Newmark’s Ryan Lang: Student Housing Demand Remains Elevated

Features| Paul Bubny

As head of Newmark’s student housing team, Ryan Lang brings years of experience with institutional, public and private investors to the conversation. He’s seen this property type rebound strongly from an uncertain future during the pandemic, when it seemed as though remote learning would eliminate the need to be on or near campus. ApartmentBuildings.com caught up with Lang recently to assess the current state of the market.

Q: During the pandemic, when most colleges and universities conducted classes remotely, student housing was considered potentially obsolete. Plainly that long-term view was disproven by the sector's recovery, but how did the pandemic influence the current market?

A: Things have changed pretty dramatically from 2020 to where we sit today. In 2020, it looked as if the world was ending in terms of student housing. Universities were uncertain about how to tackle the situation. You had kids living in their parents' basement. And a lot of institutional appetite for the sector dried up in a pretty significant way. But we found there were some smart, prudent investors that invested through COVID, when student housing was probably at the absolute bottom, and were rewarded pretty handsomely over the past couple of years based upon how the fundamentals have bounced back.

For a year and a half to two years during 2020 and 2021, we saw enrollment down. But things became normalized in terms of enrollment and how groups handled on-campus and off-campus housing. Enrollment picked up dramatically and in a very significant way. This helped address a couple of issues that were on the minds of prospective investors. And one of them has been, how will online education possibilities disrupt the traditional college experience? That question has been out there for a decade now. When COVID hit, it accelerated interest in that question. And we found very quickly that students had no interest in taking classes from their home. They wanted to be around their friends. They wanted to be in class listening to an actual professor and getting real-time experience in group settings. We found that was true across the board.

Q: How do current market fundamentals (asking rents, pre-leasing levels and occupancy, pricing for investment sales) compare to historic highs?

A: The 2023 academic year was the best recorded year on record by a long shot. Average rents were up double digits across the board, and you had pre-leasing at its fastest clip on record. For 2024, we're not quite to the same level in terms of average rates. But if you look at it across the country right now, you have average rent growth at just over 7% to 7.1%. Pre-leasing and current occupancy are about 200 basis points below where we were at the same time last year. But if you compare it to pre-COVID levels, normalized levels, we're still far above, from both an occupancy and rental rate perspective, where we've ever been in the student housing space.

Q: How does this compare to current fundamentals for the broader apartment market?

A: You have just under $70 billion worth of capital allocated to the alternative asset classes right now. Roughly 90% of that capital is allocated toward student housing and self-storage and healthcare-related product. You’re seeing that because of how the fundamentals of student housing hold up not only to other asset classes, but specifically to multifamily. In conventional multifamily, rents across the country are mostly flat. In student housing, you’re seeing high single-digit effective rent growth for 2024 across the country. And you're likely going to see somewhere between 6% and 8% average effective rent growth for the 2025 academic year as well.

Q: Is the student housing market's strength pretty broad-based, or is there a bifurcation in which properties near the most sought-after schools are considerably above average for pricing, rent growth, occupancy, etc.?

A: There’s no doubt that there’s a bit of a bifurcation between Tier One and Tier Two, particularly those universities and submarkets that did incredibly well this year in terms of double-digit or high single-digit effective rent growth. A lot of that has to do with supply demand fundamentals and enrollment growth. But if you look at the major public universities across the country, the vast majority performed exceptionally well. If you look at the Ivy League and some of the top tier academic institutions across the country, again, the vast majority performed exceptionally well. Where you tend to see the drop-off right now are smaller schools that are sub-20,000 enrolled and don't have a renowned academic institution name behind them.

Q: Are you seeing a lot of new faces among student housing investors or are they people who have been doing this for a while?

A: It’s both. But I think the biggest story is definitely the appetite from new equity that’s looking to scale up in the sector. They see that there's still some capital markets dislocation and multiple opportunities to partner with great sponsors who have been in the space for a long time, sometimes via recapitalizations.

Q: What advice would you provide to inexperienced investors?

A: Find a great partner to joint venture with. If you can find a way to get a great sponsor that truly understands the operational differences in student housing versus apartments, it makes all the difference in the world.

Other Features

Baltimore’s a Case Study for Multifamily Stability

In contrast to some of the Sunbelt cities that have weathered sharp declines in rent growth, the Baltimore metro multifamily market has been steadier in 2024. According to locally based Harbor Stone Advisors, which specializes in private client and middle market multifamily investment sales in Baltimore and the broader Mid-Atlantic region, the year has seen...

No Signs of Slowdown for the Student Housing Boom

The past few years have proven resilient for student housing, with the sector remaining strong. 2024 has shown continued momentum, with significant amounts of capital targeting student housing. We spoke with Jack Palms, VP of Acquisitions at RREAF Holdings, on why student housing stands out and what the future holds for the sector. Q: With...