Student housing has come a long way in the decades since most Baby Boomers went to college. Our generation had a twin bed, desk and chair, maybe a hot plate and Crock Pot, in tiny dorm rooms. The bathroom was down the hall and the gym was across the quad – no fun in winter months for millions of us.
As students head to college campuses campuses in August and September, more are luxuriating in spacious apartments steps from class with premium amenities. There was off-campus housing when Boomers were undergrads, too, but it tended to be somewhat run down, and it rarely offered luxuries.
Three trends seem to be driving this growth in upscale housing. The first is the population increase in the 18 to 24 year old demographic, which has soared from 27 million in 2000 to close to 31 million in 2016. While the age group has been fairly flat since then, it’s projected to grow again slightly for the next decade and then strongly after that. Overall growth has spurred demand for more housing and a newer, nicer supply.
A second trend is the increase in international students. According to the Migration Policy Institute, more than a million international students were enrolled at U.S. colleges in the last year studied, 2016 to 2017. Over the course of the past seven post-war decades, there’s been a five-fold increase, and international admissions now represent five percent of overall enrollment, the group reported.
Many of these international students are master’s or doctoral candidates working in high-earning fields like engineering, information technology, math and management, according to MPI, and heavily self-funding their studies. Traditional dormitory housing isn’t necessarily the ideal setup for this cohort, and they have the means – including professional employment here – to afford superior alternatives.
Both of these factors are helping to spur significant private investment in the student housing market — the third trend. These can be on-campus or near-campus apartments, and represent $29 billion invested. “New and renovated student housing tends to be vastly improved over the dorms of yesteryear,” observes Eric Luskin, senior vice president of The Scion Group, a firm that manages and consults on $5 billion in student housing assets across the country.
“There are two drivers that I’ve observed as major factors,” he says: “Both schools and private housing operators realize that the costs to provide attractive, enjoyable and supportive communities are less than the cost of vacancies.” Second, he adds, “As investors have entered this space assuming operating risk, designing communities that will attract and retain high levels of occupancy is, of course, critical. Students generally appreciate being treated as adults; for returning, upper division and older students, this is particularly valued.”