Key insights from the Interface Student Housing Conference

Just 16 years ago, the Interface Student Housing Conference was a fledgling event in Austin, Texas. No one organized CRE conferences in Austin back then, but Interface took the risk, and the move paid off in spades. The conference became an instant classic, a must-go event that now attracts big institutional and international attendees.  

Walker & Dunlop had the pleasure of attending this year’s event, which continues to offer a personalized vibe despite its impressive growth and track record. Here are a few of our key takeaways from the event and what we predict will happen in student housing in the coming months and years.

1. The student housing space is growing significantly

Based on attendance at Interface this year, there are more new people entering the student housing space than we’ve ever seen before. Many traditionally conventional multifamily clients are now interested in student housing. There’s a lot of deal flow and activity in this space, and it shares many similar characteristics as the multifamily market.  

As the old saying goes, if it looks like a duck and walks like a duck, it’s probably a duck. If investors can do a student housing deal in roughly the same market as a multifamily complex, it’s wise to go where the deals flow. We’re seeing a lot of interest here, which brings us to our next takeaway:

2. Interest in student housing outweighs available deals

From a transaction standpoint, more buyers (especially new buyers) and equity in the space are fighting for fewer deals than we’ve ever seen. Buyers are willing to put money out there, but sellers are holding onto their properties. They’re thinking, “Why would I sell in this cap rate environment if I don’t have to?”

The few deals that come to market are overwhelmed with interest—at the rate of 15 bids or so per property. People are doing things outside their norm because they must put money out. They might be shortening due diligence, offering more money, and settling for higher interest rates. The market is becoming extremely competitive.  

3. Newcomers are setting realistic expectations for an anything-goes market

It’s a tale of two cities: First, folks at lease-up feel positive, but some are stuck at 70 percent leased. We wanted to know why this was the case.

We polled everyone we sat down with at the conference and discovered a couple of things:

- FASFA is taking longer than before to verify grants. Until students have the money, they can’t lease their room. This is, at least in part, due to an overhaul to the FAFSA system, which expanded Pell Grant money and made the FAFSA system easier to use.  

- Some markets have slowed dramatically. If students pay $60K per year to attend school, rent becomes too expensive. Many students choose to live at home while they wait for rents to fall back down to earth.

We’re also seeing the theme of everyone wanting to buy but no one wanting to sell. One of our producers here has a stack of offering memoranda from last year (what we call the “OM Graveyard”). One by one, we have sellers calling us saying they’ve tried to sell, they’ve collected good rent, but now the loan is due, and they want out.

Yes, Walker & Dunlop is bringing back OMs from the dead. We’re bringing deals back to the table and having many conversations about deals of yesteryear.

Even when new sellers are coming to the market, they’re not bringing false aspirations with them. They know interest rates are high. Inflation is real. Rents are out of control, and so are expenses. It is what it is, and people are coming to the market with a realistic perspective. They are real sellers and people can only pay so much, so we’re not seeing many time wasters. They’re just holding and operating while waiting for a buyer — and right now, there’s plenty of interest.

4. Student housing aspirations remain strong in an otherwise shaky CRE space

Based on our interactions with investors, buyers, and owners in student housing at the Interface conference, the insights we gathered, and the data we’ve collected over the last several months, we believe this should be our best year in quite some time.  

Operationally, student housing investors are feeling some pain, but you can sell just about anything in the student housing space right now — something that can’t be said for many other areas of commercial real estate.  

What’s next in student housing for 2024?

The 2024 Interface Student Housing Conference in Austin was the strongest we’ve seen since we’ve been attending, which bodes well for the industry as a whole. Despite sky-high rents, tuition increases, and an unpredictable economy, students continue to line up for college and keep occupancy rates at a comfortable high.  

We expect this asset class to maintain its strength in the coming months and years — and we explain why in our latest Student Housing Report. Download the 2024 Student Housing Outlook for a more detailed look into the industry and the latest trends and insights.