The U.S. student housing market had its seventh consecutive year of annual rent growth in 2016, as inventory increased by 56.3% over the past 10 years.
And while the sector is expected to perform well in 2017, Multi-Housing News reports that declining college enrollment numbers in 2018 could result in a decline in the U.S. student housing market.
The National Center for Education Statistics forecasts college enrollment to increase by
2.2% this year, but expects enrollment in U.S. colleges to slow and to begin declining after 2018 and 2020.
“The sheer amount of supply that has come online, coupled with expectations of slowing enrollment growth after 2017, doesn’t bode well for the sector on an overall basis,” says Anna Hertzman, managing director of Kroll Bond Rating Agency, which has issued a report summarizing trends in the student housing industry. “However, performance varies considerably by market and institution and students; preference for purpose-built, highly amenitized housing appears to be overcoming headwinds in many markets.”
Some of the top markets for student housing are LSU, the University of Arkansas, Texas A&M University, the University of Maryland, the University of Florida and the University of Tennessee, among others.
Recent market conditions for student housing transactions have been generally positive and are expected to remain so in the near term because of decreasing new supply trends, robust rent growth and decreasing capitalization rates.
But if university enrollment does not return to positive growth and high school graduation rates begin to decline, student housing fundamentals could be negatively affected, which would have a negative impact on transaction activity.