Chasing the Diploma: CRE and Higher Education

September 4, 2014

This is the time of year young adults are anxious to go back to college and that can mean big business for institutional real estate investors. The higher education sector is an important revenue source for our industry.

Development, expansions and remodeling all make higher education a lucrative business for developers and construction companies. However, schools usually own all of their real estate, including land, administration buildings, sports facilities and classrooms, which is why strategic CRE investors look for opportunities in the surrounding campus area, where colleges help boost local economies through retail and housing.

College students and faculty can flood a small college town or neighborhood of a big city with thousands of new residents, and those students and faculty need coffee shops, book stores, clothing shops, doctors’ offices, and of course, restaurants and bars to get through the school year ahead. These consumers are why commercial realtors are eager to represent the development of areas in and around campuses.

Even more lucrative than campus retail is student housing. Colleges and universities can’t always keep up with the growing numbers. This has started a trend of schools outsourcing the development and management of campus housing.

In a recent Llenrock Blog, Eric Hawthorn commented that schools “have discovered that owning, maintaining, and operating residential space for their many students is too costly and difficult for an organization whose primary expertise is education and research, not real estate management. That’s why many schools, whether flagship universities or small liberal arts colleges, have opted for assistance from… real estate firms specializing in the development and operation of student housing properties have become frequent partners with schools seeking to house students on or off campus.”

Also interesting is how the economy affects enrollment for higher education. During recessions, enrollment numbers tend to spike, but when the economy is stable, numbers will come down. Right now, we’re seeing a slight decline in enrollment from the recession, but numbers are still strong enough to make higher education a smart decision for commercial real estate investors.

Talk to the Intelica team about opportunities to invest in development, lease retail space, or buy property around flourishing campus communities.