The student housing sector has been shaken amid uncertainty over the exact length and scope of the coronavirus outbreak, with operators and investors bracing for the possibility of revenue losses at properties across the country. However, some in the industry are confident the niche that many call “recession-proof” will feel very minor impacts.
Student housing represents about 7 to 12 percent of the total U.S. rental market, according to a recent study from the National Multifamily Housing Council. With most states under some form of quarantine or stay-at-home measure, colleges and universities have shifted to online-only learning or have cancelled classes all together until the fall, with even the start of that semester unclear.
Now, the major questions student housing owners and operators are asking themselves are when will they return, and will they sign new leases?
“I think people are very worried that the rent roll is going to be reduced as a result of the virus,” said Matthew Berger, vice president of tax & student housing at the National Multifamily Housing Council. “I think that’s number one.”
Another big question is when colleges and universities will open again. The seasonal nature of student housing means units typically get leased up during a period of a few months. Some in the industry are waiting to see whether that window will get pushed back, and how far.
“Are universities going to open on time? When are they going to announce that? It affects next year’s rent roll and lease-up cycle,” said Berger.
The other big worry for those in the industry is construction timelines. Some cities around the country have put a halt to all non-essential construction for safety measures, potentially leaving current projects under construction, like student housing properties, in limbo.
“Once the school year starts, if you haven’t leased your beds, you’re very unlikely to do so,” said Berger. “If your property isn’t ready to lease by start of the school year due to construction delays, you could lose a whole year of rent.”
CBRE Executive Vice President Jaclyn Fitts, who leads the firm’s National Student Housing Team, said another potential impact to construction could come in the form of delayed permits in localities where city employees are not working.
A POSITIVE OUTLOOK
However, while it may still be too early to tell, Institutional Property Advisors Executive Managing Director in Investments’ Peter Katz said he believed there was a high percentage of rents among student housing properties that were in fact paid on April 1, which he called “very encouraging.”
Katz, who has been in the sector for more than two decades, believes the industry won’t see any long-term disruption as a result of the pandemic. In the short-term, the only potential hiccup he sees is in unit turns, which refer to the process of getting a unit back in shape for a new resident after one resident moves out, and the preleasing timetable.
“I think the reality is, it’s a fairly likely scenario that some of the preleasing will be backloaded until parents and students feel comfortable that university’s fall semester will open,” said Katz.
While some students left their campuses and returned to their family home to ride out the pandemic, many others have chosen to stay, including international students, who may be unable to return home. The properties are still up and operating and provide a safe housing option, experts say.
“Students really want to get back to the norm,” said Dave Borsos, vice president of capital markets at NMHC, which keeps a close eye on student housing residents. “They are clearly highly interested in returning. So, to the degree universities are signaling a reopening, we would expect a very fast recovery for fall leasing activities.”