Industry News

Market Reporting that Matters

Winter 2017 Student Housing Newsletter

Monday, February 20, 2017

 

Development Activity Remains Moderate and Performance Steady

With a few months of leasing under way, results indicate another strong year for the student housing sector. Supply is maintaining moderate levels for the third consecutive year and performance is on pace with last fall.

Axiometrics has identified nearly 47,000 new off-campus student housing beds to be delivered for the Fall 2017 semester, with a few hundred still considered planned (though those are unlikely to be ready this fall). These figures are in line with the new supply seen in 2015 and 2016, but still below peak levels seen in 2013 and 2014. For Fall 2018, Axiometrics is already tracking more than 30,000 beds, which is around the volume tracked this time last year for 2017 deliveries.

 

 

Not all of the universities that saw deliveries last fall will see them again this fall. Of the 74 universities expecting new supply, only 31 experienced new supply in Fall 2016 and only 10 of the total are anticipating more than 1,000 beds. 


 

Although these schools are expecting a larger volume of new supply, demand is still outpacing supply for many of them. Texas A&M’s College Station Campus remains among the top in terms of enrollment growth, with over 11,000 additional students enrolled since 2011. The University of Alabama in Tuscaloosa comes in second with 7,500 new students, and Northern Arizona University and the University of Houston at a close third and fourth with slightly more than 5,000 new students during the same time frame.

 

Early and Solid Start to Leasing Velocity

As mentioned in previous newsletters, the Fall 2016 leasing season was the strongest to date, but began trending towards 2015 averages at the beginning of summer. The Fall 2017 leasing season is off to a similar start, though it began earlier than we have typically seen. Prelease averaged 3.3% in October, 80 bps higher than Fall 2016 and over 200 bps higher than Fall 2015. In November and December, leasing velocity remained ahead of previous years, but the spread tightened in January.

 

 

These results were anticipated given the tremendous performance seen across the sector in recent years. Nationally, prelease is still averaging above a few years ago, even though the pace is slowing.

Furthermore, properties located closer to campus continue to illustrate stronger results. On average, properties located less than a half-mile from campus were 43.1% preleased in January, up 98 basis points from January 2016 and well above January 2015.

Properties located between a half-mile and one mile from campus were 33.5% preleased in January, down 170 basis points from last year, but still above the average of January 2015. Those located more than one mile from campus were preleased at a slightly higher level, at 33.6%, only 38 basis points below the prior year.

 

         

Fastest Leasing Universities

Across the student housing sector, it is important to keep in mind that trends vary by university, as well as individual asset. The national trend shows leasing velocity averaging almost 40%, but many universities have surpassed this level and are experiencing a larger (positive or negative) spread year-over-year.

The table below shows universities with the highest 3-year same-store average prelease as of January 2017. The universities highlighted in red are expecting new supply this fall.

 

 

 

The two same-store properties located near Virginia Tech are averaging 100% leased for the third consecutive year, with no new supply expected in 2017. Of the other universities not anticipating new supply this fall, Illinois State and the University of Michigan are seeing an increase in leasing velocity year-over-year, while prelease is averaging below pace for the remaining schools.

Of the universities expecting new supply for Fall 2017, Iowa State, Alabama, and Penn State remain among the top performers so far this leasing season. Clemson, Baylor, and Auburn had new supply delivered in 2015 and 2016, with more in the pipeline for 2017, yet leasing velocity remains ahead of the last few years.

Many of these universities are typically early leasing markets, so higher prelease is normal this early in the leasing season. However, the majority of these schools have seen or will see new supply this fall, so maintaining or pacing ahead of previous years shows strength in these markets.

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