12 Oct InvestRE: Big 3 with Chris Cobb on Student Housing
By Chris Cobb | Associate
Welcome back to the Big3 with CC, your weekly real estate investment source. I want to start off by wishing JJ Watt of the Houston Texans a speedy recovery from his tibial plateau fracture he suffered during Sunday’s game. For a man who raised approximately $37 Million for Hurricane Harvey victims, we can only hope he will return soon and stronger.
Student Housing. If you have been on a college campus recently, you have undoubtedly seen beautiful new student housing being erected with retail on the ground floor. I’ll spare you the “back in my day dorms were 10 SQFT…” story and get right down to brass tacks student housing as an investment opportunity:
Since 2015, US college enrollment has increased approximately 3% (this equates to approximately 500K students). Enrollment is currently projected to steadily increase over the next 5 years. I had the pleasure of spending some time at the University of Central Florida over the past two years and that area is EXPLODING. It has now become the largest school in the county in terms of student enrollment and has housing projects popping up all over Oviedo. Lake Nona, a nearby city is also expanding with the Orlando to include, but not limited to, university satellite campuses. Here in Pensacola, we have the University of West Florida, which has a brand-new student housing development and possibly more on the horizon (hopefully downtown).
Performance during the downturn
Student housing was a solid asset class during the last economic downturn. It acted as a beacon of steadiness, performing with little downside risk. After building this respect, from 2014 to 2016 the U.S. student housing transaction volume grew from $3 billion to $9.8 billion. It is also worthy to note that private investors make up 35-45% of all student housing transaction volume in 2017. And any industry or asset class that can be labeled near recession-proof is worth inspection.
This can be the one limiting factor that puts a cap on student housing. Finding appropriate sites near college campuses is essential when erecting these complexes. In addition to giving students the proximity needed to get to classes or make an “honest” attempt to get to class, the retail components would likely want to be in the high-volume area where students and everyday consumers alike pass by. The sites must also be suitable for the student housing plan with respect to zoning and the layout/composition of the dirt. If you recall from one of my previous blogs, phase 1 or specific site inspections are a must during this due diligence period to determine whether or not the parcel can support the future of college living.
When it concerns real estate, invest yourself.