'Student Housing Stays Strong Despite Performance Drop', Reports Yardi

The student housing landscape is experiencing a shift, as the latest data  from Yardi® Matrix reveals. The student accommodation sector has demonstrated strong fundamentals as it embarks on the 2023-2024 academic year.  According to Multifamily Executive MFE, this change in pre-leasing has not only affected the rate at which students secure student accommodation but has also left its mark on rent growth.

According to Yardi news, this change in pre-leasing has not only affected the rate at which students secure student accommodation but has also left its mark on rent growth. The sector is well prepared for the upcoming semester of 2023- 2024, with a lot of occupancy and the highest rents.

Despite these challenges, the student housing sector remains robust as it enters the fall semester of 2023. Development in the student accommodation sector remains fueled by its strong fundamentals. Yardi Matrix predicts the delivery of approximately 40,000 new beds in the fall of 2023 at Yardi 200 universities, a significant increase from the 27,000 beds delivered in the previous year.

According to PBSA news, the data set has undergone an update, now encompassing 892,511 beds across 30 markets, including a broader range of student housing properties. In contrast, many universities enjoyed high pre-leasing rates, and a few faced challenges. Some universities that have 4 or more properties are not doing as well as they did last year. They are more than 10% behind because of new things being added.  For example, Boise State University had over 1,000 beds delivered in the year and lagged by 21.8% in pre-leasing.

As of September 2023, pre-leasing stood at 95.1% for beds at Yardi 200 universities, a slight drop from the 96.2% recorded in September 2022. PBSA news also reports that this decline in pre-leasing led to a sluggish lease-up of new deliveries in 2023, which only reached 84.4% released in September. Furthermore, it's worth noting that the pre-leasing numbers for September 2023 still exceeded those of 2019-2022. An impressive 56 university markets achieved pre-leasing rates of 99% or higher.

According to MFE, rents are near their historical peak, averaging $846 per bed/year, with minimal fluctuations over the past four months. Rent growth, however, dipped to 6.1% in September, down from 6.5% in August and a peak of 7% in March 2023. Despite this slight decline, it remains considerably higher than the figures recorded in the previous years of 2019- 2022. Remarkably, 33 markets displayed double-digit rent growth in September, including prominent student accommodation hubs like Purdue, Arizona State, Clemson, and the University of Georgia.

Market conditions have played a role in rent fluctuations, with the 10 markets showing the lowest rent growth, experiencing a decline in enrollment of approximately -1.8% last year. The University of Nebraska-Lincoln is a case in point, with enrollment decreasing each year for the past five years, dropping by 8.7% between 2017 and 2022.

In terms of transactions, the student housing sector has seen a noticeable decline in volume compared to 2022. Yardi also mentioned that only 42 deals comprising 24,792 beds were completed by the end of August, marking a 72.6% decrease from2023. Moreover, only two portfolios with two or more properties were sold, a significant drop from the 20 portfolios sold through August 2022. Interestingly, 8 of the top 10 buyers from the previous year remained inactive in 2023.

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