MarketView: 2022 Year-End Report

The student housing sector experienced record transaction volume in 2022, all while impacted by capital market shifts due to high inflation and rising interest rates. The CBRE Student Housing MarketView: 2022 Year-End Report delves into transaction volume trends, buyer and seller profiles, and cap rate analyses of the past year.

Key Takeaways

• Total transaction volume more than doubled year-over-year to $22.9 billion in 2022. Notably, the privatization of ACC by Blackstone accounted for almost half of the total amount transacted, at $12.8 billion. The first half of 2022 was the largest first half of a year in the sector’s history, due to strong operating fundamentals and increased investor demand.
• In the midst of FED rate hikes, the 4th quarter of 2022 represented the lowest share of transaction volume across the year for the first time in more than a decade, as investors typically race to close deals before the end of the year. CBRE expects an overall decline in volume in 2023 compared to 2022, in line with expectations for the greater multifamily industry.
• Student housing cap rates have steadily compressed since 2016, with rates averaging 4.92% in 2022, marking the first year in the sector’s history average cap rates fell below 5.00%. Notably, capital market turmoil due to inflation and interest rate hikes place upward pressure on yields in the second half of 2022, instead of continuing the cap rate compression trend.
• Core student housing cap rates plummeted by 81 basis points to a trough in the first half of 2022, before rising 66 basis points in the second half of 2022 amidst the changing capital market environment.
• In 2022, nearly all cap rate compression was from Class A, pedestrian and Class B, non-pedestrian assets.  Institutional investors’ notable activity during the first half of 2022 drove the compression of cap rates for Class A, pedestrian product, while investors of student-to-multifamily conversions drove the compression for Class B, non-pedestrian product.
• Cap rates at Power 5 conference universities were 47 basis points lower on average than Division I, non-Power 5 universities--the largest spread since 2017. There were more transactions at Power 5 institutions in 2022 than all non-Power 5 universities combined, demonstrating strong investor focus on Power 5 universities.
• Fannie Mae and Freddie Mac’s overall multifamily production in 2022 of $142 billion was a small increase from the previous year. CBRE saw a strong recovery in their loan production for student housing in 2022.