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The student housing sector began the 2023-2024 school year with strong fundamentals. Preleasing has matched last year’s solid trend, and year-over-year rent growth has outpaced 2022’s historic growth. According to the latest National Student Housing Report from Yardi Matrix, it is one of the few real estate sectors to continually be resilient post-pandemic.

“The sector is in prime position to weather a potential recession with countercyclical demand patterns and solid occupancy and rent growth ‘baked in’ for the 2023-2024 school year,” stated the report.

The student housing sector’s strong fundamentals continue to fuel development. According to Yardi Matrix, approximately 40,000 new beds are projected to deliver this fall at Yardi 200 universities compared with 27,000 beds in fall 2022. The solid preleasing and rent growth suggest that much of the new supply already has been absorbed.

According to the report, as of August, 94% of beds at Yardi 200 universities had been preleased, a 3.3% month-over-month increase and a 0.2% decrease from a year ago. Month-over-month rents remained flat in August; however, rents were up 6.9% year over year, well above the historic average for the sector.

Out of the Yardi 200, 40 universities were 100% preleased for the school year, including 17 schools with four or more dedicated student housing properties. Eighteen of the 40 hit the 100% mark in August. Rent growth for those universities with four or more properties that were fully preleased averaged 8.6% compared with the national growth rate of 6.9%.

However, 10 universities with four or more properties were over 10% behind last year’s lease-up pace, with new supply impacting several of the markets. Boise State University has over 1,000 beds delivering this year and was 21.8% behind on preleasing, and Washington State University, with over 2,100 beds delivering, was 13.9% behind.

Another 26 Yardi 200 universities were less than 85% preleased in August and an average of 8.6% behind 2022. One of the largest student housing markets, the University of Minnesota-Twin Cities was 81.6% preleased in August, which was 7.3% behind 2022. According to Yardi Matrix, new supply is impacting the market with 3,458 beds under construction.

Rent growth for the student housing sector remained strong throughout the leasing season, averaging 6.8% since October 2022. Overall rent per bed was at an all-time high of $845. However, growth varied across universities, with 33 schools posting double-digit growth and 22 seeing rent declines in August.

According to Yardi Matrix, the markets that struggled to increase rents haven’t expanded enrollment while also absorbing new supply. The 10 markets with the lowest rent growth saw enrollment decline an average of -1.8% last year. An example is the University of Nebraska-Lincoln, which has over 1,000 beds under construction and had 575 beds deliver in 2022. Enrollment has declined there each year for the past five years, down 8.7% between 2017 and 2022.

On the transaction front, volume is down noticeably from 2022 in the student housing sector. In the Yardi 200 markets, 42 deals with 24,792 beds were sold by the end of August, down 72.6% from last year. Only two portfolios, those with two or more properties, have sold this year so far compared with 20 through August 2022. In addition, eight of the top 10 buyers from last year have remained inactive so far in 2023.