Student Housing REITs: Spoiled By The Millennials

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• The millennial generation - the largest cohort in American history - supported the maturity of the student housing industry over the last decade into a mainstream institutional-grade real estate sector.
• At 23 years old, the youngest of the millennials are now out of college and entering the workforce and beginning to come full-steam in the undersupplied housing markets.
• For the student housing sector, growth has been harder to come by over the last half-decade. Enrollment growth, even at the highest-quality institutions, has been flat-to-down since 2012.
• Meanwhile, supply growth continues to be a headwind for the sector as capital remains plentiful. Off-campus units are also highly exposed to changes in university housing policies.
• Despite these headwinds, student housing REITs are perhaps the most “recession-resistant” REIT sector. Concerns regarding rising tuition costs are overstated by the widening gap between “sticker prices” and net costs.

Within the Hoya Capital Student Housing Index, we track the lone student housing REIT, American Campus Communities (ACC) which accounts for $6.4 billion in market value. Once viewed as a riskier asset class than traditional apartment REITs, the sector has matured over the last decade, no doubt helped by the robust demand for student housing associated with the enormous millennial generation. American Campus owns roughly 110,000 student housing beds of the more than 5 million purpose-built student housing beds across the country. ACC's portfolio is primarily on-campus or near the campuses of major 4-year public universities. Small-cap REIT Preferred Apartment (APTS) also owns a portfolio of roughly 6,000 beds.

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