The National Multifamily Housing Council (NMHC) and InterFace Student Housing joined forces to host a virtual conference tackling the student housing sector in the age of COVID-19.
The industry kicked off 2020 on a high note, according to American Campus Communities CEO Bill Bayless, who delivered the keynote address today. All professionals were ahead in the lease-up for the fall of 2020, he noted; the rental rate growth was between 2 to 3 percent year-over-year; cap rates were down and valuations were up for ACC. “The fundamentals of our business have never been stronger; many times in our lives you don’t realize how great things were until something occurs,” Bayless said.
Several months into the pandemic and with uncertainty looming over every sector, student housing professionals were still unsure about the crisis’s impact on their businesses: “Certainly, the universities and the institutions of higher education that we serve were the focal point in that,” Bayless noted. When universities decided to close, sending students home, ACC started to struggle with cash flow, recession resilience and the inevitable concerns about the fall semester.
Rents grow amid occupancy drop
When universities decided to close due to the high level of uncertainty regarding the novel coronavirus, ACC was faced with a drop in occupancy levels in late March and throughout the month of April, at a time when student housing assets are always almost fully occupied. But students continued to pay their rent, Bayles said. “We reported in the second quarter—in the months of April, May and June—that 93.7 percent of students did continue to pay their rents,” he noted.
On a national basis, as of September, the occupancy rate was 86.9 percent, down 450 basis points year-over-year, according to RealPage’s Carl Whitaker, senior manager for market analytics & asset optimization. However, performance by schools widely varies.
Despite COVID-19’s impact on the student housing sector, one thing came as a surprise to industry professionals: “(…) rent growth was 1.4 percent year-over-year, and while that was 30 basis points off of last year, the fact that we had such a significant industry headwind in COVID-19, I think a lot of people were pretty pleased with 1.4 percent rent growth of the year,” Whitaker said.
CBRE’s Americas Head of Multifamily Research Jeanette Rice noted that recessions can be a good thing for student enrollment, adding that, between 2008 and 2010, 1.3 million new students entered college. And based on early estimates for enrollment for the fall of 2020, “the total for all classifications of higher education was down by 3 percent—which, given everything, doesn’t seem that bad, but it depends on where you are on the spectrum.” Enrollment statistics are impacted by the state of the economy, as well as by freshman and international students.
Rice also noted there was a big drop in international enrollment for the current academic year, but there’s some room for improvement in the year to come. “I think that even though 2021 probably won’t have that drastic of a drop in international enrollments (…) I can’t see a situation where enrollment returns to its pre-COVID-19 levels at least for a few years,” Whitaker added.
Wrapping up the Economic Outlook session, the two panelists agreed that college is not just about learning, it’s an experience. Students want to return to campus and parents are willing to let them, which will benefit the student housing industry on its road to recovery.