is spurring demand for student housing
One commercial property type that does not garner much attention is the student-housing sector. Niche investors
in this asset class know that some student-housing properties can be very safe investments, given the rising
demand for a college degree.
As development has been significant in a number of markets, however, student-housing owners have had to
keep a lid on rent growth in some markets because of slowing enrollment. As college costs have soared over the
past few decades, enrollment growth for these schools has been spotty — especially large public universities,
according to the National Center for
Taking a look at Reis statistics for 177
student-housing markets across the
U.S. for which we have enrollment
data, from the fall of 2016 to fall of
2017, enrollment in these schools grew
by 1.2 percent. In fact, the 2016-2017
school year was the 12th consecutive
year of enrollment growth, as repre-
sented in the chart on this page.
Overall, enrollment growth has resulted
in rising demand for student-housing
properties, which has been reflected
positively in market fundamentals each
year. Reis monitors student-housing
properties on a fall-to-fall basis to reflect the typical lease term that students
are given for the school year.
Property fundamentals in this sec-
tor also are split into two distinct categories: properties that rent by the bed and properties that rent by the unit.
In properties that rent by the bed, students are responsible for their individual lease, while in properties that rent by
the unit, students have joint-housing contracts for the entire unit.
The supply and demand trends for the two property types differ. Thus, for a more accurate understanding of the
way the sector is performing, we have split the two sets of properties. Occupancy has been typically higher for
properties that rent by the unit, although this property type also has seen less inventory growth than properties
that rent by the bed.
In the 2017-2018 school year, inventory for properties that rent by the bed increased by 33,794 units, or 4. 3 percent.
Properties that rent by the unit increased by 955 units, or 0.4 percent.
With strong occupancy growth, the vacancy rate for properties renting by the bed declined this past fall from
5. 9 percent to 4. 9 percent. Properties renting by the unit experienced an increase in vacancy, from 2.5 percent
to 2.6 percent, but this rate is expected to decline in the coming year — down to 2.4 percent.
These low vacancy rates indicate that the increase in enrollment is providing adequate demand to meet the
incoming growth in supply.
In terms of national rent growth, both properties leased by the unit and properties leased by the bed saw a
rental-price increase of 3.1 percent in the 2017-2018 school year. Both property types have seen positive rent
growth in recent years and are expected to experience even higher rent growth in the coming year because of
an additional influx of new units coming onto the market that are still expected to be absorbed.
Some college markets are growing faster than others, including schools in California, Texas and the state of
Washington. Others, however, have seen rent declines, including many in the Midwest. In other words, while
college enrollment growth should spur further rent growth, investors should consider other local factors when
investing in student housing. n
By Keegan Kelly and Barbara Byrne Denham
Barbara Byrne Denham is an economist in the research and economics
department at Reis Inc. She previously
served as chief economist at Eastern
Consolidated and is a Ph. D. candidate
at New York University, where she has
studied economics, monetary theory
and game theory. Reach her at
Keegan Kelly is an analyst in the
research and economics department
at Reis Inc. She earned a bachelor’s
degree in economics from
Boston College. Reach her at
Source: U.S. Department of Education and Reis Inc.
The years represent academic-calendar years — so, for example, 2017 is the 2016-2017 school year.
The data is drawn from the 177 student-housing markets nationwide that are tracked by Reis Inc.
Total College Enrollment*