As Triad Real Estate Partners’ Director of Research and Analytics, I spend a lot of time with my nose in spreadsheets, analyzing data, looking for trends, opportunities, anomalies. This process is generally conducted, at the bequest of a client, within the context of underwriting a specific student housing asset, while also surveying other properties in the market in order to judge the property’s performance against the market as a whole. Of course, the university itself is a key component, with student enrollment being the largest factor of all, dictating the overall demand for housing.
Where those students come from is important as well. Particularly from a student housing developer or investor’s perspective, because a student arriving from abroad is going to have a very different set of housing needs and wants than, say, a student who graduated from the local high school. While analyzing the enrollment trends of scores of universities from across country over the past five years, it quickly became apparent that there’s one aspect which almost all universities — regardless of size, geography, or prestige — have in common: international student enrollment has been increasing at a rapid clip for the past decade.
The data gathered for the Open Doors Report on International Educational Exchange 2016 edition corroborated that observation. Open Doors is published annually by the Institute of International Education (IIE), a non-profit organization supported by a grant from the U.S. Department of State’s Bureau of Educational and Cultural Affairs. The IIE has conducted an annual statistical survey of campuses with regard to international students in the United States since 1919. Today, the census is based on a survey of approximately 3,000 accredited U.S. institutions. Open Doors is the most thorough and comprehensive source focusing on international enrollment available. That said, there are a couple of aspects of their methodology which warrant attention.
I first came across the Open Doors data via an online Business Insider article in December 2016, aptly titled, “The 20 American colleges with the most foreign students”. The piece had almost no analysis and simply listed the 20 universities with the number of international students and the total enrollment at each campus. That’s fine as far as click-bait goes, but as I scrolled down I began to take issue with some of the statistics. For example, it listed the University of Illinois-Urbana-Champaign (UI-UC) as having 12,085 international students, when I knew that the University reported a number closer to 10,000. I checked a couple of the other colleges on the list and found that the numbers in the article were generally 10-20 percent higher than the institutions reported. Dismayed, I was formulating a strongly worded email in my head to Business Insider concerning their reporter’s sloppy research when I noticed where they had sourced the data — the IIE’s Open Doors 2016 publication — and decided that maybe I should check it out first…
After examining the methodology of the Open Doors report, the reason for the discrepancy became clear. The IIE includes students enrolled for academic credit at U.S. colleges or universities, as well as those who were enrolled and stay on after their studies for Optional Practical Training (OPT) for a period of up to 29 months, depending on the terms of their student visa. While satisfied with the explanation, I was reluctant to use the data. After further consideration I decided including the OPT students was applicable, because even if they are no longer attending classes, those individuals remain part of the pool or potential renters within a given market.
Though there are signs the rapid growth is ebbing, foreign students now account for 5.2 percent of all post-secondary enrollment. Some prestigious universities with highly regarded STEM programs, such as Purdue and UIUC, are comprised of about 20 percent international students. While that percentage may seem high, it’s worth noting that some countries higher education systems have much higher ratios. In both Australia and the United Kingdom, for example, international students make up approximately 21 percent of the total student population. The point being that, even though it may be dangerous to continue to rely upon foreign student enrollment to buoy U.S. institutions of higher education, there is, theoretically at least, still plenty of room to grow.
Because of the nature of student housing, it is almost entirely university/market specific — the high-rise development going up across the street from the University of Michigan has little to no bearing on the overall occupancy at the University of Alabama. This being the case, I don’t often pay much attention to national or macro trends and statistics, preferring to analyze each property and market on its own merits. But the staggering growth of international students is different, though, and the profound ramifications it has upon the student housing market in particular are impossible to ignore.
If there was a shroud of uncertainty surrounding the future of international enrollment, the fog has become denser as a result of the current geopolitical climate. In fact, the administration’s original budget proposal called for disbanding the Bureau of Educational and Cultural Affairs which, along with funding the Fulbright Program and other foreign exchange programs, issues the grant supporting the IIE and the Open Doors publication. While the administration’s decision to gut funding is hardly surprising — “open doors” being in direct opposition to their stated agenda — it is also myopic. International students have become an integral part of the higher education ecosystem, contributing more than $32.8 billion and supporting over 400,000 jobs in a large spectrum of cities across the United States. Disrupting that environment by discouraging foreign students from attending college in the U.S., especially as less American families are able to afford the rising price of admission, may have the effect of harming universities and the communities they support.
— Dane Olmstead is the Director of Research and Analytics for Triad Real Estate Partners. In 2016, Dane completed more than $4 billion in real estate valuations and conducted in depth analysis of dozens of university markets. A native of Australia and a graduate of the University of Michigan, Dane has been with Triad since 2013.