Go Big AND Go Home: Developing Off-Campus Student Housing

Real estate may be all about “location, location, location,” but real estate investment is about timing. As the traditional multifamily market—especially in the Sun Belt—has grown oversaturated, off-campus student housing is emerging as a tempting and worthy investment opportunity for portfolios across the U.S.

This shift signals a significant trend. Many historically multifamily-focused businesses are now positioning themselves to invest in student housing, and the result will likely lead to a major shift in market dynamics.

Why the Shift? A Precipitous Drop in Inventory

A decade ago, an oversupply of student housing beds was the norm. That level of vacancy is hard to imagine today. According to a recent Fannie Mae report, the delivery of new student housing beds has been steadily declining.

? In 2016, over 60,000 new beds were added annually.

? In 2024, this figure is expected to plummet to just 30,000—a 50% reduction in less than a decade.

Meanwhile, student demand, which dipped during the COVID-19 pandemic, has rebounded rapidly. This mismatch between supply and demand has created a prime investment opportunity. Developers who act on this gap stand to see significant returns as more students seek off-campus housing options. With campus housing geographically limited, off-campus units have become the go-to solution for a growing student population, making them resilient even in times of market downturns.

Closures, New Growth, and a Surge in International Students

Supply and demand aren’t the only drivers. Shifts in which campuses are thriving and the types of students attending them are also positively impacting the off-campus student housing investment class.

Small Colleges Are Closing at a Rapid Rate:

According to a report from The Chronicle of Higher Education, smaller colleges and universities are closing or merging at an alarming rate—about one per week this year. This is a marked increase from last year’s rate of just two closings per month. Several factors, including demographic shifts and rising operational costs, are driving these closures. Smaller institutions, often lacking the resources of their larger counterparts, are struggling to compete, especially in regions where large universities dominate.

While some attribute this trend to declining birth rates, others, like the National Student Clearinghouse Research Center, point out that total undergraduate enrollment actually grew by 1.2% last year. Even so, smaller institutions lacking the resources and name recognition of their larger counterparts are likely to continue struggling.

Community Colleges Are Gaining Ground:

In contrast, community colleges are experiencing a resurgence in enrollment, with a 2.6% increase, according to Inside Higher Ed. While most community colleges don’t offer housing, they act as feeders for four-year institutions. As students transfer after earning their associate degrees, demand for housing at larger universities is likely to grow. This trend presents a unique long-term opportunity for off-campus housing investors, particularly in markets near major four-year universities.

International Students Could Boost Demand:

Another key factor is the surge in international student enrollment. The Institute of International Education reports a 4% increase in the number of international students studying in the U.S. last year. With countries like the UK, Canada, and Australia tightening restrictions on foreign students, the U.S. could see an even larger influx.

More international students mean more demand for housing, particularly near larger institutions that attract global talent. Many international students are likely to seek modern, well-equipped off-campus housing to support their academic journey.

Bigger is Safer

Off-campus student housing is not just growing in demand but in size and scope as well. Recent trends show that larger student housing projects are dominating the market, particularly those serving major public and private universities.

Several factors contribute to this trend:

• Institutional Resilience: Larger universities have stronger financial backing and a greater ability to adapt to economic shifts, making them less vulnerable to the challenges facing smaller schools. This makes them attractive to developers who want to minimize risk.
• Economies of Scale: Rising material costs and high interest rates are pushing developers toward larger-scale projects. Bigger developments allow for lower per-bed costs, increasing profitability in the long run.

For example, Core Spaces, a leading developer, has projects underway in Tampa, FL, Madison, WI, and Knoxville, TN, which together will add approximately 9,800 beds to the market. Landmark Properties is developing an 826-bed property in Columbia, SC, and a 321-bed project near the University of Texas.

Mixed-Use Developments and High-End Amenities are Key

Another trend reshaping the off-campus student housing market is the incorporation of mixed-use elements. Today’s developments often include retail spaces, providing students with convenient access to goods and services while creating additional revenue streams for property owners.

Core Spaces is integrating retail space into all its new projects, ranging from 4,000 to 10,000 square feet. This shift reflects a broader trend in real estate toward mixed-use communities that cater to the needs of both students and young professionals.

Students today also expect more from their housing than ever before. According to a survey by RealPage, top amenities driving demand include resort-style pools, state-of-the-art study spaces, and luxurious common areas. Over 80% of students indicated that they are willing to pay more for housing with enhanced amenities like fitness centers, upgraded appliances, and communal social spaces.

Developers are responding by creating spaces that resemble high-end apartment communities rather than traditional dorms. These features not only attract tenants but help retain them, making the properties more profitable over time.

Why Now is the Time to Invest

The future of off-campus student housing is bright. As the gap between supply and demand widens, the opportunities in this sector are immense. Whether you’re looking to develop a new project or invest in an existing one, now is the time to act.

At Conservice, we help property developers and managers optimize their student housing investments. With our suite of utility management services, we ensure that every bed pays its fair share, reducing overhead and boosting profitability. Our detailed data analytics help assess potential development sites and manage ongoing projects efficiently.

Now is the time to go big. Contact us today to learn how we can support your next off-campus student housing development.