The student housing industry is heading into the new year with positive momentum after reaching records in 2022, according to the National Student Housing Report from Yardi Matrix.
As of December, pre-leasing was off to a solid start for fall 2023. Nearly half of the beds, 48%, at Yardi 200 universities had already been leased, a new high for the end of the year. Annual rent growth at those universities also was 4.7%, which Yardi Matrix said is the highest rate of growth for any December on record. The average rent per bedroom was $800 last month, up $2 from November.
“Momentum is strong heading into the new year, even as the effect of higher interest rates take hold in the economy and has led multifamily rents to decelerate,” said Yardi Matrix experts. “Student housing remains largely unaffected, as the industry typically does better during times of economic volatility.”
About one-third of Yardi 200 universities were over 50% preleased in December. According to Yardi Matrix, leasing activity is strong across universities of different sizes and geography. As of December, five universities—Texas Christian University, University of Pittsburgh, University of Wisconsin-Madison, University of Tennessee-Knoxville, and Purdue Universities—were over 90% preleased for the 2023 school year.
While rent growth for the industry saw signs of a cooldown in September, it rebounded for the final three months of the year as the new leasing season began, hovering at or above 4.7%. According to Yardi Matrix, 13 universities saw double-digit rent growth in December, led by Purdue with 22.6% growth.
The report cited that a few universities saw negative annual rent growth last month. This includes Ohio’s Bowling Green State University, with a 4.3% year-over-year decrease; however, rents are still above the historical norm.
“With over eight months to go until the start of the next school year, we anticipate 2023 being another record-breaking year for student housing performance,” stated the report. “One caveat: Highly selective universities with name recognition are maintaining their interest among incoming students, while smaller schools are having more difficulty with enrollment.”
However, the economic slowdown and rising interest rates are affecting new supply. At the start of this year, about 124,000 bedrooms were in various development stages at Yardi 200 universities, a 3,000-bedroom drop from the prior month. Approximately 50,000 bedrooms were under construction in January, with Yardi Matrix expecting new starts to continue to slow.
The University of Texas at Austin tops the list for most bedrooms under construction, citing nearly 5,000 beds at six properties. This new supply is not anticipated to create any issues, as 59.6% of beds were preleased as of December, the annual rent growth was 5.5%, and no additional properties are in the pipeline.
Student housing sales volume also was high in 2022 but just short of 2021’s peak. Sales volume was nearly $5 billion for the year, with the average sales price per bed at approximately $76,500, also a slight drop. Arizona State University-Tempe topped the list, with $335.8 million in sales volume, followed by University of Arizona with $301.45 million.
“Transaction activity will be sure to slow with rising interest rates, but the sector remains a solid investment for those that are looking to deploy capital,” the report stated.