2021 Student Housing Market Overview and 2022 Outlook - Flipbook - Page 24
Cross-Border Foreign Capital
conversion strategy. Through these conventional conversions, purchasers hoped to tap into the conventional multifamily rent trade outs
Cross-border foreign capital maintained its position within the student housing space as appetite for the risk-averse product type,
in high-growth markets along with compressed reversion cap rates regularly seen in conventional multifamily throughout geographic
record rental rate growth, strong occupancy, and historically low supply continued to drive an influx of interest from overseas investors.
growth corridors. Newmark Student Housing anticipates this trend to continue as all sectors of the multifamily market continue to
The student housing sector’s ability to prove its resilience in uncertain times over the past two years encouraged greater involvement
become more competitive with elevated inflation and increased capital supply.
from overseas funds moving equity away from ultra-competitive conventional multifamily and industrial asset classes. Approximately
26 percent of capital transitioning into the student sector through COVID-19 (2020 and 2021) decidedly came from direct foreign
In 2020, cross-border foreign equity made up the largest percentage of market share for acquisition volume, with approximately
investment, an impressively high number when compared to 6.24 percent of direct foreign investment over the last two years in
$2.9 billion, or 45.8 percent of market share. The increase in cross-border foreign equity in 2020 was largely driven by the QuadReal
conventional multifamily.
Property Group and CA Ventures portfolio recapitalization and GSA’s ~$697 million portfolio acquisition of the University Communities
8,000 bed domestic student housing platform. Direct foreign investment activity represented 16 percent of total acquisition volume in
The student sector’s robust market fundamentals, both pre-pandemic and current, drove significant investor confidence in the
asset class. Steady revenue streams, healthy collections, and fast-paced leasing metrics have enticed greater capital spillover
2019 BUYER PROFILE
User/Other
5%
2020 BUYER PROFILE
User/other
5%
CrossBorder
20%
Inst'l/Eq
Fund
23%
Private
48%
Private
29%
from more institutionalized real estate asset classes. In 2021, the sector surged on the coupling of increased on-campus learning
2021 BUYER PROFILE
User/Other
4%
demand and the return of international students, affording an astounding 4.2 percent effective rent increase nationally. Following
a challenging year in international educational
CrossBorder
16%
CROSS-BORDER FOREIGN CAPITAL ACQUISITION
VOLUME
CrossBorder
45%
Inst'l/Eq
Fund
21%
Private
58%
Listed/REITs
4%
Inst'l/Eq
Fund
21%
Listed/REITs
0%
Listed/REITs
1%
Source: Real Capital Analytics
the 46 percent decline in Fall 2020, per Open
10.0
Doors Data. Congruently, college enrollment
continued to steadily rise through 2021. Average
2020
total registration at the nation’s top 175 four-year
9.0
public and private universities had increased
8.5
every year since 1994 with 2022 and 2023 lining
8.0
up to potentially surpass the major enrollment
7.5
2021, with nearly $1.9 billion in student housing acquisitions. Although cross-border acquisition volume decreased by 30 percent after
7.0
a record-setting year for cross-border market share in 2020, there was still an influx of international equity being placed in one-off LP
6.5
transactions with domestic private funds in 2021, which elevated the private buyer market share. Cross-border capital purchasing has
6.0
matured in recent years with single-asset acquisitions far more common than seen in years past. The sustained pursuit of purpose-
5.5
built student housing by foreign capital sources will continue affording an array of opportunities for domestic firms to strategically
partner with overseas equity providers. Foreign investment continues to be a driving force in transaction volume with similar levels of
acquisition activity expected over the coming year.
gains of every economic downturn since the
2019
1950s. With on-campus student housing typically
having the capacity to accommodate only onefifth of enrolled students at many colleges and
2018
universities, and development supply being at
a 5-year low, cross-border capital is expressing
5.0
continued
4.5
4.0
a 69 percent increase in the number of new
international students, a notable increase from
Yearly (in billions)
9.5
exchange, higher education institutions reported
interest
in
opportunistic
yield
premiums garnered by, purpose-built, off-campus
2017
housing. Moreover, the aging and constructed
In line with traditional student housing norms, the fourth quarter of 2021 marked one of the strongest periods for student housing
3.5
stock of college dorms have created unrealized
investment activity in the history of the sector. $6.1 billion, or 51 percent of acquisition volume in 2021, occurred in the last 3 months
3.0
value for privately held assets, allowing foreign
of the year. Much of the elevated activity is comprised of portfolio transactions with confidence building around the sector. Harrison
2.5
investors to take advantage of pent-up demand
Street finalized the sale of two large transactions amounting to nearly $2 billion in volume and 23,000 beds. Additionally, Landmark
recapitalized 5,416 beds with BREIT for $784 million. Greystar recapitalized a 3,833-bed on-campus portfolio with Harrison Street. The
student housing sector is anticipated to see a further institutionalization of the asset class, and, in turn, a movement of market share
while investing in a product that boasts the ability
2.0
1.5
consolidation from some of the largest real estate investors in the world. Newmark Student Housing expects 2022 will be comprised
1.0
of multiple scaling portfolios as groups continue to take advantage of the abundance of low-cost capital, low interest rate environment,
0.5
and lack of alternatives offering both cash flow and value accretion.
0.0
to weather an economic downturn.
2016
Cross-border foreign capital direct investments
amounted to $1.9 billion in total acquisition
2015
2014
2013
2013-2020
2021
Source: Real Capital Analytics
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
volume for 2021, a decrease of 33 percent from
the year prior. Although a dramatic year-over-year
drop-off, foreign capital has strengthened its
NEWMARK
25