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Student housing market expected to improve in 2024

Student Housing

Student housing market expected to improve in 2024

Fred Pierce, President and CEO of Pierce Education Properties, discusses debt in the student housing market, leasing, and gives a 2024 market outlook.

By Quinn Purcell, Managing Editor | February 13, 2024
AI student housing dorm room
AI image courtesy Vusal, Adobe Stock

The past year has brought tough times for student housing investment sales due to unfavorable debt markets. However, 2024 offers a brighter outlook if debt conditions improve as predicted.

Fred Pierce, President and CEO of Pierce Education Properties, a privately held owner and operator of student housing, provided his commentary on the financial marketplace and state of student housing in a recent Q&A.

Student Housing Market Highlights:

Investment sales

Though low in 2023 due to unfavorable debt markets, investment sales are expected to rebound in 2024 with improving debt conditions.

“The investment sales market in student housing this year, much like all of commercial real estate, has not been very voluminous,” says Pierce. “In fact, some are expecting perhaps 20% of the volume that has been realized in recent years.”

A positive area for loan assumptions is in the places that didn’t look promising in previous years, but have now become attractive in the current market. According to Pierce, 80% of the deals that Pierce Education Properties are underwriting in 2024 will involve a loan assumption.

Debt markets

Debt markets were challenging in 2023 with high interest rates, but potential rate reductions  offer a positive outlook for 2024.

“The debt markets have been the subject of the year 2023 for sure,” says Pierce. “In commercial real estate, we've all enjoyed real estate interest rates being at almost zero for decades. And quickly over the last 18 months, those have skyrocketed to now be over 5 percent and near about 5.25 percent”

According to Pierce, that has taken people's variable rate loans and made them triple or quadruple what they were just a year ago. However, the fixed rate debt markets are now below 4.3% as of early December—coming down almost three quarters of a percent.



The “bright light” in the student housing market outlook is that development has slowed down. As lenders have gotten more conservative, developers have found it more difficult to build projects to meet their return expectations.

“The delivery of new inventory this year was below 40,000 beds—the lowest it's been in about 10 years,” says Pierce. This has positively impacted rent growth.


Early indications suggest a positive outlook for 2024 with high pre-leasing rates and rent growth surpassing last year. Just 3 months into the 2024 leasing cycle, we're already matching the robust pace of last year with pre-leasing at 42 percent.

“Student housing is a real bright spot in the commercial real estate sector today, and it starts with pre-leasing,” says Pierce. “As a result, there was strong rent growth and it was over 10% for the year.”


Pierce suggests we’re looking at a “return to normalcy” in the second half of 2024.

“It's going to take some improvement in the debt markets, but there is a strong outlook for investment sales in the coming year.”

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