US Opportunity
In the United States, the Obama administration has championed higher education as “the ticket to the middle class”. Consequently, the uptake of tertiary education is higher than ever, with around 21 million students currently in the system – approximately 5.7% of the total population.
By 2020 total enrolments are likely to increase to 23 million, but this figure could be even higher if President Obama’s proposal to make two years of higher education free for all Americans is passed.
The President’s oft-repeated goal is that by 2020 the US will have the highest proportion of college graduates in the world. His belief in the value of education and his administration’s investment in the sector is paying off; the US is home to 109 of the Times Top 400 Universities in the world.
Because of America’s reputation on the global stage for quality education, it attracts more foreign students than any other country – 23% of all overseas students. Asians account for the bulk of international students in the US, mainly originating from China (29%). The US is also popular with students from India, South Korea and Saudi Arabia. The number of international students in the US grew at a rate of 19% between 2001 and 2011 and looks set to continue. By 2025 the number of foreign students globally is expected to hit 8 million – with the majority seeking an English-language education and the US being the number one destination. Demand from international students has been fundamental to the expansion of the student accommodation sector in the country, in terms of both size and quality.
This demand from these wealthy international students has been fundamental to the expansion of the student accommodation sector in the country, in terms of both size, value and quality.
The US has led the way in the private, purpose-built, student housing market since its emergence in the early 1990s. Annual investment into the US student housing market is now at $2.6bn on average. However, despite the success of major investments into the sector, PBSA still only accounts for 9% of the student housing market. The bulk of the market (62%) is privately owned rental accommodation, which is often of sub-standard quality or poorly located. As a result, there is a real and ever-increasing demand for quality purpose built student housing in close proximity to colleges and universities throughout the country.
One sign of the USA market’s maturity is the number of student housing real estate investment trusts (REITS) that are now traded. American REITs – although the first was only established in 2004 – are among the biggest investors in the sector today, owning 30% of the market. A recent like for like comparison showed Student REITS matching the S&P 500 performance of 100% gains since 2009, although the average S&P dividend yield is a little over 1.8% PA against average REITS yields over 3.5 times higher – with much lesser associated volatility risk.
The north east of America has the highest levels of purpose-built student housing (college or private), led by Vermont (34%) and Washington DC (33%).
Meanwhile, despite being home to the most or largest Times Top 100 Universities, states such as California, South Carolina, Texas and Florida, have a low percentage of students living in purpose-built accommodation, suggesting growth potential.
