The coronavirus pandemic had a huge impact on real estate investors. In the course of the past 15 months, malls have lost countless tenants to closures, hotels have seen record low bookings, and office buildings have grappled with widespread vacancies and sluggish leasing activity.
But things are looking up. The availability of coronavirus vaccines has made it so that many industries that took a hit during the pandemic are poised to recover, if not immediately then in time (malls being the one exception, given they were struggling before the pandemic began).
But if there's one sector of the real estate market that could really thrive in the near term, it's student housing. And that's something investors should keep on their radar.
A faster recovery and more rapid growth
Now that coronavirus vaccines are making it safer for people to rejoin society, foot traffic at malls is likely to increase, hotel bookings should pick up, and office buildings will see more workers coming back. But demand for student housing could outpace all of that in time.
Net operating income in student housing is expected to grow nearly 2% after 2025, according to commercial real estate intelligence firm Green Street. For malls, hotels, and office buildings, profitability growth projections are all at 1.3% or less.
While it's true that demand for student housing waned during the pandemic itself when colleges across the country went remote, the outbreak has also spurred demand for off-campus housing that's notably more spacious than dorm rooms, which are known to be cramped. And that's a trend real estate investors may want to capitalize on sooner rather than later.
Over the past number of months, colleges and universities across the country have announced they'll be mandating coronavirus vaccines in an effort to bring students back to campus. And the more students who return to in-person learning, the more the need for housing will increase.
While student housing could see its share of growth in the next few years, revenue in that area could be impacted by several factors. First, the need for student housing hinges on academic enrollment, and some students may not be ready to return to campus this fall, either because they can't yet get a vaccine for health reasons or because they'll need to relocate from overseas and may not have the green light to do so.
Also, a lot of colleges have invested in remote learning and will likely continue to offer that option even once the pandemic is a thing of the past. And since an online education can cost a lot less than an in-person one, budget-conscious students may opt to get their degrees remotely.
But while student housing demand may be iffy for the upcoming semester, and remote degrees may threaten it on a longer-term basis, the sector is still expected to outperform other corners of the real estate market over the next few years. And that's reason enough for investors to consider buying income properties in college towns or putting money into student housing REITs (real estate investment trusts).