Berkadia: Student Housing Fundamentals Still Strong, but Sales Environment Weaker

(Image courtesy of Berkadia)

Berkadia, New York, released its 2024 U.S. Student Housing Market Report, finding student housing sales for 2023 fell 43% from 2022.

That figure excludes the Blackstone acquisition of American Campus Communities, Berkadia noted. Portfolio sales were only $900 million.

However, the historically strong operating fundamentals of the sector allowed owners to be patient and not sell. Factors such as falling new deliveries, enrollment growing and year-over-year rent increases sparked robust leasing activity.

The average price per bed decreased to $98,427, from $99,937 in 2022. The average price per unit was $251,000.

There was $5.73 billion in total sales volume in the sector last year, across 276 sold properties.

The cap rate was 6%, compared with the market-rate multifamily cap rate of 5.4%. However Berkadia’s report cautioned the need for context in examining that figure.

“There was a significant lack of high-quality, core student housing transactions in 2023. Core assets demand the most aggressive cap rates due to the extremely low risk profile of these assets,” the report stated. “The combination of the lack of core trades and many sales resulting from capital events, such as debt maturities, interest rate cap reserve increases, or the impact of floating rate debt on some owners, artificially elevated student housing cap rates. For the limited number of core assets that did transact, the prevailing cap rate was 5.5% +/- 10 basis points. This suggests that the spread between conventional multifamily and student housing has actually narrowed, rather than widened.”

In 2023, private investors reclaimed the largest share of the market; driven in part by the Blackstone acquisition of American Campus Communities.

In terms of a pipeline, there are 199 properties in all phases of construction–totaling 109,488 beds. The largest share is in the Southeast, where 59 properties with 36,656 beds are under construction.