Private investment in student housing, specifically in dormitories, saw a slight uptick in the second quarter of 2023, according to data from the Bureau of Economic Analysis (BEA). The investment rose by 1% to a seasonally adjusted annual rate (SAAR) of $3.6 billion, following a 6.4% increase in the first quarter of 2023. Despite this growth, private fixed investment in student housing is still 8.7% higher than the same time last year but remains below pre-pandemic levels.
Recovery from Pandemic Decline
The student housing sector experienced a significant decline during the pandemic. In the aftermath of the Great Recession, private investment in student housing surged as college enrollment grew from 17.2 million in 2006 to 20.4 million in 2011. However, with the onset of COVID-19, enrollment dropped, and in-person classes were replaced with virtual learning, resulting in a sharp decline in private investment.
In the final quarter of 2019, private investment in student housing peaked at $4.47 billion (SAAR), but by the second quarter of 2021, this figure had plummeted to $2.93 billion (SAAR). Enrollment also took a hit during this period, with a 3.6% decline in fall 2020 and a 3.1% decrease in fall 2021, according to the National Student Clearinghouse Research Center.
Post-Pandemic Recovery
As the pandemic officially ends and colleges return to in-person learning, the demand for student housing has seen a steady recovery. With students returning to campuses, the private investment in dormitories is expected to continue its gradual rise. This rebound highlights the ongoing need for student housing as enrollment numbers stabilize and grow, contributing to positive momentum in the sector.
This slight increase in investment marks a positive shift for student housing after a prolonged period of disruption. However, while recovery is underway, the market is still working to return to its pre-pandemic levels of growth and investment.
Looking Ahead
As the sector continues to recover, builders and investors may want to consider capitalizing on the trend by seeking financing solutions tailored to student housing projects. With favorable market conditions, the demand for construction loans in this sector could see an uptick, potentially driving future growth opportunities in student housing development.
For developers and investors, monitoring these trends will be crucial in ensuring they are well-positioned to take advantage of the market’s recovery while navigating potential risks.