Brookfield likes the student housing business. The company noted that the student housing market in the U.K. benefits from strong market fundamentals. Most schools in the country are only able to provide a fraction of the housing their students need. As a result, students need to look outside their school for a place to live. That's why most of Student Roost's properties are at or near full capacity. Other European countries have similar dynamics where the ratio of students to beds is low, making demand for outside housing high.
Meanwhile, the U.S. housing market also benefits from strong fundamentals. According to the National Multifamily Housing Council, the U.S. will need 9.2 million beds to house students by 2031, up from 8.5 million this year. That's due to growing enrollments at public universities.
That growing demand will continue to keep occupancy high at existing properties. That should enable owners to steadily increase rents, growing their income streams. That's why Brookfield is seeking to join Scion to invest at least $1 billion into the sector.
They're not alone. Student housing has been a hot sector despite the pandemic's impact on demand. Blackstone's (NYSE: BX) non-traded real estate investment trust (REIT) BREIT recently formed a $784 million joint venture with Landmark Properties to acquire and recapitalize eight U.S. student housing properties with 5,416 beds. Meanwhile, TPG Real Estate Partners purchased Preferred Apartment Communities (NYSE: APTS) student housing portfolio consisting of eight properties and more than 6,000 beds for $478.7 million late last year. Institutional investors, like private equity funds, are increasingly allocating capital to the sector because of its history of generating steady income due to stable demand and its long-term growth potential.
Expanding further into a growing sector
Student housing properties produce stable income because of steady demand. It also boasts excellent long-term growth prospects due to projected enrollment growth. That's leading institutional investors like Brookfield to seek opportunities to pour even more capital into the sector. They believe those factors will enable these investments to generate attractive returns for their investors.