Austin, Texas — While interest rate volatility and the potential implications of tariffs loom heavy over lending and transactional activity in the student housing space, the outlook remains bright for 2025 according to panelists at the 17th annual InterFace Student Housing conference.
“Despite the expectation that interest rates would remain higher for longer, the student housing capital markets did indeed start off the year hot,” began moderator Ian Bradley, partner with TSB Capital Advisors, during a capital markets panel on April 10. “We’re seeing increased lender liquidity and lofty 2025 allocations combined with a shortage of top tier lending opportunities, which drove competition and spread compression across lending sources in the first quarter.”
That said, the implementation and rescinding of reciprocal tariffs has intensified investor fear, according to Bradley, setting the stage for potential capital markets volatility as we move through the second quarter. But for Jake Kramer, senior managing director with Kayne Anderson, it’s still business as usual.
“We intend to remain open and active through all parts of the market cycle — we’re built that way, and we’re capitalized that way,” Kramer said. “But the market has been tough as a lender over the past 12 months, particularly in the student housing space. We were smoked on a lot of deals that we liked. We showed up, we fought hard and we won a handful of deals. We intend to be active and we see a bit of an opportunity to be more selective moving forward if things do stay choppy.”
Will Baker, senior managing director with Walker & Dunlop, agreed, noting the firm has a history of leaning in and remaining consistent through tough times. “Even before all of the tariff news, the Treasury has been more volatile over the past few years than it had in the 15 previous years,” he said. “There have been re-trades, deals dying, transactions falling out — it’s been a challenge for all of us here.”
His advice for transactions and lending in the current environment? If you are buying a deal, buffer in as much of a spread delta as you can. And if it’s a refinancing rate? Lock in as soon as you can. “Get that variable over with,” Baker continued. “Lock in deals as soon as you can and get in all third-party orders early to cut out some steps. The speed-to-rate lock is critical right now.”
As far as the types of lenders in the current market, Martin Kearney, director with BMO Harris Bank, noted that a number of balance sheet lenders are coming into the student housing space. “We’ve seen a lot of spread compression and a lot of the debt funds have widened out that are reliant on certain types of capital,” he said. “The tariff issue is going to take a while to play out but look at this industry — the fundamentals are really great. We have an external issue that is causing some volatility and uncertainty, and the quicker that plays out, the better for the space. But we’re going to continue lending in student housing.”
And lender interest in the space has already been demonstrated through the beginning of 2025 according to Samantha Miller, senior vice president and mortgage banker with KeyBank Real Estate Capital.
“At the beginning of the year, a lot of deals were frontloaded because people were concerned about economic and tariff uncertainty moving further into the year, so we have been as busy as ever over the past few months,” she said. “I think there will be some recalibration given all the noise and volatility, but I recommend pushing through. There are a ton of capital sources out there and they’re not going anywhere.”
The biggest concern noted by Miller is that the volatility in the market is going to lead to investor paralysis. But as far as tariff impact is concerned, Justin Glasgow, managing director at Northmarq, does not expect we’ll be feeling the pains of those decisions this early in the process.
“There’s going to be some delay between the actual rising costs on items related to tariffs; it’s not going to be instantaneous,” he began. “What we’ve talked to folks about is breaking down a budget to see what kind of impact tariffs might have and what kind of solutions we can come up with.”
“It’s day by day at this point and I think if we can get some clarity, we’ll start to see people moving assets around or changing strategy,” Glasgow continued. “Right now, the overriding factor is the resiliency of student housing. Investors and lenders have watched the sector’s resiliency through the global financial crisis, then COVID-19. We’ll see how firmly they believe in it today.”
—Katie Sloan