Off-Campus Student Housing Goes Large

Off-campus student housing is experiencing very strong leasing numbers for the coming fall semester. A boost in demand and a lack of supply at certain universities are driving this trend, besting 2015’s favorable numbers.

National Real Estate Investor cited student-housing data from research firm Axiometrics that says, as of March, that privately built assets are 60.1-percent pre-leased for the fall, up from 55.5 percent during the same year-ago period. Overall vacancy rates are at 95 percent.

Rental rates are favorable as well. They are coming in at $617 per bed for the fall, up 2.4 percent year-over-year from the same time in 2015.

These boosts are taking place despite new product coming on the market. Axiometrics forecasts that 45,000 new beds will online at the start of the fall semester, on top of the 48,000 that were added last year. 

What’s driving all of this activity is, in part, is an increase in college enrollment rates projected in 2016.

This has led to investors dumping plenty of money into their student housing projects. Bloomberg reports that $4.5 billion was put into projects last year, trying to attract a wider student base with luxury amenities, such as swimming pools and volleyball courts.

What makes this product type different for investors is that secondary markets are attractive, Brice Willis of Stonemont Capital Group, wrote in GlobeSt. After all, most of the largest state schools are not in gateway cities, but in smaller-sized college towns. He points out that these locales can be very favorable if they are within walking distance to campus, as well as entertainment and other amenities.

On another note, the strong numbers on the pre-leasing end is especially good news because, as the National Apartment Association points out, it can be very hard to fill up vacancies once the school year starts.

Though student housing is often overlooked compared to other property types, it’s pretty apparent that this sector is doing very well right now and is relatively immune to downturns in the economy. It’s probably safe to assume more good news for the remainder of the year.