The abrupt nationwide shift to remote learning last year in response to the Covid-19 pandemic shook the off-campus student housing sector in surprising ways.

In the spring of 2020, as it appeared that many college students would stay grounded in their childhood bedrooms doing coursework online, some landlords panicked and sold off rental properties in prime university markets, fearing high vacancy rates in the next semester. The chaos presented unique opportunities: Investors took advantage of low prices and low mortgage interest rates to scoop up aging properties for renovation or demolition.

At the same time, individual homebuyers looking to get into typically competitive, affluent markets near university research centers saw new deals in places like Raleigh and Durham, North Carolina.

This year is very different, with widespread vaccine availability and the majority of colleges planning to reopen for in-person classes in the fall. But real estate experts who track college town markets say there is still a window of opportunity for investors interested in college towns—if they move fast and know where to look.

“The window is quickly closing,” says Garrett Derderian, director of market intelligence at Serhant, a residential real estate brokerage focused on New York and South Florida. “You’re certainly not going to be able to attain the kind of deal that you would have gotten in that very narrow window last year when students were not returning to school.”

Secondary markets, rather than major metro areas or on the coasts, are the best places to look now, experts say.

“So you’re looking outside the big San Franciscos, New Yorks, L.A.s, and you’re really looking in these more regional areas—the Orlandos, the Jacksonvilles, the Scottsdales, Austin,” Mr. Derderian said.

Outbound migration from high-cost, populous states including California, Illinois, New York and New Jersey, and inbound migration to Colorado, Florida, Texas, Arizona and Nevada has played an important role in pushing prices upward in the general housing market since the pandemic began.

Reflecting the broader U.S. housing market, smaller cities like Austin, Texas; Boulder, Colorado; and New Haven, Connecticut, are experiencing inventory shortages, fast moving markets, and rising prices, according to data compiled for Mansion Global by Realtor.com economists. The data compared listings at the city level from 2019 through May 2021. (Mansion Global is owned by Dow Jones. Both Dow Jones and Realtor.com are owned by News Corp.)

This could all bode well for investors looking for a way into the student housing sector in these cities and comparable college towns, experts say. Investors should follow the leasing velocity rates and growing rental rates. Another factor to consider is how much purpose-built off-campus student housing exists compared to regular housing stock, and whether enrollment has increased in recent years.

“Many of the most popular college towns that we see to invest in have key similarities—strong job markets, lower cost of living compared to larger cities like New York or San Francisco, favorable income tax rates should they have income taxes at all,” Mr. Derderian said.

Small cities are safe bets

College towns like Austin and Boulder are seeing strong housing market performance year over year, according to data provided by Realtor.com. In Boulder, the median listing price for all property types is up 20% year over year, and median days on market is down 17%.

Elizabeth Boese, a Boulder-based investment expert, landlord and a realtor with Coldwell Banker Realty, saw demand for housing spike during the pandemic and rents rise accordingly. Tenants weren’t limited to students who wanted to finish out the semester in town; Ms. Boese said she rented one of her one-bedroom downtown units to a Facebook employee from California who was looking for a change of scenery while he worked remotely for a few months.

Several factors make Boulder a strong bet for investors who can exercise patience to reap long-term appreciation, according to Ms. Boese: The large rental market (about 58% of households are renter-occupied), tight restrictions on how and where buildings can be constructed, and overall high quality of life in a desirable destination town. Also key: reliable demand for accommodations from students and professors associated with the University of Colorado Boulder, the largest public university system in the state, with more than 36,000 students.

“It’s a kind of a unique microcosm of high demand, and there’s no way to expand, so that’s why the appreciation is so solid, at least in Boulder proper,” she said.

Thanks in part to inbound migration, Austin is also booming, experts say. The median listing price of $664,000 is up 18% year over year, while median days on market for all properties is just 13 days, down 68%. Inventory, based on active listings, is down 62% year over year, but views per property have soared 59% in that time, according to Realtor.com, which shows that there is enormous appetite from buyers of all stripes.

Another factor for investors to consider is that a record number of colleges, including the state’s flagship University of Texas at Austin, have dropped standardized testing requirements for 2021 and 2022 applicants due to limited test availability during the pandemic. This stands to widen the applicant pool and boost enrollment; UT-Austin, for one, received 13,000 more applications for fall 2021 compared to each of three prior years, Community Impact Newspaper reported in May. The University of Houston system, Baylor University in Waco and Texas A&M University in College Station among others have scrapped test requirements at least through 2022, The Texas Tribune reported.

Other safe bets are small cities located far from other metro areas like Pittsburgh, Charlottesville, Virginia; and Champaign, Illinois, said JJ Smith, managing partner at CRG, the development and investment arm of Clayco, a design-build construction company. Because student-appropriate housing is somewhat limited to begin with, investors have a sort of “captive audience” of potential tenants, and there are opportunities to build anew, he said.

How to read the sector right now

From the investor perspective, “There’s a lot of pent-up demand and a lot more capital than there are deals right now, and so we’re seeing significant pricing power for those assets that meet the characteristics of what all the capital is chasing,” said Travis Prince, executive managing director who leads the national Student Housing Capital Markets Team at Cushman & Wakefield, a global commercial real estate services firm.

For investors looking for fertile ground for new construction or to purchase recently completed properties that have already leased up for next fall, both Mr. Prince and Mr. Smith advise looking at Tier 1 university markets (selective, private research institutions) or the Power 5 conferences, considered to be the most elite in terms of athletic prowess and revenue. The two labels comprise about 80 flagship universities in the U.S.

Some off-campus student housing operators actually saw a boost in occupancy when dorms closed in the spring of 2020, as some students decided to finish out the semester while quarantining with friends in a shared apartment.

That phenomenon pushed investors to look more closely at opportunities near Penn State, Mr. Smith said, where a new 755-bed student housing development (which he worked on while employed by a previous company) was sold to a private investor in August 2020. At the time of sale, it was nearly 100% leased for fall 2020.

“That really caught people’s attention, mostly institutional investors,” he said, as a sign of promise in the purpose-built student housing market. “We’ve really started to see heavy transaction volume, so buildings are being bought and sold now at record prices, post-pandemic, if we can call today post-pandemic.”

One CRG project currently under construction is a 679-bed purpose-built student housing development in Columbia, South Carolina, home to the state’s flagship University of South Carolina, where student enrollment is close to 35,000 and trending upward. The $95 million project is expected to open in fall 2023.

During the pandemic, Mr. Smith said his company noticed that the Columbia market was in the top-10 in terms of pre-leasing velocity and rental rates were growing too—both reassuring signs that post-pandemic return on investments are likely.

Big city college ‘towns’ are slowly recovering

Meanwhile, perennial big-city college “towns” like Boston and New York City are still on the mend after taking a hit during the pandemic, according to data compiled for Mansion Global by Realtor.com. Inventory is still higher than last year, but it’s also moving faster than last year, which points to gradually recovering demand for housing as Covid-19 infections slow.

Seattle and other college towns on the West Coast, which rely heavily on students from overseas, could start to recover from their pandemic losses in 2021–22. Last fall, an Institute of International Education survey found enrollments of new international students at U.S. higher education institutions had shrunk by 43%. In contrast, for the 2021–22 academic year, 43% of institutions reported an increase in applications from international students compared to 2020 levels, according to a Best Colleges report.

“These urban centers are potentially poised to return to form as vaccination rates continue to climb and the local economies ramp up again,” according to Realtor.com’s analysis.

With few exceptions, Mr. Prince expects the sector overall will mostly return to normalcy in the second half of 2021, driven by demand from students who are eager to get back to their friends and campus activities.

For instance, student housing leases managed by Cushman &Wakefield are “tracking on pace” to where they were at the same time in 2020, Mr. Prince said. A more definitive snapshot of the sector’s performance in 2021 won’t be available until closer to the start of the academic year.

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