Student Housing is not CRE
Student Housing Investing has grown in popularity with institutional investors. But investing in Purpose Built Student Housing is very different to CRE.
Over the last decade Purpose Built Student Housing has gained popularity across the institutional investor world. Whether interest in this segment of the real estate market will continue may depend on several factors.
Student Housing is typically characterised by shorter leases and more volatile cashflows, compared to traditional Commercial Real Estate. This can make the asset class more sensitive to a recessionary environment.
The counterbalancing effect is that during recessions, the demand for education rises as job prospects fade and wages face downward pressure. The result has been sufficient demand to sustain an historically resilient full-cycle risk return profile for Purpose Built Student Accommodation investments.
The question now is whether the unusual combination of a recession and a tight labor market will impact individuals decisions to work, or invest in themselves. The student housing demand curve could be driven by labour markets or the quest for knowledge. Data points which are being closely watched by investors.
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The U.S. Single Family Rental Housing market may be one third of the size of the U.S. Commercial Real Estate Market, but it should not be ignored.
At just under 20% of the total U.S. Single Family Home market value, and 30% of U.S. Commercial Real Estate market value, the U.S. Single Family Rental Housing market is now on the radars of Institutional Investors.
To diversify risk-return streams across their U.S. real estate portfolios, investors are now looking beyond the traditional portfolio building blocks and buildings.
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