Multifamily Sector Insights: Q&A with Berkadia’s Directors of Student Housing

August 16, 2019

Multifamily Sector Insights: Q&A with Berkadia’s Directors of Student Housing

August 16, 2019

The student housing sector is evolving beyond its niche status. Multifamily industry professionals encounter an increasingly competitive landscape as a result. A strong local knowledge of key markets, as well as a deep understanding of enrollment trends,  serve as major assets to unlocking revenue growth in this sector.

That’s why we reached out the experts to kick off our latest recurring feature, Multifamily Sector Insights. Kevin Larimer and Greg Gonzalez, Berkadia’s Directors of Student Housing, were able to offer up their insider perspectives on slowing enrollment, the role of international investors in the space, the future direction of student housing in this informative Q&A.

Enrollment Trends and the Next Generation

How is the industry being impacted by slowing enrollment at universities?

Kevin Larimer: Enrollment growth is a catalyst for development and investment.  Even where enrollment is static, if supply has not been overbearing, the market will remain healthy. On the other hand, a big decline in enrollment (or decline in high school graduates) might slow investment and increase risk. Markets with multiple economic anchors, such as a university with a strong medical program or a state capital, are less inclined to feel the impact of enrollment changes.

How is the industry preparing for Generation Z as they get ready to enter college?

Greg Gonzalez: What we saw in the Great Recession was that as job growth slowed, college enrollment spiked.  This was the tailwind that helped drive student housing from a niche private investment to receiving more institutional and foreign capital.  But even if job growth remains positive, unless there is a substantial restructuring by employers to put less weight on the value of a college degree for new hires, we expect enrollment to continue to grow.

Large Universities With Rapid Enrollment Growth
Bucking the national trend, several large universities saw record-setting enrollment in Fall 2018


New Opportunities in Student Housing

Do you expect foreign investment to continue playing a major role in the sector?

Kevin Larimer: With U.S. universities being best-in-class for education, we expect both foreign investment and enrollment to continue.  One notable trend we’ve seen is foreign investment following foreign enrollment. This is shifting investor interest from schools with storied NCAA teams to those with proven STEM programs.  Universities with both assets typically attract the deepest investor base. Examples include Georgia Tech, Arizona State, Virginia Tech, and University of Washington.

What kind of value-add opportunities are available within the sector? How do those value-add opportunities vary by region?

Greg Gonzalez: Our sector is still very much in a growth phase. That said, we do not have as much available stock as one may think.  Thanks to historically robust demand for quality student housing, properties that would have served as prime location, value-add candidates have already been scrapped and rebuilt. Markets where development has been most active—the South, the Southeast, and the Midwest—have seen more new construction than value add.  Markets with more challenges to new development have been better positioned for value-add plays.

That said, there are certainly value-add opportunities within student housing. The first generation of modern, amenity rich student housing is beginning to age. These assets will soon present opportunities for strong growth through value add to investors.

States Where College Enrollment Still Soaring
Growing enrollment sets the stage for aggressive student housing development


Create More Opportunities with Berkadia Student Housing

Thanks to industry leading expertise and the support of Berkadia’s unmatched network of investment sales, mortgage banking and advisory services, Berkadia Student Housing has been responsible or over $2.1 billion in transaction volume since 2015. Visit Berkadia Student Housing online to learn more about the team’s unique capabilities or to learn more about Directors Kevin Larimer and Greg Gonzalez.