Student Housing Sector Breaks Records in Q3 2022
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While most primary housing markets in the nation are starting to cool off, multifamily occupancies and rent growth are still notably high, especially in locations such as Las Vegas and Salt Lake City.
The student housing sector is no exception: Rent growth for some of the nation’s top universities increased by nearly 5% year-over-year by June of 2022, an unprecedented climb.
Preleasing rates skyrocketed as high as 90% in some markets, and Blackstone’s recent acquisition of American Campus Communities (a $12.8 billion purchase) signals strong anticipation of positive long-term fundamentals.
Read on to learn more about the student housing sector’s record-breaking Q2 and Q3 2022 performances.
Top-Performing Universities for YoY Preleasing Growth in Q2 2022
So far in 2022, very few university markets have struggled to fill units, with some markets in California being fully preleased and most others seeing prelease rates over 90%.
Here’s a list of just a few university markets that have seen the greatest increases in year-over-year preleasing as of September 2022:
- University of South Alabama: About 29% year-over-year preleasing growth;
- University of Cincinnati: About 24% year-over-year preleasing growth;
- Oregon State: About 23% year-over-year preleasing growth;
- University of Nevada: About 20% year-over-year preleasing growth;
- University of Texas: About 17% year-over-year preleasing growth; and
- University of South Florida: About 16% year-over-year preleasing growth.
Many California-based universities were also among the top-performing universities for year-over-year preleasing growth as of June 2022.
Universities That Experienced Low Preleasing & Preleasing Declines
Despite these immense increases in year-over-year preleasing rates, some universities came down from their peak seasons and returned back to historical norms.
The University of Memphis and the University of Akron both had the lowest percentages of preleased units as of June 2022 at about 38% and 54% preleased, respectively.
The universities that experienced year-over-year preleasing declines include the University of Southern California (USC) and Middle Tennessee State University, with declines in preleasing at about -16% and -15%, respectively.
However, USC and Middle Tennessee State are simply sliding down from their peak seasons and returning to historical norms. The University of Memphis and the University of Akron are also experiencing typical movements in preleasing for this time of year.
Rent Growth in Student Housing Matches That of Multifamily
As of June 2022, average student housing rents grew by about 5%, an unprecedented climb, alongside multifamily’s average rent growth of about 13%.
Most of the nation’s most notable universities took part in this rent growth, both annually and monthly. Only a select handful of universities experienced negative rent growth, and none of these universities are situated within notable multifamily shadow markets.
These universities include the University of South Alabama (about -8.0% rent growth) and Florida International University (-6.2% rent growth). However, these drops in rent growth have contributed to higher preleasing rates in both of these university markets.
Short-Term and Long-Term Outlooks for Student Housing Rents
While it’s unlikely that this historical growth in student housing rent will continue beyond the 2022/2023 school year, the short-term outlook is still positive, with moderate rent growth still expected throughout the rest of 2022.
An event that could trigger a trailing decline in off-campus student housing rents would be falling interest rates as the costs to borrow money and purchase properties become cheaper, creating greater competition between landlords in multifamily markets. This, however, isn’t expected to happen until we’re well into 2023.
The Student Housing Development Pipeline Continues to Stay Robust
New student housing development projects continue to fill the pipeline: The number of new bedrooms under construction (about 60,000) increased exponentially in Q2 2022 from Q1 2022 by about 13%.
The pipeline itself has grown by about 5% quarter-over-quarter, and about 150,000 bedrooms are in various stages of construction and development.
The long-term outlook for new student housing developments remains bullish.
Student Housing Deliveries in 2022
Deliveries of student housing projects haven’t suffered much at all in 2022, with nearly 40,000 new bedrooms being delivered to top universities such as Indiana University, Georgia Institute of Technology, University of South Florida, and more.
Investor Interest in Student Housing as of Q2 2022
So far this year, over $2 billion worth of student housing investments have changed hands. The year’s average sales price per bed is about $70,000, and the universities that are seeing the most transaction volume are those located in the South and Southwest regions of the nation.
Long-term investor sentiment around student housing investments currently remains bullish as of Q3 2022.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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