Expect $8B to $10B in Student Housing Sales Volume This Year

Student housing sales volumes have already hit $1.2 billion for the year, meaning the market is on track to reach between $8 billion and $10 billion in student housing sales this year. Student housing investment sales have been steadily increasing since 2015, creating a new industry normal that is likely to keep pace through 2019.

“Through mid-March, RCA had reported $1.2 billion in student housing investment sales in 2019, but that is not yet a full quarter and there is always a lag in reporting commercial real estate sales, so the Q1 totals will most assuredly be higher than that,” Frederick W. Pierce, IV, president and CEO, at Pierce Education Properties, tells GlobeSt.com. “As the first quarter has historically represented 22% of annual volume, sales thus far support the continuation in 2019 of the “new industry norm” of $6 billion or more of annual student housing investment sales that has been eclipsed every year since 2015.  Depending on how many portfolio transactions occur, the investment sales volume could again reach the $8 billion to $10 billion range.”

In the same time that sales volumes have increased, cap rates have also compressed by 5%, bottoming at an average of 5.8% at the end of last year, according to RCA. “This timeframe generally reflects top of cycle valuations in commercial real estate, in general, combined with a generally rising interest rate environment,” says Pierce. “As such, albeit the cap rate compression during the last three years has been mild, it still reflects very strong valuations and is not inconsistent with what has occurred with multi-family valuations during that period.”