Student Housing Business

SEP-OCT 2018

Student Housing Business is the voice of the student housing industry.

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INVESTMENT SALES September/October 2018 46 The Home Stretch The student housing industry is poised for a strong fourth quarter for investment sales. With fewer large transactions in 2018, investment sales brokers are reporting a "return to normal" with a greater number of small portfolio and one-off transactions. By Randall Shearin I Investment sales brokers are pre- dicting a strong fourth quarter for student housing acquisitions. While there are no mega-portfolio transactions in the offing, many investment sales executives in the industry say that the fourth quarter of 2018 is lining up to be similar to the "normal" years of 2013, 2014 and 2015, when a large volume of single assets and small portfolios came to market. That is, in fact, what many are seeing come to market this year. While cap rates have continued to com- press over the past year, the avail- ability of capital to buyers is bol- stering appetites for acquisition. "When you compare cap rates across the country and through all classes and vintages of stu- dent housing, cap rates are still inside of where they were last year," says Ryan Lang, executive managing director of ARA's Stu- dent Housing Group. "We are see- ing more one-off transactions this year than last year. From a seller's perspective, you have more capi- tal now than has ever been in the space. We get calls on a weekly basis from capital groups who are looking at student housing." "Over the past few years, we have seen an equal number of transactions that have occurred across all four quarters, with the exception of the second quar- ter," says Jaclyn Fitts, director of CBRE's National Student Hous- ing Group. "My guess is this year we will see a trend of more trans- action volume in the second half of the year versus the first. Many sellers waited to bring assets to market until their rent rolls were finalized. That is what used to happen in 2012 and 2013." Supply and Demand One of the biggest drivers of market dynamics and pricing is supply and demand. And there has been a lot of supply of pur- pose-built student housing added in many markets over the past few years. At the same time, there have also been some delays with deliveries. For both of these rea- sons, some projects — new and old — have experienced weaker occupancy rates. Whereas it used to be common for a new project to sell once it had fully leased — prior to even being occupied — it is now increasingly common for a developer to own the project for at least one academic year. That hold time allows the project to go through two leasing cycles and provide some proof of stabiliza- tion to a potential buyer. "Many buyers now prefer a full year of operation because pre- leasing has been a little bit slow across the board," says Greg Gon- zalez, director of student housing for Berkadia. "Some of that is because of delivery issues, which cause owners in the market to use concessions and incentives more often to get new deals leased. Many builders are now hold- More Than Brokers. With our growing footprint across the US, Colliers International Student Housing Group is pleased to team with in-house service teams specializing in: Brokerage Appraisal Debt Origination Equity Placement Market Research Demand Studies DOROTHY JACKMAN +1 727 298 5337 SEAN BAIRD +1 727 450 6158 JAMIE SWICK +1 813 605 5599 JONATHAN HOLT +1 813 221 2290 To learn more about our services call a member of our team: JACLYN FITTS Director of CBRE's National Student Housing Group

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