"Student housing isn't just real estate. It's really creating physical assets that are conducive to academic achievement," Bayless said as he showed off the building's large physical fitness center, movie theater and virtual driving range. The dorm offers private suites with full kitchens and baths, as well as traditional double rooms and communal spaces.
"They really know how to do this kind of housing right. They have a really good grip on the market, on what the students want, on what millennials want," said Robert Francis, Drexel's vice president of facilities.
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The building may scream luxury, but its rates are comparable to other on-campus housing. American Campus Communities' portfolio consists of 200 properties nationwide with close to 130,000 beds. It manages properties as well, which only add to the revenue stream. Projects like these are sorely needed, as aging dormitories built for the baby boom generation need to be replaced, and as the U.S. student population continues to grow. The company's shares are up nearly 19 percent this year.
"The fundamentals are really, really strong," said Mitch Roschelle, a partner in the real estate practice at consulting firm PWC. "When apartments get hot, the apartment derivatives tend to heat up also, that's part of it."
Student housing is now an estimated $4 billion to $5 billion business. While American Campus is the largest REIT player by far, others in the space include Campus Crest and Education Realty Trust.
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"There's definitely heightened interest in the segment, and because of that you're going to see some winners and some losers," said Christopher Merrill, co-founder and president of real estate investment firm Harrison Street Real Estate Capital, which invests in student housing.
Some markets will be overbuilt, and some schools could see enrollment dips. That is why developers are looking to big public universities for on-campus opportunities because enrollment tends to be more stable.
"It's very difficult to paint the industry with a broad brush and say, yes, student housing is going to be good at 4,000 schools and universities around the country, that's not going to be the case," he added.
As with other real estate sectors, international interest is driving growth and will continue to do so for the foreseeable future.
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"In 2006, foreign students enrollment in U.S. colleges and universities as a percentage of the total population was about 5 percent; in 2021 it jumps up to an estimated 12 percent," Roschelle said.