Why Student Housing Outperforms Traditional CRE: What Investors Should Do About It in 2025

Commercial real estate (CRE) investment has traditionally centered around offices, retail centers, and industrial spaces. Yet, over the last decade, student housing has emerged as one of the most resilient and lucrative sectors within CRE. It consistently outperforms many traditional asset classes in terms of occupancy, yield, and risk-adjusted returns.

For investors looking to diversify portfolios and tap into stable income streams with long-term growth potential, student housing offers unique advantages. This blog explores why student housing outshines conventional CRE investments and what strategies investors should adopt to maximize returns in this vibrant market.

Understanding the Student Housing Market

Student housing refers to residential properties specifically designed and managed for college and university students. It encompasses on-campus dormitories, university-affiliated apartments, and, importantly, purpose-built student accommodation (PBSA) operated by private entities.

PBSA developments offer amenities, lease structures, and living environments tailored for student lifestyles — features that differentiate them from general multifamily or traditional residential rentals.

According to the latest market research, the global student housing market was valued at approximately USD 12.7 billion in 2024 and is expected to reach USD 19.7 billion by 2033, growing at a CAGR of nearly 5%.

1. Reliable and Predictable Demand

Academic Enrollment Trends

Unlike office and retail CRE, where tenant demand can fluctuate significantly with economic cycles, student housing benefits from predictable, cyclical demand tied to academic calendars. Students enroll each year in universities worldwide, generating consistent housing needs.

In the U.S., Fall 2024 preleasing rates for student housing reached a record 92.9% occupancy by August. Similarly, in Europe, occupancy averages around 98%, signaling sustained demand despite global uncertainties.

International Students Fuel Growth

International student populations are growing, particularly in countries like the U.S., UK, Canada, and Australia. These students often prefer private housing over on-campus options, driving demand for PBSA.

For example, the UK saw a 7% increase in international student enrollments in 2023-24, according to Universities UK data, intensifying demand in key university towns.

On-Campus Housing Shortages

Many universities face limitations in on-campus housing availability, forcing students to seek off-campus accommodations. This shortage benefits the private student housing market, especially properties located within walking distance of campuses or accessible by public transit.

2. Superior Income Yields Compared to Traditional CRE

Student housing often commands higher rental yields than other CRE sectors.

• Average U.S. rents per bed reached $909 monthly in 2024, with an annual growth rate of 3.8%.
  
  
• Cash-on-cash returns commonly range from 8% to 12%, with top-performing assets exceeding 17% annually.
  

Multiple Revenue Streams

Student housing properties often generate ancillary revenues from amenities such as:

• Parking and bike storage fees
  
  
• Laundry services
  
  
• Meal plans or partnerships with food providers
  
  
• Technology or cable packages
  

These additional income streams improve overall returns beyond base rents, providing an edge over traditional multifamily or office properties.

Flexible Lease Terms with Frequent Rent Resets

While commercial office and retail leases often lock rents for multiple years, student housing leases usually run for 9-12 months aligning with academic terms. This allows property owners to annually adjust rents based on market conditions and inflation, reducing income lag seen in longer-term CRE leases.

3. Resilience During Economic Downturns

Student housing shows remarkable stability in recessions:

• Enrollment often increases during economic slowdowns, as workers seek retraining or advanced degrees.
  
  
• Unlike office vacancies that spike with layoffs or retail centers affected by consumer spending drops, student housing occupancy remains strong.
  
  
• Universities have historically maintained robust enrollment numbers, supported by government funding and international demand.
  

For instance, during the 2008 financial crisis, many colleges saw enrollment increases, which cushioned student housing demand. Current economic uncertainties only reinforce this trend as education remains a high priority.

4. Favorable Demographics and Urbanization Trends

Growing Youth Population

Globally, the 18-24 age group — the prime university enrollment demographic — remains sizable and is growing in many developing regions.

Urban Campus Expansion

Universities are increasingly expanding urban campuses or satellite centers in major cities, where student housing is essential due to limited space and high living costs.

International Mobility

International students continue to gravitate towards countries offering quality higher education and English-language instruction, maintaining demand in key markets.

5. Lower Tenant Default and Risk Profile

Student housing often exhibits lower default risk relative to commercial tenants:

• Leases are commonly backed by guarantors such as parents, adding financial security.
  
  
• Turnover is high, but consistently replenished by incoming student cohorts, minimizing vacancy risk.
  
  
• Partnerships with universities or contracts with student organizations may add stability.
  

6. Enhanced Amenities and Community Features

Modern student housing goes beyond mere accommodation — it offers a lifestyle.

• High-speed internet and study lounges support academic needs.
  
  
• Fitness centers, game rooms, and social spaces create community engagement.
  
  
• Security features like gated access and 24/7 monitoring provide safety.
  
  
• Onsite management improves tenant experience.
  

These amenities justify premium rents and improve retention.

7. Portfolio Diversification and Reduced Correlation

Student housing returns have lower correlation with traditional CRE sectors, helping investors diversify risk.

• While office and retail properties respond heavily to economic cycles, student housing depends more on education trends.
  
  
• The sector’s unique tenant base buffers portfolios from CRE downturns tied to employment or consumer spending.
  

What Investors Should Do to Capitalize on Student Housing

1. Target Locations Close to Top Universities

Proximity is key. Properties within walking distance or short transit rides to major universities attract the highest occupancy and rental premiums.

2. Partner with Experienced Operators

Operational expertise in managing student tenants, marketing to youth, and maintaining communal amenities is essential. Partner with firms specializing in PBSA.

3. Understand Local Regulations and Lease Structures

Student leases often differ from traditional rentals. Align lease terms with academic calendars and understand guarantor requirements to reduce risk.

4. Invest in Value-Added Amenities

Focus on technology infrastructure, study and recreation spaces, and safety features to command top rents.

5. Leverage Data Analytics

Use demographic data, enrollment forecasts, and market supply analytics to identify growth hotspots and avoid oversupplied markets.

6. Explore Emerging Markets

While U.S., UK, and Australia dominate, emerging markets in Asia and Latin America show growing demand for quality student housing.

7. Monitor Macro Trends

Stay alert to changes in visa policies, university funding, and shifts in education delivery models (e.g., hybrid learning), which can impact demand.

Challenges and Risks

• Seasonal Cash Flow: Income fluctuates with academic calendars; careful financial planning is needed.
  
  
• High Turnover Costs: Frequent tenant turnover increases operational costs.
  
  
• Supply Risks: Oversaturation in some markets can depress rents.
  
  
• Changing Education Models: The rise of online learning may reduce housing demand in the long term.

Regional Spotlight: Top Student Housing Markets in 2025

United States

• Key Cities: Boston, Austin, Los Angeles, Ann Arbor
  
  
• Strong demand driven by world-class universities and international students.
  
  
• Preleasing rates exceeding 90%, with rents growing at 3-5% annually.
  
  
• Market remains fragmented, offering acquisition and development opportunities.
  

United Kingdom

• Key Cities: London, Manchester, Edinburgh, Glasgow
  
  
• Growing international student population; high PBSA penetration.
  
  
• Universities face housing shortages, boosting off-campus demand.
  
  
• Increasing institutional investor interest fueling new developments.
  

Canada

• Key Cities: Toronto, Vancouver, Montreal
  
  
• Rising enrollment, especially international students.
  
  
• Favorable immigration policies supporting student stays.
  
  
• Emerging market with increasing private sector participation.
  

Australia

• Key Cities: Sydney, Melbourne, Brisbane
  
  
• Strong university reputation attracts global students.
  
  
• Robust rental yields supported by limited on-campus capacity.
  
  
• Increasing adoption of PBSA with lifestyle-focused amenities.

Conclusion

Student housing stands out as a high-performing, resilient, and growing sector within commercial real estate. Strong demand driven by education trends, superior income yields, and counter-cyclical stability make it a compelling choice for investors seeking consistent cash flow and diversification.

By focusing on prime university locations, working with expert operators, investing in tenant-focused amenities, and staying informed on evolving market dynamics, investors can position themselves to benefit from the expanding global student housing market.

As the global demand for higher education grows and evolves, student housing offers a unique and attractive pathway to long-term CRE success.