How has Covid-19 impacted the US student housing market?

Covid-19 hasn’t left the student housing market in America unscathed. Less than two years ago, the US took the lion’s share out of a $16 billion global investment into purpose-built student accommodations, things have slightly changed because of the pandemic. 

The damage has been multidirectional. 

At the moment, student enrollments are down, campuses are turning into virus hotspots, universities are losing money, and the student sector is seeing a sharp drop in investment activity through the second quarter of 2020. For comparison, until mid-year, the transaction amount has been worth $1.58 billion compared to the $2.29 billion transacted through the same period in 2019.

This year, many first-year International undergraduates–a key demographic for the student housing sector–are holding on to their applications and numbers in enrollments have seen a double digit-drop reaching -13.7%. Last year, the number of international student enrollments at US universities and colleges was 1,095,299. 

Overall, the big players in the student housing market remain unchanged. The lead owner is American Campus Communities, which has more than 150 properties with 100,000+ beds. However, when it comes to the place where most development plans are scheduled to be delivered in 2020, the University of Illinois is the top location in the US with 2,620 beds in the pipeline. Universities in the country can accommodate 21.5% of students in on-campus housing leaving 78.5% of the undergraduates to seek accommodation off-campus or live at home.

Student housing mid-year condition 

The title of this section was inspired by Newmark Knight Frank’s report, which summarizes the situation on the student housing market as one slowed by the pandemic and moving from acquisitions to focused internal operations. The focus now is on asset management and implementing procedures to guarantee the safe housing of residents throughout purpose-built accommodations across the country. 

Despite the pandemic, the interest in core and value-add purpose-built assets hasn’t subsided. Especially those properties within walking distance from top-notch universities in the country. The sources of capital in the student housing market have been substantial and diverse. In general, the industry is performing well and almost on par with the velocity of 2019, experts say. 

Meanwhile, universities are trying to adapt to the circumstances created by the virus and are keeping their plans fluid. Now, higher institutions are busy crafting strategies for returning students to campus, handling on-campus logistics and trying to agree on how many students it’s okay to house on campus. As an immediate measure, most universities have lowered their on-campus capacity for the fall semester. This has created a situation where the demand for off-campus housing has significantly surpassed the supply on the market. At Washington State University, for instance, more than 1,000 students have sought alternative housing for Fall 2020.

Money in the student housing sector is coming from several directions, but private capital leads in investment with more than $840 million in transaction volume through the first half of 2020.

Naturally, it’s daunting to make any predictions in times when the world is grappling with a pandemic, but if things remain stable and reach some normality, the outlook for the student housing market looks encouraging in the US. Many factors contribute to such expectations such as a growing population of international students, tighter competition among property developers, and consistent yields for student housing.

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