Half of All U.S. Student Housing Investment Serves

Half of All U.S. Student Housing Investment Serves "Power Five" Football Schools Alone

Commercial News » Gainesville Edition | By Michael Gerrity | August 29, 2019 9:04 AM ET

According to the latest analysis from CBRE, student housing linked to U.S. universities with elite football programs attract the best pricing and greatest demand from investors, drawn by the large and consistent enrollments, as well as the stable cash flows that these properties offer.
College football conferences are strongly correlated with student housing capitalization rates⁠--a valuation measure used in commercial real estate to indicate investor interest (the lower the cap rate, the greater the appeal and value). CBRE analysis finds that student housing at colleges with elite football programs trade at lower cap rates than properties serving colleges with lesser-quality football programs.
"Football works as a very effective marketing tool for universities and creates value for student housing properties. The strong football programs in Division I schools, and particularly in the 'Power Five' conferences, create national branding and prestige. In turn, these 'football schools' recruit more students, as evidenced by the spike in applications following the NCAA National Championship game. These characteristics give investors confidence in the sustained superior performance of the student housing assets serving 'football schools'," said Jaclyn Fitts, CBRE's director of National Student Housing.

Power Five Conferences Draw Most Capital

At the NCAA's Power Five universities (Atlantic Coast Conference, Big Ten Conference, Big 12 Conference, Pac-12 Conference, Southeastern Conference), student housing acquisitions had an average cap rate of 5.40% in H1 2019--43 basis points lower than cap rates for properties serving schools with non-Division 1 programs. Power Five universities also captured the majority of total student housing investment volume, with nearly half of all transactions in H1 2019.
Strong demand from students for limited spaces at the main campuses of large public universities--locations with leading sports teams and offering vibrant downtown areas--is leading to the emergence of new destinations in satellite campuses.
"The power of football to attract students, secure stable or upward enrollment trends, and enhance national recognition is spreading beyond the elite football conferences. Investors are looking at student housing serving Division 1 schools that are not Power Five conference members; these universities benefit from strong student growth like many flagship universities while offering higher cap rates," added Ms. Fitts.
Examples of non-Power Five schools with strong football programs that are gaining significant national attention, along with rapidly growing enrollments, and may be of interest to commercial real estate investors says CBRE include:

  • Boise State University
  • San Diego State University
  • University of Central Florida (UCF)
  • University of Cincinnati
  • University of Houston
  • University of Memphis
  • University of South Florida

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