2021 Student Housing Market Overview and 2022 Outlook - Flipbook - Page 21
Pricing Metrics
PRICING METRICS: UNIT VS BED
Pricing metrics for purpose-built student assets remained higher than in the previous five years at an average cost per unit of $235,633.
With sharply rising construction costs, low new development supply, increasing national university enrollment, and effective rent
growth maintaining positive movement from the previous year’s metrics, the sector continued to build on its ever-growing foundation.
As interest rates decreased to historic lows through the better part of 2021, the prolongation of investors recycling low-cost capital into
Quarterly (based on assets priced $2.5mm+)
$300,000
secure stabilized assets with strong positioning to campus, as well as new entrant activity, assisted in driving pricing.
$250,000
Average pricing per unit of investment-grade student housing assets that traded for $2.5 million or more in 2021 increased by roughly
$200,000
15 percent over 2020 figures, a 14 percent increase over the five-year average. Notably, Q1 saw a dramatic decrease of 44 percent
compared to the first quarter of 2020. The decrease is primarily due to 1Q20 being just prior to COVID-19 reaching the United States,
combined with typical Q4 transactional carry-over that is realized in Q1 and Q2.
Much of 2021’s growth in pricing metrics occurred in Q3 and Q4, mirroring traditional transactional activity in the student sector
$150,000
$100,000
when pre-leasing begins to finalize and new in-place occupancy sets in. 3Q21 saw an increase of 84 percent over the comparable
2020 metric to $243,746. 4Q21
earned the highest price per unit
metric of the year at $256,080 – a 31
percent increase from 4Q20, as well
as a record for the industry. Although
rising construction costs, increased
debt optionality, and the investment
communities continued “flight to
quality” mantra had a material impact
on increased pricing, the influx of
new entrants, particularly those being
outpriced in conventional multifamily,
$50,000
PRICING METRICS: UNIT VS BED
During most of 2020, pricing metrics
$120,000
densification and future reopening
plans, and, most importantly, the
ability to secure accretive financing.
Due to limitations on the ability to
secure attractive leverage on coreplus, value-add, and assets located in
4Q21
$/Bed
Source: Real Capital Analytics
$180,000
$140,000
corresponding school’s policy of de-
$/Unit
3Q21
$200,000
reach newfound cap rate territory.
a property’s ability to stabilize, the
2Q21
$220,000
$160,000
were predominantly governed by
1Q21
$240,000
supplemented added competition to
within the student housing space
$0
Yearly (based on assets priced $2.5mm+)
2021 that the student housing sector found relief in the debt markets. GSEs, the resurgence of debt funds, and the CLO market, privatelabel CMBS, life companies, banks, and other alternative capital sources began to play a larger role in the sector with performance
uncertainty dwindling. As universities began to report record application numbers for Fall 2021 and accelerating year-over-year preleasing velocity supported the notion of sizable national enrollment growth, a flurry of activity from pent-up capital sources took
advantage of the historically low-interest rates in the second half of 2021. The appetite from student housing debt sources is now
abundant but remains focused on select submarkets and the credit strength of sponsorship.
$100,000
Due to the buoyant nature of the product type, increasing interest across the capital spectrum continued to influence increased pricing
$80,000
metrics. Traditionally, institutional and private capital have been focused primarily on Tier-I, flagship universities. This continues to hold
for the majority of larger existing operators and new equity entrants as many have built their investment thesis surrounding brand-name
$60,000
universities throughout the country.
$40,000
Newmark Student Housing anticipates pricing metrics will see moderate increases in 2022 as buyers recognize the defensive nature
$20,000
$0
of the industry during times of economic crisis and continue to seek out the attractive yield offered by the sector. It is projected that
the competitive pricing environment in 4Q21 will continue into 2022 as interest in Tier-I, Power-5, markets will remain elevated through
2020
2021
non-Tier-I markets, new entrants and
existing players were pinched to find
limited core-pedestrian opportunities
to exercise capital. It was not until the
end of 2020 and into the beginning of
2 0 2 1 S T U D E N T H O U S I N G M A R K E T O V E R V I E W A N D 2 0 2 2 O UT L O O K
2022. While the primary focus of capital groups remains at Tier-I universities with pedestrian access to campus, both domestic and
international investors are expected to expand their investment criteria—particularly in markets with strong future supply and demand
$/Unit
$/Bed
Source: Real Capital Analytics
fundamentals, and in states with increasing high school graduation rates. As the sector sees greater consolidation of Tier-I, corepedestrian ownership from some of the largest real estate investors in the world, smaller private capital groups appear likely to further
consider Tier-II markets with robust fundamentals. Newmark expects to see pricing metrics elevate in non-primary markets as groups
seek alternatives to the narrowing yield of properties well located in stabilized Tier-I markets.
NEWMARK
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