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Date: October 1, 2018
Category:Real Estate

Taking a Look at the Transformation in Student Housing Investment [Video]

Created with Sketch. Run Time: 1:57
Gene Nusinzon Portfolio Manager Resource Real Estate Diversified Income Fund
In addition to typically generating higher income than other real estate sectors, student housing offers investors some downside protection in the late stages of a real estate cycle.

Forget the bare bones, cinder-block dorms with little other than four walls and a window. Student housing has evolved and is now comprised of modern apartments in off-campus buildings with many lifestyle amenities.

We are seeing lightning speed Wi-Fi, fitness centers, and roof deck pools as standard in new construction.

The demand for luxury student housing comes from two main areas. First, we look at investments in the urban core, where colleges offer an attractive mix of culture and convenience. We also focus on investments in large public universities, where enrollment is on the rise. Examples are tier-one state schools like Alabama, University of Texas, and Penn State with strong academic and athletic traditions.

Student housing investments came on strong following the Great Recession and have maintained robust demand and strong occupancy rates in the years since. Many college students extended their education during the downturn, while laid-off workers went back to school. With the economy now on solid footing, international students are contributing to demand. Despite a recent drop-off in visa approvals during the Trump administration, still nearly 400,000 students were issued F-1 visas in 2017. While supply is meeting this demand at some colleges, like Texas A&M and Florida State University, most areas continue to experience a supply-and-demand imbalance.

At Resource, we believe the sector has appeal for several reasons. In addition to typically generating higher income than other real estate sectors, student housing offers investors some downside protection in the late stages of a real estate cycle. People attend college in good and bad times, especially in today’s information economy and competitive labor market. A bachelor’s degree is the bare minimum to land an interview in many industries. Also, as capital crowds core sectors like office and retail, there’s potential alpha embedded in student housing’s solid fundamentals.

Resource Securities LLC, Member FINRA/SIPC.
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