The student housing sector continues to break records for rents and preleasing for the fall 2023 term, according to the latest National Student Housing Report from Yardi Matrix.
In March, rents jumped 7% year over year to an average of $829 per bedroom, which is a record high. As for preleasing, 69.7% of beds at Yardi 200 universities were preleased for the fall term as of last month, 7.8 percentage points higher than a year ago.
“While other commercial real estate property types are seeing deceleration in fundamentals performance amid a slowing economy, the student housing industry is gaining steam,” noted the report. “A sector that often performs better during times of economic volatility, student housing continues to achieve record-breaking rent and preleasing levels.”
According to Yardi Matrix, demand has been strongest in the larger and more competitive universities.
Student housing rents have climbed each month since September. As of last month, 23 Yardi 200 universities that have at least four student housing properties saw double-digit rent growth. Purdue University led with 29.6% growth, followed by the University of Arkansas with 24.8%.
In addition, the report noted that student housing rents are highest in traditionally expensive multifamily markets with supply constraints. Three California universities—University of California, Berkeley; University of Southern California; and University of California, Santa Barbara—had average rents over $2,000.
With six months until the start of the school year, six Yardi 200 universities were fully preleased by March, though most have a limited amount of off-campus student housing properties. An additional 13 universities had preleased over 90% of beds.
However, the picture is not all rosy for the sector, with development and sales activity being impacted by higher interest rates, reduced debt availability, and weakening investor sentiment.
After a record 2022 for investment for the sector, student housing sales slowed dramatically in the first quarter at Yardi 200 universities. Transaction activity for the first quarter only saw $148 million in sales compared with $1.5 billion in the first quarter of 2022.
Yardi Matrix noted that the first quarter number will increase as more sales are documented and added; however, it will still be well below last year’s first quarter.
Approximately 70,000 bedrooms were under construction at the start of the second quarter, an increase of 20,000 beds over the previous quarter. However, the number of beds in the pre-construction phases was unchanged from the previous quarter.
“As projects begin to deliver, there may not be as many developments to backfill in future years,” stated the report.
