US Student Housing Market: Trends and Forecast

The US harbours some of the best higher education institutions, attracting students from all over the world. With rising numbers of international and domestic students, the demand for student accommodation in the US has also leaped across a range of housing types. This includes options from dorms and PBSAs to private apartments and homestays. The US student housing market is a significant economic contributor and is currently poised for substantial growth.

The rising demand for student housing underscores the urgent need for more active developments. As more projects are added to the pipeline and more investors join the foray, the US is on track to become a key region for higher education and the global student accommodation industry. This blog explores the burgeoning demand, market trends, and investment prospects of the US student housing landscape.

US Student Housing Demand Forecast

The demand for off-campus housing in the US is driven by a growing student population seeking independent living experiences. Factors like privacy, community involvement, and evolving student preferences contribute to this trend. Today's housing requires convenient, innovative, and eco-friendly measures to attract renters.

According to the National Multi-Family Housing Council (NMHC), projections indicate growth from 8.5 million beds in 2020 to 9.2 million by 2031—an average annual increase of 0.8%.

Valued at over $10 billion, this thriving industry generated $3.1 billion in revenue in 2023 and is projected to reach $4.2 billion by 2029, with a CAGR of 6.5%. With major universities only able to house 22% of their undergraduate scholars, the demand for rental housing among the total college population of 22 million remains high.

• The bulk of this growth will stem from public four-year universities. Undergraduate enrollment is expected to rise by 448,000 beds, with an additional 112,000 projected for graduate enrollment.
• Private four-year universities will also see growth, particularly in graduate programs, with an estimated increase of 96,000 beds.
• Despite experiencing volatile growth, public two-year universities are expected to require an additional 79,000 beds to accommodate their enrollment.

10 Major Trends in the US Student Housing Market (2024)

Investor interest remains high in 2024, indicating a promising future for US student housing. Here’s a breakdown of the key student housing trends that investors need to be familiar with:

1. Growing demand: The US student housing market has experienced a surge in demand. As universities expand enrollments, there's a need for quality accommodation, creating a favourable environment for investors.
2. Off-campus preferences: Only 22% of undergraduate students reside on campus, emphasizing a preference for off-campus accommodations. Factors like personal space and privacy drive this trend, with around 63% of student housing featuring private rooms. (Amber)
3. Technological integration: Incorporating technology like smart home features and high-speed internet enhances property appeal to meet student demand for modern amenities.
4. High occupancy rates: The US student housing market anticipates an average occupancy rate of 95% among top universities, with an enrollment projection of 19.25 million students for 2024. (Statista)
5. Focus on sustainability: Investors prioritize eco-friendly initiatives and regulations like LEED certifications in order to align with student preferences and enhance property attractiveness.
6. Enhanced amenities: Properties offering fitness centres, communal spaces, and study lounges are gaining traction, creating a holistic student living experience.
7. Affordability concerns: Rising rents underscore the need for affordable off-campus housing options, posing a challenge for students.
8. Strategic locations: Investors focus on locations near universities with rental growth potential and higher accessibility, catering to student demand.
9. Adaptive reuse: Redevelopment projects that transform existing structures into student accommodation are gaining traction in the US. Mixed-use developments are also becoming popular among developers and PMGs. These options offer cost-effective investments and contribute to urban renewal.
10. Flexibility and adaptability: Changing preferences and needs highlight the importance of flexible leasing options in student housing.

US Student Housing: An Investment Magnet

Investors are witnessing increased interest from capital partners entering the US student housing market. This year, the sector anticipates heightened involvement from institutional and foreign investors, pushing property sales to record levels.

• In 2022, the US saw $22.8 billion in student housing investments, with Blackstone's $12.8 billion acquisition of ACC marking the largest single transaction.
• According to JLL's student housing market annual report, cross-border capital accounted for 20% of deals from 2017 to 2021, up from 6.7% in the previous five-year period.
• Notably, capital from the Middle East, Singapore, and Latin America is becoming increasingly prevalent.

Steady Demand & Rental Growth of US Student Housing

The US market's strength can be attributed to a combination of factors, including fierce competition among developers and consistent yields.

The outlook for 2024 and beyond is promising, with institutional and foreign investors eyeing opportunities in the US student housing sector:

1. Exponential rental growth: Rental growth in the market has seen an 8% increase, with pre-leasing rates reaching 85% capacity for FY 2023-24. These figures highlight the sector's expansive investment potential.
2. Student housing sales in the US: Student housing sales added up to $22.8 billion in 2022, with an average unit price of $260,000. A total of 470 properties were sold, boasting an average cap rate of 4.87% (Berkadia).
3. Property value appreciation: The value of student housing beds has also seen significant growth. The average price per bed rose by 17.9% from 2021, reaching $99,937 in 2022. Even properties located more than 2 miles from campus saw an average price of $74.089 per bed (Berkadia), underscoring the increasing value and appeal of this dynamic market.
4. Investment avenues: Overall, the US market continues to offer promising student housing investment opportunities driven by steady demand.

The Bottom Line

The US student housing market continues to attract investors due to its strong market dynamics and growth potential. The sector's resilience and profitability make it a compelling investment option for savvy investors. This is the best time for property investors to make a strategic move by listing thier property with amber.

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