While there are many stereotypes about college students, one thing is certain: they all need a place to live. A recent article in the Minneapolis Star Tribune described how student housing is an often-ignored niche of multifamily real estate that continues to grow—even in a recession. This means that the commercial real estate industry will benefit from the increasing number of people deciding to attend college rather than diving headfirst into a recovering job market.
Adequate student housing is as important to the college experience as textbooks and pizza. As noted in a previous post, the recession resulted in an increase of for-profit college student enrollments and an expansion of buildings designed to house classrooms and training facilities.
Education is more important than ever in this global economy and college enrollment numbers continue to rise. Since fewer high school students are choosing immediate employment over attending college, these students will need a place to live. In other words, there’s an increase in demand for student housing.
Banks are more likely to provide loans to builders when they know that there is a demand for student housing. Banks are also more apt to provide the loans necessary to construct student housing as long as there is a continued demand. Like any successful real estate development, the project must command rents high enough to offset the cost of construction. Investors in real estate investment trusts (REITs) are putting money into student housing and banks appreciate the stable occupancy rates.
The commercial real estate industry follows the law of supply and demand. In this economy, when things are uncertain, it’s comforting for investors to have a “sure thing.” While there are no “sure things” when it comes to investing, the student housing market comes close. As long as recent high school graduates seek to get an education and live independently from their parents, student housing should be a stable commercial real estate investment.
