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However, the National Multifamily Housing Council estimates the student housing market will grow by an average annual increase of 0.8% per year.

Investor appetite for student housing assets appears to have waned during the COVID-19 pandemic, as investment volume in the asset class remains 12% below pre-crisis levels. 

While deal flow slumped considerably during the height of the pandemic, “the year 2020 eventually ended on a high,” Real Capital Analytics’ Haley Crimmins writes in a recent analysis of the sector. Of note: QuadReal Property’s acquisition of a 50% stake in CA Student Living’s portfolio. (Also of note: the $3 billion in portfolio deal volume achieved in the fourth quarter of last year, which constituted the strongest level in any given quarter for deals of that structure.)

As the summer of 2021 neared, cap rates inched up to 5.5% by Q2 – a number that’s 20 basis points higher than record lows posted in the third quarter of 2020. Cap rates on the outskirts of large universities and outside of major metros hit a low of 4.9% in the second quarter. 

But some analysts argue that “pockets of opportunity” are there for the taking, if you know where to look. Institutional student housing operators will benefit from a predicted surge in post‐baccalaureate enrollment, and experts say off‐campus properties with better bed‐bath parity and single occupancy rooms will likely be big winners in the immediate aftermath of COVID-19, as colleges de-densify on-campus housing.

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A recent report from the National Multifamily Housing Council estimates the student housing market will grow from 8.5 million beds last year to 9.2 million by 2031, an average annual increase of 0.8% per year. NHMC predicts that demand in public four-year universities will likely be concentrated on the undergraduate side, while private colleges will see demand focus on graduate student housing. 

NHMC says Texas will likely lead college-aged population growth, followed by Nevada and Washington. Conversely, the college-aged population in New England continues to decline, “which means high quality schools in this region will need to continue to draw from a wide geographic area, and lower quality schools in the region may struggle with a shrinking population,” the report states.

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