I was sent the following report by a Commercial Realtor in our office, Erik Snyder, who emphasized the importance of student housing in our local market (Tallahassee, Florida). I found it to be not only interesting, but also uplifting as we fight through this corrective market.
Student Housing Multifamily Apartment Property Niche
The need for privately owned near campus student housing will be greatly impacted due to three major factors: 1) The Echo Boom generation is reaching college age boosting the number of people turning 18 over the next decade to 75 million; 2) an increasing percentage of high school graduates are enrolling in colleges and universities; and 3) public universities are under increased financial pressure due to state budget deficits which limit funds available to pay for the cost of additional university owned student housing.
According to a recent study performed by the National Multi Family Housing Council, Student Housing 101: Where are the Opportunities?, as a result of the demographic trend increasing the number of college age students, "student housing is becoming one of the apartment industry's most important niche opportunities." Due to the large increase in the population size of college age students and the increased percentage of the population obtaining a post high school education, university enrollments have been rapidly increasing.
Of 118 colleges and universities recently surveyed by College Planning and Management Magazine, the on-campus school owned student housing capacity was, on average only 23.7 % of the total current student population. The remaining and projected increasing number of students must look for near campus housing elsewhere. As colleges and universities remain unable to meet the demand for housing themselves, well located privately owned student housing apartment buildings will continue to achieve high occupancy levels and increased cash flow. Occupancy levels and the ratio of rental income to operating expenses are often far superior in the student housing niche as compared to traditional apartment buildings.
Positive Demographic Trends
The current decade is ushering in a steady and significant increase in the number of school-age children and young adults. Primary schools through colleges will accommodate an estimated 94 million students by the end of the century, representing an increase of more than 42 million from 2000. By comparison, the school-age population rose by 30 million during the 20th century. As a result, demographic trends will be favorable to demand for university education and accompanying student housing in the coming years.
The Echo Boom Generation Comes of Age
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What makes this growth trend different from the surge in the late 1960s is that this most recent upswing is a long, rising wave, with no immediate fall-off in sight. Bolstered by the Baby Boom Echo and the Millennial Boom, college enrollment will stay on a strong course and continue to increase for several years. The Department of Education projects that nationally, enrollments will climb to 18.2 million students by 2013 for an increase of 1.8 million during the next decade alone.
It seems to me we should be anticipating continued strong demand for student housing in the Tallahassee Market for years to come.
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