Yardi Matrix recently provided updates on the student housing market, both in the form of a report and also in the form of a webinar. The report covered the student housing market fundamentals while the webinar provided more detailed information on individual markets.
Yardi Matrix collects information on a large group of public and private universities, but it focuses much of its attention on a smaller group of top universities that it calls the Yardi 200. These universities are the subjects of most of the discussion in the report and webinar.
Market fundamentals remain strong
Continuing a trend from recent years, enrollment at the more selective schools rose in 2022 while less selective schools and community colleges continue to struggle with enrollment. However, final enrollment numbers for the fall term are not yet available.
Student housing leasing during the fall 2022 preleasing season, which began in September of last year, consistently ran ahead of the rates of the three previous years. By September 2022, 96.6 percent of bedrooms had been leased at Yardi 200 schools, a record and 2.3 percentage points higher than last year’s level. More than a quarter of the Yardi 200 schools’ student housing was fully leased at the start of the current term.
Rent growth high compared to history
Rent growth for student housing returned to historical levels for the fall 2022 term, reaching 4.1 percent year-over-year. While this is well below the rate seen in market-rate multifamily housing, it is high by historical standards for student housing. The report noted that the differential that has opened up between the average rental rate per bedroom for student housing and for nearby multifamily housing in some markets may create opportunities for higher rent growth for the student housing in the future.
Of the Yardi 200 schools with 4 or more student housing properties, 12 had double digit rent growth for the year while only 4 had rents decline year-over-year. Rent growth tended to be higher at larger schools with lower acceptance rates.
The business of housing students
There are currently 62,000 bedrooms under construction at Yardi 200 schools, with 18,000 bedrooms delivered over the past 12 months. The school with the highest number of bedrooms under construction is the University of Texas at Austin with 5,315 bedrooms under construction. These are enough to house 10.5 percent of current enrollment.
Yardi Matrix defines a metric it calls “capture opportunity”. This is the percentage of the student population who cannot be housed in the dormitories or in existing student housing. Among the 20 Yardi 200 schools with the most bedrooms under construction, the capture opportunity varies from a high of 91 percent at Florida International University to a low of 21 percent at Florida State University. For the University of Texas at Austin, the capture opportunity is 48 percent.
Sales transaction volume for student housing at the Yardi 200 schools in 2022 has already exceeded that in every prior year except for 2021. So far, the average sales prices per bed is down from last year’s level, which was itself down from the record level seen in 2020.
The school with the highest transaction volume was again Arizona State University-Tempe with $335.6 million transacted at a price of $144,000 per bed.
Student housing is viewed as a defensive sector and is continuing to attract capital despite rising economic uncertainty and interest rates. While the student housing sector did not see the same surge in rents in 2021 as did the market-rate multifamily sector, it also did not see the decline in rents that the market-rate multifamily sector experienced in 2020.
Student housing at universities in sun-belt states are attracting the most investment due to the universities’ perceived ability to maintain enrollment growth.
The webinar and its companion report are available here.