Yardi Matrix recently released a report on the off-campus dedicated student housing industry which shows strong operational performance from the sector. However, property sales transaction volume has been declining.
Yardi Matrix collects information on a large group of public and private universities, but the focus of this report is a smaller group of top universities that it calls the Yardi 200.
Student housing preleasing shines
Preleasing of student housing for the fall 2023 academic term has been running ahead of last year’s pace. This is despite last year being the strongest preleasing season in the Yardi Matrix dataset, which goes back to the Fall 2019 academic term. However, although this year’s preleasing rate was significantly above last year’s rate earlier in the year, the June preleasing rate of 86.4 percent is only 0.4 percent above last year’s preleasing rate at the same point in the preleasing season.
While the current national average preleasing rate level is very solid, results vary significantly around the country. Yardi Matrix noted that 6 of the schools that they track which have 4 or more properties are fully leased at this point and another 14 schools are over 95 percent leased. However, there is one school which is only 51 percent leased. The report attributes this variation in results to supply and demand conditions specific to individual schools rather than to national or regional causes.
Rent growth plays catch-up
Rent growth for student housing trailed well behind that of market-rate multifamily housing over the last 2 years. That situation has now reversed with Yardi Matrix reporting year-over-year rent growth of 7.2 percent for student housing in June. This compares to their report of year-over-year rent growth of only 1.8 percent in June for market-rate apartments.
Student housing rent growth varied widely among the schools studied. Of the Yardi 200 schools with more than 4 properties, 3 had rent growth rates above 20 percent. All of the top 6 schools for rent growth had preleasing rates above 97 percent and three of them had preleasing rates of 99.5 percent or higher. At the other end of the scale, the University of Southern California saw rents fall by nearly 12 percent on a decline in enrollment and an increase in supply.
The current average rent per bed at the Yardi 200 schools is $846. The current national average apartment rent as reported by Yardi Matrix is $1,726.
The business of housing
Student housing continues to attract developers. There are currently 153,000 bedrooms in some stage of development at Yardi 200 schools. Since the start of the year, construction has begun on 22,000 bedrooms.
The school with the highest number of bedrooms under construction is again the University of Texas at Austin with 5,862 bedrooms under construction. These are enough to house 11.3 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 86.1 percent at Florida International University to a low of 28.2 percent at Florida State University. For the University of Texas at Austin, the capture opportunity is 45.9 percent.
The report notes that there are 41,000 dormitory beds expected to be delivered to the Yardi 200 schools by 2027. However, it does not discuss the impact of competition from other rental housing in the proximity to the school.
While sales transaction volume for student housing at the Yardi 200 schools in 2022 was the highest level Yardi Matrix has seen, volume in 2023 so far is down significantly. The report states that the $646 million in student housing sales transactions this year is down by 73 percent from the transaction volume seen at the same point last year. However, the price per bed is only down by 4.3 percent to $66,000.
The school with the highest transaction volume was again Arizona State University-Tempe with $178 million transacted, over one quarter of the national total. The transacted price per bed of $147,000 per bed is actually up slightly from last year’s level.
The Yardi Matrix National Student Housing report is available here.
