With most schools having returned to campus, enrollments at tier one and tier two schools trending upward, and interest in the market growing, student housing demonstrated impressive sales in 2021. Total investment sales volume reached $9.6 billion across 271 properties sold, with an average price per bed of $84 thousand and 5.1 percent cap rate.
New capital is flowing into the market from both foreign and domestic capital sources. As conventional multifamily yields are being compressed to historic lows, the student housing industry offers some of the best risk-adjusted returns in any sector of real estate. As our annual newsletter highlights, we fully expect the debt markets and sales volume to continue this positive trajectory as student housing begins 2022 with strength and resiliency. A few key takeaways:
Portfolio sales on the rise
2021 saw a dramatic increase in student housing portfolio sales, accounting for $3.5 billion of the overall market transaction volume, up significantly from 2020 and 2019. Student housing cap rates remained 40 basis points above conventional multifamily, a ten-basis-point year-over-year spread increase. Given the relatively favorable cap rates and resilience of the category, student housing was a popular asset for private and institutional investors, who made up the largest shares of acquisition volume in 2021 (59 percent and 23 percent respectively). For these investors, portfolio acquisitions are a particularly favorable method to achieve scale in the space.
Price per bed continues upward trend
Price per bed has been on a steady incline for the past ten years, climbing from $46.9 thousand in 2011 to $84.8 thousand in 2021. In 2021 alone, the average price per bed increased 9.2 percent from 2020. And the increase is even more sharp for properties located within close proximity to campus. In 2021, the average price per bed for a property located a half a mile or less from campus was $126.7 thousand, up 38.3 percent from 2020. There are a number of factors that impact price per bed, but proximity to campus remains a leading driver of value for student housing communities.
The Southeast leads in growth
The Southeast leads in terms of regions with the most beds under construction (25.7 thousand), well ahead of the next closest regions, with the West Coast, Midwest and Northeast all slated to deliver more than eight thousand beds. Though California and Texas are the top states for projected 5-year student enrollment growth, Florida, Georgia and North Carolina round out the top five with combined projected enrollment gains totaling 39,623 students in the next five years. The University of Central Florida alone saw enrollment grow by 1286 students year-over-year, from 71,453 Fall 2020 enrollment to 72,739 Fall 2021 enrollment.
The student housing market remains a top destination for investors for good reason. For more detail on the 2022 student housing market, including cap rate trends, investment activity and pipeline projections, read our full report here.
-Berkadia Student Housing