Safety Act 2021, Building Safety Act, etc., have highlighted safe living conditions for this tenant group.

Factors Contributing to Market Growth

The student housing market has experienced remarkable growth over the years. Market expansion has been possible due to a surge in rising demand for suitable accommodation in major student hubs. Evolving regulatory frameworks and favourable investment trends highlight the sector's potential for continued expansion in the coming years. Let's explore some key factors driving the growth of the student accommodation market:

1. Rapid international student enrollments: The higher education markets in the UK, US, Australia, and Canada continue to skyrocket the demand for student housing from international migrants. In the UK, 2,226,580 full-time (FT) students were enrolled in HE as of 2023, whereas the US recorded approximately 19M+ FT students. According to Colliers, Edinburgh accounted for the highest proportion of overseas students, residing in key UK cities at 39.4%.

2. Heightened demand: Increasing enrollment numbers and the trend of higher education have heightened the demand for suitable housing in major student cities globally. Increasing demand for accommodations in the student housing market signifies the stability of this sector, attracting investors to capitalise on long-term return opportunities. The supply crunch for student housing further opens doors for more developers to tap into opportunities in low-supply regions.

For instance, the number of full-time students residing in private-sector halls, including private PBSA schemes in the UK, has increased by 70.3% in 2023. Moreover, according to Cushman & Wakefield, the student-to-bed ratio (SBR) is expected to grow from 2.12:1 in 2021-22 to 2.24:1 by 2030-31, highlighting a high-demand low-supply market in the upcoming years.

3. Recession-proof: The student housing market remains resilient during economic downturns since it is a recession-proof industry unaffected by volatile market conditions. Students travelling from major source countries like China and India add to international student mobility, making this business model advantageous for investors. Counter-cyclical demand is further projected to stabilise revenue generation rates for operators.

Student demand is expected to remain stable despite policy changes like dependent visas in the UK. In the US, the University of Wisconsin, Madison, and the University of Texas, Austin, are expected to reach peak growth in 2024 owing to the quality of education and high living standards in these prime student cities.

4. Steady rental growth: The average monthly rent in Continental Europe, the UK, and Canada rapidly increased owing to improved PBSA projects and a more organised private rented sector. Observing a 98% occupancy rate, the UK student housing market experienced a 12.9% Y.o.Y. rental increase in 2023 as compared to 2022, standing with an average rent of €1,370. Canada, on the other hand, witnessed a significant 15.4% increase in rental rates, surpassing an average rent of €1,071 for private PBSAs (Source: BONARD).

Average Monthly Rent of Private Student Residences: 2023 vs 2022
In 2023, the student housing market observed positive average rental growth rates across key regions including Europe, the UK, and Canada.

Investment Outlook & Global Interest

Student housing has become one of the most preferred assets for investors in recent times. In the UK, increasing interest rates have impacted overall transaction volumes. Despite this, investor interest has risen in recent months, possibly due to the Bank of England's policy rate having peaked at 5.25% in September 2023. The US student housing market has also observed increased inventor activities, especially through public-private partnerships.

  • Investors globally are constantly looking for stable returns and diversification in the student housing market to capture greater ROIs. Institutional investors, private equity firms, and real estate investment trusts (REITs) are directing funds toward student housing developments, attracted by their potential for long-term income growth.
  • According to ICEF Monitor, global investment in student housing reached a record high in transaction volumes at an annualised total of $18.9 billion in 2022. High transaction and sales volumes signify robust investor interest, resulting in increased capital inflow and expansion opportunities.
  • In the UK, despite the undersupply of PBSA beds, transaction activity in 2023 remained relatively subdued compared to previous years. However, transaction activity is expected to increase in 2024 as investors get more confidence in the cost of debt, pricing, and the overall market outlook.
  • Due to the growing number of students, the UK student housing market is expected to observe an average of 10% rent increases in 2024–2025. Despite the investment rebound in 2023 after a record-breaking year in 2022, the student housing sector is poised to gain momentum into 2024 and outperform other UK real estate residential subsectors.
Average Yield % by Sector in UK
The student housing sector in real estate has consistently observed an increase in average yield percentages as compared to other sectors.
  • Over the years, the London student accommodation market has observed average rental yields of 6% to 7%, whereas other UK cities have observed a 3.5% to 6.3% average. In terms of rental yield, in Q2 2023, the student housing market rental yield stood at 5% whereas the rental growth of premium schemes stood at 12.5% (Source: Cushman & Wakefield Report).
  • With an average of 9.4% rental growth observed for the private sector in the UK, investor interest has peaked due to favourable conditions and high returns. Moreover, the average rental growth for direct-let beds in the UK has remained poised, reaching 10.42% in 2023, according to a C&W Report. This trend continues to draw in new capital and bolster investor confidence.
  • The US, on the other hand, recorded the highest amount of student housing sales value in theSouthwest region, with high investor activity in California. According to amber’s US International Student Housing Report, a total of 57 student housing transactions were recorded in Q2 2023 for 5256 units/rooms, with Florida State University beds. Many players are opting to capitalise on strong leasing activity and boost revenue numbers with these positive market conditions.

Student Housing Market Trends in 2024

Growth trends, including digital integration, value-for-money amenities, ESG impact, and more, are shaping the future of the student housing market. The brand value of big players in the industry is also influencing the way students perceive housing, further shaping their expectations of their homes. Here are some thought-provoking student accommodation market trends shaping the future of modern living in 2024:

1. Smart technology & modern amenities paving the way

Students are often willing to pay a premium for smart tech and modern amenities in their abodes. Common facilities like high-speed Wi-Fi, high-tech security systems, video doorbells and smart lighting are valued higher for students than other features including TV/cinema rooms or games areas. The trend of smart tech is expected to continue its presence and role in shaping the future of modern living.

2. Off-campus housing on the rise

Diverse student housing options, high-end amenities and inclusive utility bills are the factors students consider before booking their accommodation. In recent times, students have been more open to exploring off-campus housing options over traditional housing setups like dorms, further shaping the student housing market. With limited on-campus options available, combined with evolving student preferences favouring privacy and modern amenities, there has been a rise in demand for off-campus housing. This dynamic shift highlights the need for comfortable living environments through diverse property types that cater to the on-ground expectations of students for modern and tech-savvy accommodations.

3. Mixed-use projects for both living and learning

New types of student housing options are mirroring and adapting to off-campus living styles. Modern abodes now offer an urban aesthetic combined with a plethora of modern amenities, essential to meet the academic, social, and daily needs of students. Ranging from on-site convenience stores to in-house coffee shops, mixed-use student housing projects are on the rise with changing student preferences.

4. Sustainability footprint getting bigger & wider

Sustainability is an integral trend for the student housing market and the environment. According to the Global Student Living Index, a majority 87% of students responded positively in a survey to integrating sustainable efforts in student accommodations. Nowadays, students prefer staying closer to universities for convenience while also considering greener transport options for commuting from their accommodation to the university. The rise of transport options like biking, walking, taking the bus, or carpooling further highlights the sustainability footprint in student housing.

How to Address the Student Housing Crisis?

The top regions with high student demand also observe a disparity in the supply of beds. Countries including the UK, the US, and Australia currently have a student-to-bed ratio of 2:1, 4:1, and 10:1, respectively. The only real long-term solution to the supply crunch challenge is to increase the availability of affordable homes with close collaboration of key stakeholders.

It is imperative for colleges and universities to come together to address the issue of student housing shortage. Strategic collaboration between the local authorities and government bodies becomes essential in the student housing market. Colleges and universities can adopt the following strategies to support students dealing with housing shortages:

Collaboration Between Universities & Private Players With PPP

Collaboration between universities and private student housing providers is an integral part of solving the student housing crisis. In general, the collaboration between academic institutions and real estate management companies is essential as it increases housing affordability and quality, diversifies available options, and encourages innovation in the student housing market.

More off-campus housing projects through public-private partnerships (PPP or P3) have emerged to meet the high demand. Moreover, with more PPP efforts, the PBSA sector is expected to continue to outperform other residential and commercial property markets, owing to high investment volumes and strong rental growth.

For instance, American Campus Communities, owned by Blackstone REIT, has successfully executed more than 115 public-private partnership transactions with 65 colleges & universities since its inception three decades ago (Source: Amber's US International Student Housing Annual Report 2023-24).

Active Collaboration of Universities & Developers

The solution to the housing problem also lies in the active collaboration of key players like universities and developers. Top developers in the student housing market, including Landmark Properties, Core Spaces, Peninsula Investments, Harrison Street and others, make up the maximum share of global student housing projects.

For instance, as per Student Housing Business Magazine 2023, the top 25 industry developers have planned the delivery of 251,921 new beds by Fall 2026 in the US. Landmark Properties and Core Spaces are leading the way for a boost in property development planning with a target of 38,762 beds and 35,557, respectively, during this period.

Academic institutions should encourage discussions that support their strategic goals, especially to aid the current housing shortage in the student housing market. Open communication fosters collaboration, even when the university's residence policy doesn't align with a specific lifestyle.

With greater support from universities, government intuitions, and local authorities, these players are predicted to add a high number of beds in different student properties across the globe.

Standardised Modular Construction & Micro-Units

Universities and developers around the globe are looking at modular or off-site construction as a transformative answer to the housing crisis. The rise of micro-apartments, container homes and mixed-use developments is fostering growth in the student housing market.

The demand for university housing for Volumetric Building Companies (VBC) is growing significantly. VBC experts develop state-of-the-art prefabricated and modular building techniques. They later transport and assemble individual modules on-site after their production in a controlled industrial environment.

Modular construction and innovative student housing solutions are particularly advantageous in high-demand regions such as the US and UK as they allow for rapid construction activities with fewer resources and manpower.

Challenges for Property Operators & Managers

Student housing professionals often find themselves tangled by ownership and operations of student housing, making it more challenging. This section will highlight the most common challenges that developers and operators face in the student housing market:

1. High maintenance costs: High maintenance costs pose challenges due to the varied demands of students. Tight budget constraints and seasonal maintenance fluctuations are also some hindrances that property operators face. Strategic cost-effective planning and solutions are integral for balancing ongoing maintenance needs with limited budgets while adhering to safety standards of the student housing market.

2. Targeting new student tenants: Student accommodation operators face challenges in attracting new tenants due to factors such as market competition, location, and demand for attractive amenities. In this regard, it is essential for property operators to balance affordability and provide a top-notch living experience in the student housing market.

Operators need to differentiate their properties, offer desirable amenities and strike a balance between affordability and quality to attract students looking for accommodation near their campuses.

3. Mitigating property damages: Minimising property damage for longer sustainability is a challenge for student accommodation operators due to factors such as student behaviour, security and budget constraints. The transient nature of student tenants, along with the possibility of unforeseen accidents, increases the risk of damage to facilities and equipment. Keeping a check on maintenance and repairs is essential to address wear and tear, ensure safety, and maintain property value.

4. Lack of rebooking from students: Student housing operators rely on rebooking to maintain stable income sources, streamline operations and retain tenants. Tenant retention saves money on marketing and screening costs, while consistent occupancy guarantees steady income. Property managers and operators can retain tenants by providing them with the necessary amenities, addressing problems and aligning with student housing market trends.

Is Student Housing A Lucrative Industry in 2024?

To sum up, the way the student housing market has changed over time is evidence of how dynamic the real estate investment sector is. The allure of academic brilliance in nations like the US, UK, and Australia, along with the significant increase in investment from major companies, has propelled the need for student housing globally.

This market has evolved significantly from its historical beginnings with limited options to its current varied array of PBSAs, HMOs, and university-provided apartments. This change has not only met the demands of the expanding student housing units but also created new opportunities for creative real estate development with higher investment sentiment.

Due to flexible rental growth, the student housing market signifies resilience, maintains stability and fosters sustainability in the face of this dynamic industry. Highlighting its development and investor potential, global student living is constantly being shaped by evolving demands. Prospective investors should consider making the most of this lucrative market by listing their property with amber to maximise global expansion opportunities.

Uploaded On
April 19, 2024
last updated on
April 18, 2024

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