Something quiet, but profound, happened in the past year. The Millennial generation’s magnitude eclipsed that of the iconoclastic Baby Boomer generation. And, just as the sheer size of their grandparents’ generation had a profound effect on nearly every aspect of society, the Millennials are already leaving their mark—especially on student housing.

More Millennials, which include those born roughly between 1980 and the mid-2000s, are attending college and earning postsecondary degrees than any other generation of young adults. This demographic swell combined with a higher propensity to pursue higher education suggests that college enrollments will continue to climb well into the future.

Further buoying enrollments is an influx of foreign students seeking an American style of higher education.

According to the National Center for Education Statistics, in the fall of 2015, 20.4 million young adults were enrolled in U.S. colleges. That figure is expected to grow by 2.2 million students, or 11 percent in the next eight years, reaching 22.6 million in fall 2023. 

More college students means more demand for housing options, both on and off campus, at many colleges and universities around the country. In response, the private student housing market is rapidly growing and adapting to meet the volume of new college students and their demands for tech-saturated, highly amenitized housing.

Demand Hot Spots

While the overall demographic picture and broad-brush college enrollment projections are positive for student housing, Michael McGrath, CEO of Asset Plus Companies, which owns Asset Campus Housing, says the need for more student housing is uneven across the country because it’s driven by local enrollment rates and supply levels.

“Student housing varies in every market,” he says. “Some markets have a very high demand for housing while others are becoming over saturated.”

Axiometrics, an apartment and student housing market research firm, expects enrollments at all degree-granting, post-secondary institutions to grow by 950,000 new students between 2016 and 2018. This is likely to boost near-term student housing demand in the Midwest and Northeast regions relative to demand levels from 2013 to 2015 while demand in the Southern region is expected to stay the same. In contrast, the Pacific Northwest and Mountain regions should experience some slowdown in demand during that period.

However, specific schools are seeing enrollments rise more significantly and faster than others. Of the nearly one million new college students that Axiometrics is expecting in the next two years, more than a fifth, or roughly 200,000 students, will head to the 160 universities the research company tracks as core student housing markets.  That compares to about 160,000 new students from 2013 to 2015 in the same group of schools, a 25 percent increase, says Taylor Gunn, Axiometrics’ student housing analytics lead.

For Peak Campus, a leading privately-owned, student housing company with more than 53,000 student housing beds under management, tier-one state universities continue to be safest bets given their strong enrollment trends, says Casey Peterson, senior vice president of business development and strategy for Peak Campus.

“That said, there are certainly smaller university markets where purpose-built student housing projects can be successful,” says Peterson. “As operators, this is why it is so critical that we work closely with buyers and developers of student housing deals to fully underwrite the local market and understand the asset positioning.”

Foreign Contributions

While the U.S. Millennial population is providing the biggest lift to enrollment in American universities, foreign students are also contributing to the swelling ranks.

Nearly a million international students studied in the U.S. during the 2014-2015 academic year, marking an increase of 10 percent and the highest rate of growth since 1979, according to the Institute of International Education.

“This [demand segment] is particularly significant at tier-one research universities,” says Peak Campus’s Peterson. “In recent years, we have made substantial improvements in our marketing and customer service platforms in order to best service students coming from abroad.”

Dan Oltersdorf, senior vice president of campus relations and residence life at Campus Advantage, a provider of student housing, agrees.

“International enrollment continues to increase,” he says. “There is no crystal ball, but the trend continues to show an increase across the board.”

However, Oltersdorf cautions that global factors can affect foreign demand for student housing, as well as the $30.8 billion a year that international students contribute to the U.S. economy. For instance, the Saudi government recently slashed their scholarship program due to the oil crash, significantly impacting the fourth largest group of international students in the U.S., he said.

As foreign students have become an increasingly important market segment in campus housing, particularly private, off-campus housing, many firms are adjusting their marketing, leasing and communications strategies to better serve their needs.

“We have seen demand [from foreign students] tick upwards over the last several years,” acknowledges McGrath of Asset Plus Companies, parent to Asset Campus Housing. “To capture this growing resident base, we create strong relationships with each institution’s international student department and also work with firms that specialize in assisting international students to find accommodations in advance of their arrival in the U.S.”

Asset Plus also created an easy method of leasing apartments from abroad. Similarly, Campus Advantage has ramped up its multicultural communication training and is working with international student offices to foster better communication and assess differing needs of foreign-born students.

Off-Campus Opportunity

As more Millennials reach college age, fueling enrollment increases at colleges and universities across the country, meeting the subsequent student housing demand is increasingly requiring the participation of private players.

Some schools lack enough on-campus dorm capacity to accommodate rising student populations. Others have limited financing available to build new on-campus supply. And for others, it’s an allocation issue.

“The pendulum is swinging toward off-campus housing because most colleges and universities want to put their money toward on-campus academic buildings and facilities,” McGrath says. That leaves the private sector to step into the void and cater to the market demand.

And while some students still tend to live on campus their first and maybe second years, the trend is for them to move off campus as they become upper classmen and -women, says Peterson. And it’s often much about having more housing choice off campus, as many on-campus housing facilities lack the technology and amenities that today’s students want.

“Due to this and the historically highly fragmented nature of the off-campus market, we believe that off-campus [housing] currently provides for more attractive opportunities [for student housing developers],” says Peterson.