Dive Brief: 

• Student housing investment prices are at an all-time high, with a single bed averaging more than $90,000 in 2019, according to data from Real Capital Analytics (RCA). 
• Investors recently "discovered" the student housing sector, explains RCA Senior Vice President Jim Costello in a blog post, pushing capitalization rates — a measure of real estate investments' expected one-year rate of return — to record lows and, as a result, prices up. 
• Investors accounted for half the acquisitions in the sector in early 2018, up from nearly a third before the "run-up in prices," Costello wrote.

Dive Insight: 

Investment in student housing swelled in the past decade, reflecting growth in the traditional college-age population that has since ebbed. In 2016, sales of existing student housing peaked at a value of $9.8 billion, up from less than $2 billion in 2010, according to a separate report from RCA.

Amid that growth, a so-called amenities arms race broke out. In a bid to draw students, developers built apartment complexes with deluxe features such as lazy rivers, sprawling fitness centers and decked out common rooms. 

The trend is driving students who can't afford luxury student housing to live farther from campus, as well as pricing out some city residents, according to Blueprint, an online magazine from investment firm CBRE.  

That was the case at the University of Virginia, the publication notes, where in the early 2000s private developers jumped to build large-scale housing targeting wealthier students. Such housing — and the more expensive businesses and restaurants that followed — has since displaced locals and forced some shops to close, according to a report from U of Virginia students. 

With the undergraduate population expected to stagnate, it remains to be seen whether investors will remain interested in student housing, Costello explains in the earlier RCA post.

Colleges have previously "been caught overinvested in staff and facilities in response to demographic swings," Costello wrote. They experienced the downside of that when welcoming Generation X, which was a significantly smaller generation than the baby boomers.

"Universities owned the student housing back then," he explained. "Today, it's investors in student housing who may face a similar challenge with too many beds and not enough students." 

Colleges also ramped up capital investment in new facilities by taking advantage of low interest rates following the Great Recession, according to a recent S&P Global report. That's been coupled with strong investment returns that improved the financial position of public and private institutions, though increased competition across higher ed has thinned margins. 

The scramble to add new buildings over the past decade also left many colleges with "swollen campus footprints" amid declining tuition revenue, according to a 2018 Sightlines report.

The report warns that a growing backlog of deferred maintenance will evolve into an unprecedented demand for capital investment that many colleges won't have the funds to address.