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Student Housing at D1 Schools Have Lower Cap Rates

D1 Schools housing

By Les Shaver

While student housing at Power 5 conferences traditionally sold at lower cap rates, other Division 1 schools closed the gap this year.

Traditionally, if you own student housing at a Power 5 conference, there’s a good chance, your assets have more value than properties at schools in other conferences.

According to CBRE, cap rates at Power 5 schools in the Atlantic Coast, Big Ten, Big 12, Pac-12 and Southeastern football conferences, acquisitions were an average of 5.40 percent in the first half of 2019. CBRE says Power 5 schools also had the majority of total student housing investment volume, with nearly half of all transactions in H1 2019.

“Football works as a very effective marketing tool for universities and creates value for student housing properties. The strong football programs in Division I schools, and particularly in the ‘Power Five’ conferences, create national branding and prestige. In turn, these ‘football schools’ recruit more students, as evidenced by the spike in applications following the NCAA National Championship game. These characteristics give investors’ confidence in the sustained superior performance of the student housing assets serving ‘football schools’,” said Jaclyn Fitts, CBRE’s Director of National Student Housing.

Cap rates for student housing at Division I non-Power 5 universities, such as Boise State, University of Central Florida, and San Diego State University, are catching up though. Cap rates at those schools came in at 5.43 percent over the first half of the year. Cap rates for student housing assets at non-Division I universities was 5.83 percent, according to CBRE. Part of the what is holding back pricing at these schools is that they don’t have big football programs. 

“The power of football to attract students, secure stable or upward enrollment trends and enhance national recognition is spreading beyond the elite football conferences. Investors are looking at student housing serving Division 1 schools that are not Power Five conference members; these universities benefit from strong student growth like many flagship universities while offering higher cap rates,” Fitts said.