Currently I am looking at an acquisitions role (Washington DC) in student housing and wanted to get some opinions on the asset class. I love the role/company but I am nervous about the outlook in the market. Deals are getting tighter with direct conflict coming from local cities and even universities.
Simply put, does student housing pigeon hole you?
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It doesn't pigeon hole you, but I would be cautious. For a while, student cap rates were in lockstep with market rate multi, but now they're trending at least 50 bps higher. A lot of the major student markets are fully built, if not overbuilt.
The skills are transferable and it's an early roll, no reason you'd get "stuck" in the class. That being said, big emphasis on @CRE's point above. It did not take long for the hot SH markets to reach capacity/oversupply and won't be long for runner up markets to see the same. Also worth noting there are a few major players that dominate the space.
One thing I will add is that student housing markets "trend" in terms of development. Strong enrollment growth data comes out on a previously ignored university, developers flock there and overbuild, then a new great market comes along. Some markets are steady-eddy, though, due to restrictions on supply from a zoning or land availability perspective.
Examples: TAMU and University of Oklahoma got swamped in recent years and that market is still performing terribly. Austin, TX is currently getting hit hard and will probably be overbuilt in the next two years. Meanwhile, Penn State University is a powerhouse in terms of enrollment but the town of State College strongly discourages new supply, so the market has remained steady with a trickle of deliveries.
So an investment thesis of focusing on markets with natural barriers to entry makes even more sense in student housing than in other asset classes, but it is overall an asset class with a promising future.
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