Student Housing Shone in Q1 2023

Preleasing and rent growth reached new historic highs in the first months of the year, according to Yardi Matrix.

Students

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Amidst a general slowdown in activity across most asset classes, student housing is still swimming against the current: the sector has continued its record-breaking performance in the first quarter of the year, according to a report by Yardi Matrix. The biggest demand for student housing remains across more competitive universities with soaring enrollment rates.

Reaching nearly 70 percent, the March preleasing rate at Yardi 200 universities outperformed last year’s historic high for the month, while annual rent growth also surged.

However, prevailing setbacks in the general economy, such as high interest rates and weakening investor sentiment, seem to have taken their toll on development and sales activity in the sector. Despite an increase in bedrooms under construction since the previous quarter, pre-construction volume remained unchanged. Transaction volume in the first quarter of the year plummeted, compared to the same period in 2022.

Student housing is still breaking records

As of March, the preleasing rate for the fall 2023 term at Yardi 200 universities stood at 69.7 percent, up 7.8 percent year-over-year, marking another record high for the month. Six schools were fully preleased at that point, with most institutions having a limited amount of dedicated off-campus housing available. Additionally, 13 universities bore a preleasing rate of at least 90 percent.

Rent growth climbed as well, with a 7.0 percent increase since last year, reaching an average of $829 per bed in March—the highest rate on record for this month. Since September, rents have been increasing steadily, with larger schools with higher acceptance rates recording higher rent growth. Purdue University led Yardi 200 in terms of rent growth, with a 29.6 percent increase in March, followed by University of Arkansas, with a 24.8 percent boost.

Heightened construction activity, but sales down

As of early April, Yardi 200 universities had roughly 144,000 beds in various stages of development—up 20,000 beds since January. The pre-construction pipeline remained mostly unchanged through the first quarter of 2023, signaling a possible slowdown for the sector. The University of Texas at Austin had the largest under-construction pipeline, comprising 5,555 beds, representing 10.7 percent of enrollment.

Student housing investment sored in 2022, but sales have come to a significant slowdown in the first quarter of the current year. Transaction volume at Yardi 200 added up to $148 million between January and March, with an average of $74,500 per bed, much lower than in the first quarter of 2022, when sales reached a total of $41.5 billion.

Head over to Yardi Matrix to read the full report.

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