The student housing industry has attracted the attention of many investors looking to diversify their assets over the last few years. So much so that some industry vets are wondering if the sector is starting to overheat.

With nearly 5,000 universities across the nation, there are about 300 major institutions with an enrollment greater than 8,000 students. Professional student housing owners comprise less than 10 percent of the off-campus housing supply, leaving room for growth. But not all markets are created equally.

“We've seen a lot of new real estate operators come into the student housing space and develop or acquire student housing, which has decreased cap rates and increased the challenge to get quality assets,” says Mike Peter, president and CEO of Austin-based Campus Advantage.

With the coming investments, there are a select number of markets in danger of being oversupplied for the upcoming academic year, likely due to developers underestimating the amount of supply coming in. Markets in Fayetteville, Ark., for instance, boast 3,000 beds, an increase of 20 percent year-over-year. Austin could also see an oversupply, and markets in Columbia, S.C., and Tallahassee, Fla., are also cause for worry.

“Those markets all have several thousand beds coming on line in one year, which is a large number of beds, a very high increase in total supply in just one year,” Peter says.

Campus Advantage recently struck a $150 million joint venture with a major, albeit unnamed, public pension fund. The firm anticipates the partnership will yield about $150 million in equity that will help it purchase approximately $300 million worth of assets. This follows on the heels of a similar joint venture the company struck in December with the California State Teachers’ Retirement System in December.

“Student housing during the last recession proved itself to be very recession-resilient through most of the downturn,” Peter says. “Student housing, on the other hand, did not have decreases in net operating income, did not suffer occupancy decreases or rental rate increases. It actually grew throughout the recession.”

Campus Advantage anticipates delivering more than 70 new off-campus projects, with almost 40,000 beds, to the market in the coming year.