Why Investors Flocked To Class A Student Housing

Class A sales represented three-quarters of total trades in 2020, with average pricing of $355,000 per unit and $129,000 per bed.

Pricing for Class A student housing properties eclipsed pre-COVID levels in 2020, according to a new analysis from Walker & Dunlop on pricing metrics in the space. 

The average price per unit clocked in at $251,000 and the price per bed hit $96,000 last year, with the Pacific Coast reflecting the highest pricing for both. Overall, pricing within the sector increased 18% on a per-unit basis.

“It is extremely promising that we saw such an increase in student housing pricing, despite the downturn that the pandemic caused,” the report notes. “It speaks to the resiliency of the space.”

Buyers primarily flocked to “stabilized, high-end, often high-rise properties in the heart of campus, where

the high price per bed can offset high construction and land costs,” the report states. But of particular note: Class A properties in primary markets – particularly those in the much-maligned urban core – actually maintained pre-COVID pricing levels. This is reflective, according to Walker & Dunlop, of the high level of interest in the sector among institutional, foreign, and sovereign capital. 

Class A sales also represented three-quarters of total trades in 2020, with average pricing of $355,000 per unit and $129,000 per bed, both of which are all-time highs.  Respondents to a Walker & Dunlop survey on the space predict that Class A pricing will continue to rise this year and may hit above $130,000 per bed for the first time ever.

In the face of this flight to Class A quality, Class B and C sales tanked, with per bed pricing dropping 11% off 2019 levels for the former.  Class C sales accounted for 8% of all trades, with some all-cash buyers dropping in to grab distressed deals (if they could find them).

“In 2021, prospects for Class-B and C student housing sales remain TBD as enrollment trends, living habits, and financing conditions play out,” the report notes. “We’ll see people with their antenna up for core Class-A and others circling Class-B and C properties: Once the financing returns for these properties, we expect an influx of opportunity.”