Industry News

Market Reporting that Matters

Winter 2018 Student Housing Report

Monday, February 12, 2018

Development Activity and Performance Remain Moderate

With the 2018-19 leasing season underway, results so far indicate another year of flat performance. New supply of purpose-built student housing remains at moderate levels for the fourth consecutive year, and performance is on pace with last fall.

A total of 46,000 new off-campus student housing beds are scheduled to be delivered for the Fall 2018 semester, with 900 beds still considered planned (though they are unlikely to be ready this fall). These figures are in line with the volume of new supply seen since 2015, though certain universities have seen fluctuations and even elevated levels of new supply.


Click to enlarge in new tab.

Seventy-one universities received new supply in 2017, but fewer universities have been identified to receive new supply in 2018. Additionally, of the 69 universities identified as having completions in 2018, only 21 saw new supply in 2017 – meaning that many current high-supply markets such as Texas Tech, Mississippi State and Baylor will have a chance to rebalance.

However, several universities are expected to see an increase in new supply. There are 15 universities with 1,000 or more additional beds being tracked for 2018 delivery.


Click to enlarge in new tab.

Several of these universities will be important to watch throughout the leasing season due to the volume of supply being delivered. For instance, Florida State University has not seen this level of supply delivered since 2014 (during the peak development years), which contributed to declining rent growth and low occupancy. New supply at the University of Mississippi is tracking above last year’s levels and is resulting in slowing leasing velocity (down 7.5%) and negative rent growth of 2.6%.

Penn State, which is typically a high occupancy, early leasing market, is expecting the largest quantity of new off-campus supply since 2013. However, there is no indication so far this leasing season that performance in the market will slow. Prelease is averaging 64%, up 330 basis points (bps) from last January, and annual effective rent growth is averaging 2.6%.

Early Leasing Points to Continued Moderation

In 2017, the year-over-year spread in leasing velocity began to narrow around January and remained in line with the 2016 velocity throughout most of the year. Ultimately, Fall 2017’s leasing velocity fell slightly below the Fall 2016 average by August.

A similar trend is seen a few months into the 2018 leasing season. Prelease averaged 5.3% in October 2017, 103 bps higher than in October 2016. In November and December 2017, leasing velocity remained ahead of previous years, but the spread tightened in January 2018. Leasing velocity averaged 37.2% in January, only 28 basis points below the prior year.

These results were anticipated given supply trends. Several large markets are recovering from elevated supply volumes in 2017, and some markets are expected to see performance moderate or even decelerate as supply increases this year.


Click to enlarge in new tab.

Furthermore, properties located closer to campus continue to see stronger results. On average, properties located less than a half-mile from campus were 41.1% preleased in January, up 61 basis points from January 2017. These properties were also averaging above $700 per bed for Fall 2018, with annual effective rent growth of 1.6%. This is in line with the current national average but below historical levels.

Properties located between a half-mile and one mile from campus were 34.6% preleased in January, up 89 basis points from last year. These properties are seeing the largest year-over-year increase in leasing velocity and the highest rent growth of 2.0%. And while they have continue to see the highest rent growth over the past few years, the average price per bed is only averaging $17 more than properties located more than one mile from campus.

And as traditionally seen, those located more than one mile from campus saw the lowest average prelease of 28.5%, which is a decline of 350 basis points from January 2017.

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 slightly over 37%, but several universities have surpassed this level. Many are experiencing a larger (positive or negative) spread year-over-year.

The table below shows universities with the highest two-year same-store average prelease as of January 2018. This only includes universities with more than two same-store properties.

 


Click to enlarge in new tab.

The two same-store properties located near Virginia Tech are averaging 100% leased for the fourth consecutive year, with no new supply expected again in 2018. Driving this strong performance, Virginia Tech has seen consistent demand and minimal development activity, with only 1,700 new beds this cycle and some on-campus housing renovations.

James Madison and Auburn also continue to illustrate positive signs this leasing season, with no new off-campus supply anticipated at either university. Of the other universities not anticipating new supply this fall, the University of Maryland, University of Illinois – Urbana-Champaign and Minnesota State are seeing solid increases in leasing velocity year-over-year and positive rent growth. This is a positive sign after a moderated leasing season last fall for all three schools.

Of the universities expecting new supply for Fall 2018, Georgia Tech and UT Austin are seeing a slowdown in leasing velocity year-over-year. Despite the slowdown, leasing velocity at the two schools remain ahead of the national average, with both schools tracking positive rent growth thus far. Iowa State and Clemson continue to be among the top performers for prelease so far but are seeing a pullback in rents. This indicates that properties are dropping rents to boost velocity and are seeing some impact from new supply.

UNC, Kent State, University of New Hampshire and Slippery Rock University are experiencing a different trend, with leasing velocity down year-over-year. But they are achieving higher-than-average rent growth.

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

 

Javascript is not enable. This may affect content rendering. You can enabled Javascript in your Settings Menu.