Student Housing Anticipates Stronger School Year

Preleasing is down for off-campus higher ed housing as colleges and universities prepare to resume in-person instruction this fall, but that should improve over the summer with rents stable or increasing moderately, according to a new Yardi Matrix report.

“Many factors are pointing to increased student housing demand, fueled by students who took a gap year now enrolling in four-year institutions, new high school graduates, and the gradual return of international students,” say the Yardi analysts.

The views in the report come from an analysis of the Yardi Student Housing data which over 1,000 universities and colleges nationwide, including the top investment grade universities across all major collegiate conferences, known as the Yardi 200.

As of April, preleasing was at 58.6% for surveyed schools, about 4.2% below the same time last year and 5.8% below 2019.

After almost a year of decelerating rents, year-over-year rent growth finally ticked for the Yardi 200. Rent growth was 1.2% year-over-year up from 0.6% year-over-year in March.

However, company analysts expect the situation will improve over the summer.

The report says the situation varies by locality and region.

“In general, universities in Eastern states have had better preleasing and rent growth, while universities in Western states have struggled a bit more. There is also a noticeable trend in campus settings, as college towns have generally performed better. These universities face less competition from conventional multifamily properties in the shadow market,” the authors note.

The universities that are struggling the most with preleasing are largely located in the western half of the country.

Pacific Northwest universities including Portland State University, the University of Washington-Seattle and the University of Oregon were all lagging last year’s prelease levels by more than 20% as of April. Similarly, California universities including the University of California-Santa Barbara and the University of California-Riverside were also significantly lagging last April’s prelease levels, according to the Yardi Matrix report.

The authors warn college communities with significant new off-campus housing construction could face occupancy shortfalls.

Some universities with significant development pipelines may face absorption issues once those bedrooms are delivered, Yardi notes, with nearly 40,000 units in the various stages of development for the Yardi 200. Of those, about 15,000 of those units under construction. Most development is still concentrated in the Southern and Southwestern United States—specifically in Florida, Texas and Arizona.

Pierce Education Properties told GlobeSt earlier this month it is bullish on the asset class.

The pandemic has reinforced the recession-resistant nature of the asset class and has also demonstrated that student housing can succeed even when feeder universities are imperiled,” While overall university enrollments were down 2.5% in academic year 2020-21 according to National Student Clearinghouse, enrollments at four-year public universities were level, said Frederick W. Pierce, the company’s president and CEO.

In February, RealPage reported this year’s top performing off-campus markets tend to be located in college towns where there’s less conventional apartment product to compete with purpose-built student housing.

At most of these campuses, purpose-built student beds make up at least half of rental housing within three miles of campus. In the case of Georgia Southern, Appalachian State and Clemson–each in small towns with populations of roughly 30,000 or less–it’s not surprising to see purpose-built beds make up the overwhelming share of off-campus student housing options.

As a result, these campuses tend to lease up quickly as student-viable housing options are generally limited.