College Housing Market Earning High Marks

With our recent sale of a student housing property in Connecticut to a private investor from New Jersey, it’s clear that the student market offers an attractive alternative to other investment asset types.  This is largely driven by a growing population of undergraduate students in the Northeastern U.S.

Even though a smaller generation will be approaching the 18- to 24­year-old age range in the next five to seven years (the children of Generation X), fall college enrollment for two- and four-year degree programs will continue to rise — as it has every year since 1969 — according to the Red Capital Group’s report, “Recent Developments in the Student Housing Finance and Investment Markets.”

From new construction like the multiuse Storrs Center at the main campus of the University of Connecticut and the new dorm tower at the Berklee School of Music in Boston, schools are building to meet a number of housing needs, such as

  • Being able to offer all incoming freshmen on-campus housing
  • Expanding the quantity and quality of housing for students that want to live off-campus
  • Providing a total housing pool that matches the total undergraduate enrollment

Universities may also choose to master-lease privately owned multifamily properties as an alternative to new construction, just like our recent sale mentioned above.   Since the mid-1990s, Sacred Heart University, in Fairfield, CT, for example, has leased the privately owned 110-bed property known as Taft Commons.   A series of private investors from Connecticut, Washington, DC, and now New Jersey have all seen the value of the acquisition over the years.   This “net lease” structure is somewhat unique within the multifamily asset class; it allows the investor to benefit from guaranteed rent growth with little if any management responsibility.

With the number of public and private colleges and universities across the Northeast, the surging demand for a college-educated workforce and an influx of international students pursuing higher education in the U.S., it’s no surprise that the college housing market is earning high marks in markets from New York to Boston.

In fact, Boston and New York are the two top markets leading the renaissance in the commercial real estate market.   According to a recent report by Moody’s Investors Service, which tracked commercial real estate prices in major markets across the U.S. during the 12-month period that ended September 30, Boston led all U.S. major metropolitan areas with a 10.4 percent increase in commercial real estate prices during that period, while New York was right behind with an 8 percent increase.  In fact, Boston’s commercial values are less than 1 percent below their market peak in December 2007 before the recession and 2008 financial crisis.

With our offices in New York, Connecticut and the newly expanded Framingham, MA, office, our investment sales teams are well positioned to support multifamily and commercial investors from New York to Boston.  If you’re a property owner or an investor in the mid-market segment and want to know more about the student housing market, please give us a call.  We are here to listen to your investment goals and help you achieve them.