Primary State Schools in Power 5 Conferences Drive Student Housing Demand

Those roaring crowds of students you see on the stands at big football games, screaming and waving their college colors around? They could be signaling more than their support for their team. They could also be signaling the strength of the student housing market near their college.

“Large, primary state schools in Power 5 conferences benefited most from enrollment growth,” according to a new Yardi report on student housing in the USA. And rent growth is being driven by surging demand, especially at schools with high enrollment growth. Total enrollment was up 0.7% year-over-year in fall 2023, after dipping to -0.5% in 2022.

That adds up to a lot of money, with preleasing at Yardi 200 schools rising to 67.7% in March — 240 basis points above March 2023 — and rent growth up. Both are outpacing all previous years. Preleasing is 10% above the average for 2019-2022, and the average rent for a bed has risen to $895. “Rent growth in the sector has averaged 6.2% over the course of the leasing season, making student housing one of the best performing commercial real estate sectors,” Yardi commented. Rent was up by double digits at 41 universities.

Several universities blew past the nation’s preleasing average. Preleasing rates were over 75% at 46 schools and more than 90% at eight, including Ole Miss, Purdue, Appalachian State University and Kentucky.

The highest increases in prelease rates were recorded at Central Michigan (23.3%), UC-Riverside (22.8%), University of Missouri (20.5%), Bowling Green State (19.8%) and University of Mississippi (18.4%). They were among 38 schools with preleasing more than 10% above prior-year levels.

However, not all student housing enjoyed increased demand. There were 46 markets that were less than 50% preleased in March, “including many tertiary state schools and private schools that have struggled to grow enrollment. This includes a number of schools in the West that typically prelease later than others,” Yardi reported.

Some smaller student housing markets saw rents drop. So did some bigger markets. Rents at the University of Southern California fell 8.2% due to enrollment declines and new supply. Nevada-Reno saw enrollment grow, but rent growth slipped 4% because 2,500 new beds are available. Thirty markets were more than 10% behind last year’s preleasing pace. This group included Clemson, which was nevertheless 79% preleased with 19.4% rent growth and ranked among the best-performing large student housing markets.

“Student housing rent growth [is the] envy of CRE,” the report concluded.