As featured in “ConnectCRE”
Jasmine Kilman, ConnectCRE, 09 December, 2024
RREAF Holdings has long recognized the potential of student housing as a resilient and lucrative sector within real estate. In a recent conversation with ConnectCRE, Jack Palms, VP of Acquisitions at RREAF, explores the factors driving investor interest, the unique advantages of student housing, and how this sector is poised to evolve in the years ahead. Discover Jack’s perspective in the article below.
Q: With a notable surge in investor interest, what factors do you believe are driving this enthusiasm for the student housing market right now?
A: Investors have always had a strong interest in multifamily properties, which is, in essence, what student housing imitates. However, student housing offers owners and investors an additional line of security. Year-over-year student housing has continued to have historical performance both in terms of rent growth and occupancy.
Q: How does the investment landscape in student housing differ from other real estate sectors, and what advantages does it offer to investors? What specific attributes or metrics are investors prioritizing when evaluating opportunities in student housing?
A: Student housing allows owners/developers to “lock in” leases for an entire year and not have the physical occupancy volatility of traditional multifamily. Student housing typically has an additional layer of credit through parental guarantees.
Student housing investors will investigate metrics such as school infrastructure, enrollment, enrollment projections, new school initiatives, proximity to campus, campus development activity, and school conferences. At RREAF, we are focused on acquiring student housing assets located near Power 5 Schools and Tier 1 Research Institutions.
Q: How does risk assessment differ in student housing compared to more traditional real estate investments?
A: Simply put, your tenants are students in college, which comes with different levels of credit, insurance, and asset damage risk. This can come in the impacts of occupancy or rent growth, and these risks are always weighed into the “risk-adjusted returns” for the asset type, whether that is a core, value-add, or development deal.
What are the key drivers that make student housing a resilient investment option, especially in today’s challenging economic climate?
In previous challenging economic climates, we saw an increase in higher education as this tends to correlate with a tougher labor market. This makes student housing somewhat predictable in that preleasing and lease terms provide a predictable revenue stream for owners and investors and reduce the risk of vacancies.
What factors could influence growth over the next 5-10 years? Looking ahead, how do you see the future of student housing continuing to evolve?
With new technology replacing several jobs, there might be a shift in people wanting/needing to attend school to enter the workforce. Students will continue to seek out the large tier 1 institutions, prioritize assets near the campus, and provide notable amenities.
We appreciate and thank ConnectCRE, especially Jasmine Kilman, for giving us the opportunity to speak about the student housing industry. To access the full article on ConnectCRE website, please click here.
