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Student Housing Business Survey: Investment Sales Volume Largely Dependent on Universities Reopening for Fall Semester

Source: Student Housing Business survey

By Katie Sloan, Associate Editor of Student Housing Business

The coronavirus pandemic has had a major impact on all aspects of on- and off-campus student housing. In an attempt to better assess that impact and the sector’s outlook for the future, Student Housing Business conducted a survey of industry professionals over the course of several weeks in May.

The survey was separated by industry function for specific elements of the business, allowing SHB to better understand the pandemic’s distinct influence on each segment of the industry. Of the survey’s 569 respondents, 27 defined their company’s role in the industry as that of an investment sales broker. In this segment of the industry, 15 percent of companies let go of or furloughed employees at the corporate level and 30 percent instituted pay cuts.

Are investment transactions still happening during the pandemic? The response is mixed, with half of the investment sales brokers polled during SHB’s survey indicating yes and half indicating no. Of those who responded yes, 70 percent are deals that are being re-traded.

When asked what kinds of buyers and sellers are still active, the response was predominantly 1031 exchange buyers and sellers and opportunistic buyers looking for dramatic discounts. Several respondents noted that most groups are preparing for late third- and fourth-quarter transactions.

Respondents indicated that the overall investment sales market has slowed down by 79 percent due to COVID-19, and 75 percent of those polled are expecting a surge in transactions if colleges and universities open in the fall.

Assuming universities and colleges reopen for the fall semester, 35 percent of respondents expect pricing to remain the same when compared to prices seen in fourth-quarter 2019. Thirty percent of those polled anticipate prices being down 10 percent; 20 percent expect pricing to be down by 20 percent; 10 percent anticipate prices to be down by 5 percent; and only 5 percent of respondents expect prices to increase.

Conversely, 60 percent of respondents expect that the investment market will come to a complete standstill if universities and colleges don’t open in the fall.

When asked whether the coronavirus pandemic will positively or negatively impact investor interest in the student housing sector this year, 55 percent of respondents indicated that they believe it will have a negative impact and 10 percent indicated that the response from investors will be “very negative.”

Only 5 percent of respondents believe that the coronavirus pandemic will have a positive impact on investor interest, and 30 percent believe investor interest will be unaffected.

“There is a ‘pandemic risk’ that is having to be considered when looking at student housing that particularly and uniquely impacts our industry,” wrote one respondent.

Foreign investment is also expected to take a hit, with 70 percent of respondents indicating foreign interest would be negatively or very negatively impacted following the pandemic.

The survey was conducted via email from April 29 to May 27, and Student Housing Business will be covering the results in weekly installments. Check back next week for results from the perspective of lenders, debt capital sources and mortgage bankers/brokers. Click here to read about the survey results concerning how COVID-19 is impacting student housing development.

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