Student housing has set an all-time high in transaction volume for 2022 with an annualized total of $18.9 billion, significantly surpassing the previous year-end high of $11.5 billion in 2021.
“We are seeing significant interest from capital coming from the Middle East, Singapore and starting to hear rumblings around Latin America,” said Managing Director Teddy Leatherman, who leads the Dallas Student Housing Capital Markets team. “We are speaking with our global capital teammates on a weekly basis to ensure all foreign capital is getting access to our transactions. Our most successful executions have been global marketing processes.”
The JLL U.S. student housing capital markets team is closing out a record year as well, with a total of $1.8 billion in sales, equity raises and financings.
According to JLL Capital Markets, cross-border capital has in recent years played a much larger role in the success of the asset class. From 2012 to 2016, cross-border capital only held 6.7% of the market share. From 2017 to 2021, it held 20%, deploying almost $10 billion to student housing assets.
With this broadened capital targeting the sector, the sale price per unit has steadily increased nationally. Student housing rents increased 8.8% year-over-year, with average rent at $847/bed as of October 2022 compared to $779/bed in November of 2021 (CollegeHouse).
According to the JLL Capital Markets Student Housing team, “The fundamentals of student housing have never been stronger, which is why capital is flocking to the asset class. Many investors consider student housing recession proof as every lease has a parental guarantee, and enrollment has historically increased during times of economic recession. Because of this, in addition to global capital, many domestic investors with capital to deploy are targeting the sector. Institutional investors are steadily increasing their total allocations, accelerating capital flows to the sector. Additionally, high net worth investors are anticipated to grant higher allocations to commercial real estate. In fact, two thirds of the U.S.-based family offices were established after the year 2000, and they have a combined net worth of $12 trillion. That is a lot of capital to deploy!”
Following the broader multi-housing market, student housing has seen the highest levels of new supply in the Sun Belt markets. The top prelease markets for student housing include: Tallahassee, Florida; Knoxville, Tennessee; Clemson, South Carolina; Austin, Texas; and Gainesville, Florida (CollegeHouse).