The student housing industry saw stellar performance in the first quarter, and that positive momentum is expected to continue.
“Pre-leasing and rent growth have been incredibly strong, even when comparing to pre-pandemic performance,” according to the latest Yardi Matrix National Student Housing Report. “Dedicated student housing deliveries haven’t slowed much despite materials and labor shortages, and capital continued to flood the sector.”
Even as overall undergraduate enrollment dropped 3.1% in fall 2021, according to the National Student Clearinghouse Research Center, top-tier public and private flagship universities, which have the most institutional housing options, are still doing well.
Pre-leasing for the fall term for Yardi 200 institutions, which include the top 200 investment-grade universities across all major collegiate conferences, is at a solid start. As of March, 63.7% of beds at Yardi 200 universities had been pre-leased. This is 13.5% above last year’s pre-leased percentage and 9.9% above pre-pandemic levels in March 2019.
In addition, a handful of universities were almost fully pre-leased for the fall term in March. Topping the list for the absolute percentage pre-leased as of March was Purdue University at 99.9%, with 23.5% growth from last year; the University of Pittsburgh at 99.8%, with 33.5% growth, and the University of Wisconsin-Madison at 98.3%, with 26.4% growth.
According to Yardi Matrix, very few universities are struggling with fall pre-leasing so far, but those that are tend to have higher acceptance rates. The University of Houston, which accepts about 63% of applicants, had the lowest percentage of beds pre-leased as of March, coming in at 28.6%. Louisiana Tech University, which accepts about 64% of applicants, was 29.8% pre-leased, followed by the University of Akron, with a 73% acceptance rate, at 31.1%.
For fall pre-leasing, Yardi 200 universities are seeing robust rent growth, with the average rent per bedroom rising $4 to $777 as of March, a 0.5% month-over-month increase and a 2.9% year-over-year increase.
Yardi Matrix data shows that 14 Yardi 200 universities with four or more properties saw double-digit annual rent growth as of March. University of California-Riverside topped the list at 21%, followed by the University of Nevada-Las Vegas at 18% and Wichita State University at 15.8%.
Only three universities in the Yardi 200 with four or more properties saw negative year-over-year rent growth as of March. Florida International University, which had 2,500 bedrooms delivered in the past 12 months, had the lowest annual rent growth of -9.6%. The University of South Alabama and the University of California-Santa Barbara were the two additional institutions recording negative annual rent growth as of March.
“Yardi Matrix forecasts predict another year of strong rent growth at the Yardi 200 aggregate level, with some differentiation at the university level,” according to the report. “Overall, universities that have historically strong pre-leasing and rent growth are expected to continue to experience growth, albeit at a moderated level, while universities that have experienced slower growth will continue to stabilize.”
Even though material and labor shortages are challenging developers on the construction side, dedicated student housing deliveries haven’t slowed. In the past 12 months, nearly 26,000 bedrooms have been completed at Yardi 200 universities, with Yardi Matrix forecasting just over 28,000 bedrooms coming to the market this year. This represents 3.7% of the existing stock.
In addition, nearly 130,000 bedrooms are in the various stages of development at Yardi 200 universities, with approximately 53,000 under construction.
“Most development is scattered geographically but concentrated at large universities with high capture opportunities, meaning that a high percentage of students are not currently housed in dorms or existing off-campus dedicated student housing,” stated the report.
Yardi Matrix also reported that capital continues to flood the sector, as investors are drawn to its resiliency and strong fundamentals.
Sales volume so far for 2022 for the Yardi 200 institutions totaled nearly $920 million as of March, with Yardi Matrix predicting another record-breaking year if the pace continues.
The Sun Belt markets are seeing the most investment. As of March, the University of South Carolina-Columbia tops the list with $136.71 million in year-to-date sales. In addition, four Florida universities have made the list for most sales volume year to date, totally nearly $250 million in transactions so far in 2022.
