Economic Landscape for Student Housing - NMHC | Home · 2018. 4. 5. · Sources: Bureau of Labor...

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Economic Landscape for Student Housing

Andrew J. Nelson, Chief Economist

Dorothy Jackman, Managing Director

Colliers International

#NMHCStudent @apartmentwire

Economic Overview

• Some Good News

• Some Concerns

• Student Debt


U.S. outpaces Europe but lags typical recovery.

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1 3 5 7 9 11 13 15 17 19 21 23 25 27Indexed g

row

th (

1.0

= s

tart

)

Quarters after prior peak

US UK Euro US Average

14

15

16

17

18

19

20

Trill

ion

s o

f $

Pre-Recession Trend

Actual

Forecast

Recovery continues but not making up for lost ground. Source: IHS Global Insight and Colliers International.

A Stealth Recovery A Tepid Recovery to Start

Real GDP: Actual vs. Pre-Recession Trend GDP Growth in U.S.: “Great Recession” vs. Europe and Typical


A Recovering Recovery Reaching Escape Velocity or Losing Steam?

Quarterly Year-over-Year GDP Growth Quarterly Year-over-Year Job Growth

Source: IHS Global Insight and Colliers International.

Forecasted

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%Avg. 1960+ = 3.1%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Avg. 1960+ = 1.8%


The Stealth Recovery: Not the Best of Times . . . But Good Enough for Property Markets

• Strong enough to drive tenant and investor property demand and yet . . .

• Not strong enough to overheat (most) markets or encourage excessive construction

Housing recovery gaining momentum

Jobs well past prior peaks

Consumers happier, healthier, and more confident

Credit markets benign


Single-Family Home Sales (Annualized, Millions) Housing Starts (Annualized Millions)

Housing Values (Case-Shiller 20-City Price Index)

Housing Recovery Gains Momentum

Source: Census Bureau

Source: S&P Dow Jones Indices; Jan. 2000 = 100

Source: Census Bureau

75100125150175200225

250500750

1,0001,2501,5001,7502,0002,2502,500

Multi-Family

Single Family

0.01.02.03.04.05.06.07.08.0


0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

All Other Office Based

Job Levels Well Past Prior Peaks • The U.S. lost 8.7 million jobs during recession and has now recovered 12.7 million jobs: +2.8% overall, +3.7% private

• Gains are broad-based across most (but not all) industry sectors

• “JOLT” (job openings and labor turnover) at pre-recession highs

Number of Jobs by Industry Relative to Jan. 2008 Nonfarm and Office-Using Employment (Jan. 2008 = 1)

Sources: BLS, IHS Global Insight, and Colliers International

2.8% 3.7% 4.9%

-14.6% -10.2%

7.1%

-1.8% 0.9%

5.4%

17.1%

-1.8%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Tota

l N

onfa

rm

Tota

l P

riva

te

Off

ice B

ase

d

Co

nstr

uction

Man

ufa

ctu

ring

Serv

ice

s

Wh

ole

sale

Re

tail

Tra

de

Tra

nsp

ort

atio

n

Edu

c./H

ealth

Go

vern

men

t


Stronger Households = Happier Consumers And Happy Consumers Spend!


Economic Overview

• Some Good News

• Some Concerns

• Student Debt


Sources: Bureau of Labor Statistics, Federal Reserve, and Colliers International

Unemployment: Long Term vs. Short Term Uneven Recovery: Median Family Income by Percentile

$0

$25

$50

$75

$100

$125

$150

$175

$200

$225

$250

Th

ou

san

ds

of

2013 $

Less than 20 20–39.9 All families

60–79.9 80–89.9 90–100

Some Headwinds Not Everyone Shares in Recovery

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Long-Term Unemployed Short-Term Unemployed


Divider Slide Title More Headwinds Declining Productivity and Population Growth Reduces GDP Growth

GDP: Worker Productivity and Population Growth By Decade: 1950s – 2010s

1.7% 1.3% 1.0% 0.9%

1.2% 0.9% 0.7%

2.6%

2.9%

1.9%

1.5%

2.1% 2.6%

1.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

1950s 1960s 1970s 1980s 1990s 2000s 2010s

Population Productivity

4.2% 3.0% 2.4% 3.3% 3.5% 1.9% 4.4%

Annual Total

Sources: BLS, Bureau of Economic Analysis, Census Bureau, and Colliers International


Risks / Headwinds Rising but Still Relatively Benign • Foreign economic slowdown / stagnation, esp. in China, Japan, and Eurozone

• Rising dollar a headwind for U.S. exports and mfg. (though positive for inflation)

• Geopolitical turmoil receding in most regions (except commodity-exporting nations)

• Timing and market reaction to the end of easy monetary policies

• Government shutdowns and other Washington parlor games

• No margin for error: all tools already in play

• Black swan events: Chinese property markets? Financial contagion? . . .

But . . . low oil prices and interest rates counter downside risks


Middle of the Night Concern: How Much Longer Can This (Recovery) Go On?

75

74

121

92

58

36

107

24

39

45

37

60

-

-

-

-

-

-

-

-

-

-

0 20 40 60 80 100 120 140

7/09-now

11/01–12/07

3/91– 3/2001

12/82–7/90

3/75–1/80

11/70–11/73

2/61–12/69

4/58–4/60

5/54–8/57

10/49–7/53

10/45–11/48

Post-WWII US Economic Expansions Total Months in Recovery

Total = 135 months

Avg. = 63 months

17.6% 17.7%

9.0% 7.7%

33.4%

11.7%

19.6%

23.7% 22.5%

6.3%

8.7%

16.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

US Economic Expansions Employment Growth from Trough

Δ = 8.2%

-9.5%

21.8%

10.9% 11.9%

52%

16.0%

23.3%

38.4% 42.6%

18.0%

13.0%

22.5%

-10%

0%

10%

20%

30%

40%

50%

60%

US Economic Expansions GDP Growth from Trough

Δ = 9.5%

Sources: BLS, Federal Reserve, and Colliers International

Note: Duration as of Sept 2015; GDP as of 2Q15; jobs as of August 2015

1

3


The Fed Outlook The Fed “Scorecard”

What Is the Fed Considering?

• GDP

• Unemployment

• Job Growth

• “JOLT”

• Inflation

• Wage Growth

• Global Growth

✔

✖

✔

1

4

Colliers International 2015

✔

✔

✖

✖

? • Another Lame Excuse


Economic Overview

• Some Good News

• Some Concerns

• Student Debt


College Affordability College costs rising much faster than CPI and incomes

Source: Bureau of Labor Statistics

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%

1000%

College tuition and fees Shelter

Medical care CPI

-50%

0%

50%

100%

150%

200%

250%

300%

Public 4-Yr Private 4-Yr Public 2-Yr Median HH Income

Tuition and Fees vs. Other Consumer Purchases (nominal $) Tuition and Fees vs. Median HH Income (constant $)

Source: U.S. Dept. of Education, NCES, U.S. Census Bureau


Student Debt (1) Student Loan Debt Rising Faster Than Other Consumer Debt

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

Student Loan Other Credit Card Auto Loan

+40%

-24%

+0%

+358%

1Q04 --> 2Q15

Source: FRBNY Consumer Credit Panel/Equifax

Consumer Debt Outstanding (in $trillions)

37%

10% 22%

31%

2Q15

12%

21%

33%

34%

1Q04

Student Loan OtherCredit Card Auto Loan


Student Debt (2) More Students Borrowing More Money

Source: WSJ

Average Debt per Borrower by Graduating Class Share of Students with Loans by Graduating Class


Cumulative Debt of Bachelor’s Degree Recipients

Source: NCES, National Postsecondary Student Aid Study, 2004, 2008 and 2012

30%

33%

35%

34%

36%

38%

25%

26%

28%

12%

11%

15%

10%

15%

24%

12%

17%

26%

8%

11%

19%

4%

6%

15%

13%

21%

26%

14%

21%

23%

12%

22%

32%

7%

15%

32%

18%

16%

10%

18%

14%

9%

20%

17%

12%

14%

27%

21%

12%

8%

4%

10%

6%

3%

14%

11%

5%

16%

23%

13%

18%

8%

2%

12%

5%

1%

20%

13%

4%

48%

18%

4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2011-12

2007-08

2003-04

2011-12

2007-08

2003-04

2011-12

2007-08

2003-04

2011-12

2007-08

2003-04

To

tal

Pu

blic

Fo

ur-

Ye

ar

Private

Nonpro

fit

Fo

ur-

Year

Fo

r-P

rofit

No Debt Less than $10,000 $10,000 to $19,999 $20,000 to $29,999 $30,000 to $39,999 $40,000 or More

Student Debt Rising Faster – But Less at Public 4-Yr Schools


Unemployment and Income Increasing Gaps in btw. High School and College Graduates

Source: Bureau of Labor Statistics

Unemployment Rate – Ages 25 to 34 by Education Level

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

2000 2005 2007 2009 2011 2013

High School Completion Associate's DegreeBachelor's Degree Master's Degree or higher degree

Median Income – Ages 25 to 34 by Education Level

0%

2%

4%

6%

8%

10%

12%

14%

16%

High School Graduate College Graduate Difference


Student Loan Default Rates Defaults Rising – But Moderate for Key Student Housing Groups

Sources: Federal Reserve Bank of NY Consumer and Equifax via NY Times

Default Rates by Level of Debt Outstanding (after five years)

0%

5%

10%

15%

20%

25%

30%

35%

Selective 4-year Somewhatselective 4-year

Least selective 4-year

Community For-profit

2000 cohort 2010 cohort

Student Debt Default Rates by School Type (first 3 years after initial payment due)

0% 10% 20% 30% 40%

$1K - $5K

$5K - $10K

$10K - $25K

$25K - $50K

$50K - $100K

$100K +

Sources: National Student Loan Data System as analyzed by Looney and Yannelis via NY Times


Student Housing Overview

• Cap Rate Analysis

• National Sales Analysis

• US Enrollment and Population

• Fastest Growing US Colleges

• International Students

• Key Markers


Student Housing Cap Rates Low But Still at Historically Large Spread to Treasuries

Sources: Real Capital Analytics and IHS Global Insight

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15(thru

Q2'15)

Student Housing Multi-Family 10-Yr Treasury

A

A

B

C D








• Key Markers


Student Housing – Buyer Profiles Who is Buying?

Source: Real Capital Analytics

Forecasted

OT 0% PR - 26%

REIT - 53%

CB - 2%

IN - 19%

2012 OT 2%

PR - 51%

REIT - 11%

CB - 6%

IN - 30%

2013

OT - 5%

PR - 65%

REIT - 7%

CB - 2%

IN - 21%

2014 OT 6%

PR - 47%

REIT - 8%

CB - 0%

IN - 39%

2015 YTD


Student Housing – Buyer & Seller Profiles


Forecasted


Student Housing – Regional Sales Analysis 2015 Transaction National Snapshot


Forecasted

Total Transactions - 131

2

2

1

17 4

6 1

1

2

13

5

5

6 3

4 1 6

1 7 2 8 8

1 6 1

1

1 2

4 1

9

28 26

19 39

14

5 39

26 14

28 19

5


Student Housing – Regional Sales Snapshot Where is Capital Flowing?

Source: Real Capital Analytics.

Forecasted

(In M

illio

ns)


Student Housing – Sales Analysis YoY Transaction Comparison


Forecasted

Total Transactions 200

Total Beds 64,729

Total Units 27,774

Average $/Bed $61,175

Average $/Unit $145,429

2012 - $3,908.9 B Total Transactions 166

Total Beds 57,486

Total Units 24,183



2013 - $2,862.6 B

Total Transactions 155

Total Beds 52,008

Total Units 23,449



2014 - $2,851.7 B Total Transactions 131

Total Beds 50,564

Total Units 21,181



2015 YTD - $2,489.9 B


Student Housing – Sales Analysis YoY Sales Volume


Forecasted

$3,908.9

$2,862.6 $2,851.7

$2,489.9

$3,319.8

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$3,500.0

$4,000.0

$4,500.0

2012 2013 2014 2015 YTD 2015 Est

Total Sales Volume


$61,175

$57,147

$59,529

$68,093

$25,000

$35,000

$45,000

$55,000

$65,000

$75,000

$85,000

$95,000

2012 2013 2014 2015 YTD

YoY Average Price Per Bed

$/Bed$145,429

$151,178

$173,554

$187,055

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

2012 2013 2014 2015 YTD

YoY Average Price Per Unit

$/Unit

Student Housing – Sales Analysis YoY Transaction Specific Analysis


Forecasted

2012 2013 2014 2015 YTD 2015 Est

Total Beds 64,729 57,486 52,008 50,564 67,419

Total Units 27,774 24,183 23,449 21,181 28,241








• Key Markers


Undergraduate Enrollment – Data Points Full Time & Part Time

Source: National Center for Educational Statistics, May 2015

Forecasted


Undergraduate Enrollment – Data Points Private & Public

Forecasted



Undergraduate Enrollment – Elusive Data Points Virtual Students

Forecasted



Graduate Enrollment– Data Points Population & Enrollment

Forecasted

(Th

ou

sa

nds)

Forecasted years based on NCES

1,860 2,157 2,937 2,910 2,901 3,268

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 2000 2010 2012 2013 2020 F

Total Graduate Enrollment US Population (Ages 18-24) US Population (Ages 25-29)

Forecast

Source: National Center for Educational Statistics, May 2015, US Census








• Key Markers


Forecasted

Source: Chronicles of Higher Education

University Snapshot Top 10 Fastest Growing Colleges

Rank Institution City, State Enrollment Fall 2003

Enrollment Fall 2013

Increase

1. Texas A&M U at Kingsville Kingsville, TX 6,856 12,229 78.4%

2. U. Of Alabama at Tuscaloosa Tuscaloosa, AL 20,290 34,752 71.3%

3. Utah State U. Logan, UT 16,460 27,812 69.0%

4. City U. of NY Graduate Center New York, NY 4,108 6,736 64.0%

5. Texas Woman’s U. Denton, TX 9,709 15,058 55.1%

6. U. Texas at Dallas Dallas, TX 13,718 21,193 54.5%

7. U. of Arkansas at Fayetteville Fayetteville, AR 16,405 25,341 54.5%

8. Missouri U. of Science and Tech Rolla, MO 5,459 8,129 48.9%

9. Oregon State U. Corvallis, OR 18,958 27,902 47.2%

10. U. Of Massachusetts at Lowell Lowell, MA 11,706 16,932 44.6%

Rank Institution City, State Enrollment Fall 2003

Enrollment Fall 2013

Increase

1. California State U. at Channel Islands

Camarillo, CA 1,560 5,140 229.5%

2. U. of Washington at Bothell

Bothell, WA 1,613 4,604 185.4%

3. Florida Gulf Coast U.

Fort Myers, FL 5,972 14,077 135.7%

4. U. of Washington at Tacoma

Tacoma WA 2,008 4,295 113.9%

5. Thomas Edison State College

Trenton, NJ 10,233 20,877 104.0%

6. U. of West Alabama

Livingston, AL 1,272 4,427 86.6%

7. U. of Houston at Victoria

Victoria, TX 2,411 4,491 86.3%

8. Fort Hays State U.

Hays, KS 7,373 13,441 82.3%

9. Texas A&M International U.

Ladreo, TX 4,078 7,431 82.2%

10. Arkansas Tech U.

Russellville, AR 6,249 11,369 81.9%

Public Doctoral Institutions Public Master’s Institutions


Forecasted

Source: Chronicles of Higher Education

University Snapshot Top 10 Fastest Growing Colleges

Public 2-Year Institutions Rank Institution City, State Enrollment

Fall 2002 Enrollment Fall 2012

Increase

1. River Parishes Community College Sorrento, LA 679 3,146 363.3%

2. Bluegrass Community and Tech. College

Lexington, KY

3,501 12,365 253.2%

3. Minnesota State Community and Tech. College

Fergus Falls, MN

1,842 6,464 250.9%

4. Northshore Tech. College Sullivan Campus

Bogalusa, LA

908 3,151 247.0%

5. Metropolitan Community College Omaha, NE

5,713 19,234 236.7%

6. West Georgia Tech College Waco, GA

2,077 6,915 232.9%

7. Northwest Louisiana Tech College Mansfield, LA 817 2,694 229.7%

8. Saint Louis Community College at Forest Park

St. Louis, MO

7,576 24,005 216.9%

9. L.E. Fletcher Tech Community College

Schriever, LA

655 1,968 200.5%

10. Kent State U. at Geauga Burton, OH 884 2,653 200.1%








• Key Markers


Student Housing – International Students How International Students Affect US Enrollment Growth

Source: Chronicle of Higher Education

Forecasted








• Key Markers


Student Housing – Key Markers

Source: IHS Global Insight and Colliers International.

Forecasted

• Economy is still improving

• Risks and headwinds growing but still tame

• Interest rates will rise but increases will be minimal and slow

• Student debt issues not focused on key student housing markets

• Cap rates continue to decline but likely to stabilize/rise in coming years

• Continual enrollment growth: both undergraduate and graduate

• Influx of international students to US Universities

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