American Campus Communities (ACC) is the ninth-largest apartment REIT company in the United States with a market capitalization of $4.5 billion. The company faces significant competition from the following three types of properties:
- university-owned, on-campus student housing units
- other off-campus student housing properties
- traditional multifamily housing units located close to universities
On-campus properties are more appealing
The biggest advantage of on-campus student housing units is that they are often located on a university campus. In addition, the on-campus facilities are more integrated with the academic community.
American Campus Communities also competes with national and regional operators of off-campus student housing in a number of markets. Smaller local operators of off-campus properties pose a significant competition to American Campus Communities.
There’s a number of student housing complexes located near or in the vicinity of properties owned by American Campus Communities. Such student housing complexes may have advantages and disadvantages to properties owned by ACC. For example, properties owned by competitors may be located close to campus, charge less rent, offer more amenities and services, and offer more flexible leases.
The student housing industry in the country is highly fragmented. Presently, no major company holds a significant market share. There are very few large players such as American Campus Communities (ACC), Education Realty Trust (EDR), and Campus Crest Communities (CCG). The industry is mainly driven by local and regional owner operators of student housing properties.
Factors affecting rental income
American Campus Communities’ rental income is affected by a number of factors. These include the supply of new on-campus and off-campus student housing, fluctuations in rents for housing in competing communities, and the number of students enrolled in universities. In addition, the entry of new players could increase competition for student housing properties and affect rents.
Major companies in the apartment REIT include Equity Residential (EQR), Essex Property Trust (ESS), AvalonBay Communities (AVB), UDR (UDR), and Mid-America Apartment Communities (MAA). The iShares Cohen & Steers REIT ETF (ICF) invests 1.1% of its portfolio in American Campus Communities.
In the next article, we’ll take a closer look at American Campus Communities’ business segments.