While most segments of the commercial real estate market are struggling to find capital, student housing has emerged as a bright spot in an otherwise dim time.

Student housing REITs, which began emerging in 2004, have come of age over the past few years, helping the arena to evolve from a small niche to a mainstream investment. "We're also starting to see it grow as an accepted investment class in Europe as well," says Robert White, president of market-research firm Real Capital Analytics. "It's one property type that we've seen at least as much acquisition activity, if not more, [in 2008] than previously."

In fact, one of the largest multifamily deals of 2008 was REIT American Campus Communities' $1.4 billion purchase of GMH Communities Trust's student housing portfolio. American Campus Communities reported its 2008 earnings Feb. 17 and had some very good news: Net operating income was up 2.6 percent over 2007; occupancy rates reached 96.2 percent, up from 95.1 percent in 2007; and funds from operations grew a whopping 64 percent over 2007.

What's driving the sector's health? In the past, universities often used tax-exempt housing bonds to build student housing in the past, but many schools are trying to slim their balance sheets and are increasingly entering into public/private partnerships to build housing. Demographics are also helping: More than 75 million "echo boomers" were born between 1976 and 1994, according to the U.S. Census.

Student housing developer and owner Place Properties certainly sees the opportunity. The firm is seeking to gain market share by acquiring distressed student housing properties this year. The company earmarked a portion of its Place/BV Student Housing Fund this year to target pre-distressed, distressed, or foreclosed student housing properties. And in February, the company announced two new construction deals totaling $48 million from the fund-Lafayette Place, near the University of Mississippi, as well as Parkway Place, near Texas A&M University.

Lender Deutsche Bank Berkshire Mortgage (DBBM) sees particular growth in the student housing sector and says it will expand its efforts on that front in 2009. In 2007, DBBM provided Campus Apartments $154 million in Freddie Mac financing for an acquisition of 10 student housing properties. The transaction was the first large-scale entrance for Freddie Mac into the student housing world, and, less than a year later, Freddie Mac rolled out its first student housing mortgage program. In just six months, from the program's introduction in July 2008 to the end of the year, Freddie Mac processed about $580 million in student housing mortgages.