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Deals & Dealmakers

Elite college football programs drive capital to student housing

Non-Power Five schools such as Boise State, which has a strong football program, are gaining significant national attention among real estate investors.

Student housing linked to universities with elite football programs attract the best pricing and greatest demand from investors, drawn by the large and consistent enrollments, as well as the stable cash flows that these properties offer, according to the latest analysis from CBRE.

College football conferences are strongly correlated with student housing capitalization rates.

CBRE analysis finds that student housing at colleges with elite football programs trade at lower cap rates than properties serving colleges with lesser-quality football programs.

“Football works as a very effective marketing tool for universities and creates value for student housing properties,” said Jaclyn Fitts, CBRE’s director of National Student Housing.

“The strong football programs in Division I schools, and particularly in the Power Five conferences, create national branding and prestige. In turn, these football schools recruit more students, as evidenced by the spike in applications following the NCAA National Championship game. These characteristics give investors confidence in the sustained superior performance of the student housing assets serving football schools.”

At the NCAA’s Power Five universities (Atlantic Coast Conference, Big Ten Conference, Big 12 Conference, Pac-12 Conference, Southeastern Conference), student housing acquisitions had an average cap rate of 5.40 percent in H1 2019 — 43 basis points lower than cap rates for properties serving schools with non-Division 1 programs.

Power Five universities also captured the majority
of total student housing investment volume, with nearly half of all transactions in H1 2019.

Strong demand from students for limited spaces at the main campuses of large public universities — locations with leading sports teams and offering vibrant downtown areas — is leading to the emergence of new destinations in satellite campuses.

“The power of football to attract students, secure stable or upward enrollment trends, and enhance national recognition is spreading beyond the elite football conferences. Investors are looking at student housing serving Division 1 schools that are not Power Five conference members; these universities benefit from strong student growth like many flagship universities while offering higher cap rates,” added Fitts.

Examples of non-Power Five schools with strong football programs that are gaining significant national attention, along with rapidly growing enrollments, and may be of interest to commercial real estate investors include Boise State, San Diego State University, University of Central Florida, universities of Cincinnati, Houston, Memphis and South Florida.

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