There is still opportunity to invest in US college cities, but move fast and know where to look

The sudden nationwide shift to distance learning last year in response to the Covid-19 pandemic shook the off-campus student housing sector in surprising ways.

In the spring of 2020, when it seemed like many college students would be staying home in their childhood bedrooms during online courses, some landlords panicked and sold rental properties on major college markets, fearing that vacancy rates would rise the following semester. The chaos provided unique opportunities: investors took advantage of low prices and low mortgage interest rates to harvest old properties for renovation or demolition.

At the same time, individual homebuyers looking to enter the rich, competitive markets that are typical near university research centers have seen new deals in places like Raleigh and Durham, North Carolina.

This year is very different, with the vaccine widely available and the majority of colleges planning to reopen in-person classes in the fall. But real estate experts who track college town markets say there is still opportunity for investors interested in college towns — if they move quickly and know where to look.

“The window is closing fast,” says Garrett Dederrian, director of market intelligence at Serhant, a residential real estate brokerage focused in New York and South Florida. “You certainly wouldn’t be able to make the kind of deal you would have in that very narrow window last year when the students weren’t going back to school.”

Experts say secondary markets, rather than major metro areas or on the coasts, are the best places to look now.

“So you’re looking outside the big San Francisco, and New York, and Los Angeles, and you’re really looking at these regional areas — Orlandos, Jacksonville, Scottsdales, Austin,” said Mr. Derderian.

Outward immigration from high-cost and densely populated states including California, Illinois, New York and New Jersey, and inward immigration to Colorado, Florida, Texas, Arizona and Nevada have played a significant role in driving prices higher in the public housing market since the pandemic began.

The broader American housing market mirrors smaller cities such as Austin and Texas; Boulder, Colorado; And New Haven, Connecticut, is experiencing inventory shortages, fast-moving markets, and rising prices, according to data compiled for Mansion Global by economists from The data compared listings citywide from 2019 through May 2021.

(Mansion Global is owned by Dow Jones. Both Dow Jones and are owned by News Corp.)

Experts say all of this could bode well for investors looking for a way to get into the student housing sector in these similar college towns and cities. Investors should follow the rental speed rates and the increasing rental rates. Another factor to consider is the number of purpose-built student housing off-campus compared to the regular housing stock, and whether enrollment has increased in recent years.

“Many of the most popular college towns that we would like to invest in have key similarities—

Strong job markets, lower cost of living compared to big cities like New York or San Francisco, and favorable tax rates on income if they have income taxes at all,” said Mr. Derderian.

Small towns are safe bets

College towns like Austin and Boulder are seeing strong performances in the housing market year on year, according to data provided by In Boulder, the average listing price for all property types is up 20% year over year, and average market days are down 17%.

Elizabeth Boyes, an investment expert in Boulder, owner and real estate broker at Coldwell Banker Realty, has seen demand for housing soar during the pandemic and rents have risen accordingly. The tenants were not limited to students who wanted to finish the semester in the city; Ms. Boys said she rented one of her downtown one-bedroom units to a Facebook employee from California who had been looking for a change of scenery while working remotely for a few months.

Several factors make Boulder a solid bet for investors who can be patient to reap long-term appreciation, according to Ms. Boise: large rental market (about 58% of households are tenant occupied), strict restrictions on how and where buildings can be built, and high quality In general, life in a destination city is desirable. Also key: Reliable demand for accommodations from students and professors associated with the University of Colorado Boulder, the state’s largest public university system, with more than 36,000 students.

“It’s kind of a unique microcosm of high demand, and there’s no way to scale, and that’s why the appreciation is so strong, at least in Boulder,” she said.

Experts say Austin is also thriving, thanks in part to immigration. The average listing price of $664,000 is up 18% year over year, while the average market days for all properties are just 13, down 68%. Inventory, based on active listings, is down 62% year over year, but views for each property are up 59% in that time, according to, showing a strong appetite from buyers of all categories.

Another factor for investors to consider is that a record number of colleges, including the state’s leading University of Texas in Austin, have dropped standardized testing requirements for applicants in 2021 and 2022 due to limited testing availability during the pandemic. This would expand the pool of applicants and increase enrollment; Community Impact Newspaper reported in May that UT-Austin, for example, received 13,000 more applications for Fall 2021 than in each of the previous three years. The University of Houston System, Baylor University in Waco, and Texas A&M University at College Station among others have rescinded test requirements at least through 2022, The Texas Tribune reporTed.

Other safe bets are small towns that are located away from other metro areas such as State College, Pennsylvania. Charlottesville, Virginia; and Champaign, Illinois, said JJ Smith, managing partner at CRG, the development and investment arm of Clayco, a design-and-build construction firm. Because adequate student housing is somewhat limited initially, investors have a kind of “captive audience” of potential tenants, and there are opportunities to rebuild, he said.

How do you read the sector now

From an investor perspective, “There is a lot more pent-up demand and capital than there are deals currently in place, and so we see significant pricing power for those assets that meet the characteristics of what all capital is after,” said Travis Prince, executive managing director who leads the capital markets team. National Student Housing at Cushman & Wakefield, a global commercial real estate services company.

For investors looking for fertile ground for new construction or to purchase recently completed properties that have already been rented this coming fall, both Mr. Prince and Mr. Smith advise looking into the markets of Tier 1 universities (selective private research institutions) or Power 5 conferences, which are the elite of Where dexterity and sports revenue. The two brands comprise about 80 leading universities in the United States

Some off-campus student housing operators have already seen an increase in occupancy when dorms close in the spring of 2020, with some students deciding to end term while quarantined with friends in a shared apartment.

The phenomenon has prompted investors to look more closely at opportunities near Pennsylvania, Mr. Smith said, as a new 755-bed student housing development (which he worked on while working for a former company) was sold to a private investor in August 2020. At the time of sale, it was almost 100% leased for Fall 2020.

“This has really caught the attention of people, mostly institutional investors,” he said, as a sign of promise in the purpose-built student housing market. “We’re really starting to see a huge transaction volume, so buildings are now being bought and sold at record prices, post-pandemic, if we can relate today to post-pandemic.”

One of CRG’s projects currently under construction is a 679-bed student housing development in Columbia, South Carolina, home to the state’s premier South Carolina State University, with student numbers approaching 35,000 and trending higher. The $95 million project is expected to open in the fall of 2023.

During the pandemic, Mr. Smith said his company has noticed that the Columbia market has been among the top ten in terms of advance leasing speed and that rental rates have been growing as well — both reassuring signs of the potential for a return on investments after the pandemic.

Big City College “Cities” are slowly recovering

Meanwhile, permanent college “towns” in big cities like Boston and New York are still on the mend after being hit during the pandemic, according to data compiled by for Mansion Global. The stock is still higher than last year, but also moving faster than last year, indicating a gradual recovery in housing demand as the Covid-19 infection slows.

Seattle and other West Coast college cities, which rely heavily on students from abroad, could begin to recover from their pandemic losses in 2021-22. Last fall, a survey by the Institute of International Education found that enrollment of new international students at US higher education institutions shrank by 43%. In contrast, for the 2021-22 academic year, 43% of institutions reported an increase in applications from international students compared to 2020 levels, according to the Top Colleges Report.

According to’s analysis, “These urban centers will likely bounce back as vaccination rates continue to rise and local economies are once again boosted.”

With few exceptions, Mr. Prince expects the sector in general to return to normal in the second half of 2021, spurred by demand from students eager to get back to their friends and campus activities.

For example, Cushman & Wakefield’s student housing leases are “on pace” to where they were at the same time in 2020, Mr. Prince said. A more specific snapshot of the sector’s performance in 2021 will not be available until so close to the start of the school year.

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