Is the Demand for Student Housing Slowing Down?

For the first time since 2015, pre-leasing levels for student housing didn’t keep pace, dropping 30 points says Axiometrics. Is this a signal that demand for student housing is seeing the first slow down in years?

The University of South Carolina's trustees approved a plan to
replace its outdated student housing in partnership with EdR.

Demand Slowing in a Dozen States
Despite several university housing managers trying to get a jump start on pre-leasing this year, Axiometrics’ survey reported that the initial momentum which began last year started to slow in the spring. By late spring, early summer, pre-leasing was only slightly above 2015 levels but had dropped below 2016’s pre-leasing levels; marking the first time in several years that leasing velocity did not increase year-after-year.

However, looking deeper into the numbers, even though more universities saw pre-lease slowdowns this year compared to the last few years, the majority either stayed the same or saw increases.

Student housing seeing the biggest change from last year are those properties that are a mile or more off campus. Those areas saw a 150 point drop from last year and a nearly 300 point drop from 2015 to now.

Pre-lease Stayed the Same (6 Universities): The six universities that saw no change in pre-leasing velocity from last year to this year are:

•      Georgia Southern University
•      Northern Arizona
•      University of Central Florida
•      University of Colorado
•      University of Nevada-Reno
•      Virginia Tech

New supply for these universities is flat, seeing new supply of less than 1,400 in 2017 and less than 1,100 for 2018.

Pre-lease Increased (8 Universities): The universities that saw pre-leasing increases include:

•      Auburn University
•      Boise State University
•      University of Louisville
•      University of Maryland
•      University of Mississippi
•      University of Nebraska-Lincoln
•      University of North Carolina
•      University of Wisconsin-Madison

Auburn saw nearly a 100% increase, making it one of the top 5 markets seeing rent growth this year. Another 528 beds are expected to open at Auburn in 2018.

Pre-lease Went Down (12 Universities): The majority of 3 year, same-store universities surveyed by Axiometrics saw pre-leasing activity go down. Those universities include:

•      Bowling Green State University
•      Georgia Institute of Technology
•      Colorado State University
•      Louisiana State University
•      North Carolina State University
•      Texas A&M University
•      Texas Tech University
•      University of Illinois-Urbana
•      University of Kentucky
•      University of Missouri
•      University of Texas-Austin
•      West Virginia University

Texas A&M student housing pre-leasing is down 80.1% from 2016. Still, the university’s new supply for 2017 totaled 2,336 beds and another 2,494 are slated for 2018. WVU saw the biggest drop from 2016 of 92.1% with no new supply expected this year or next.

Overall, there were only 7 universities that are facing negative rent growth coupled with a slowdown in leasing velocity, including the University of KY, University of Ill-Urbana, University of Missouri, Texas A&M, Texas Tech, and WVU. Texas universities are seeing the most new supply among 4 year universities. Missouri’s decreases are tied to its rapidly declining student enrollment.

The State of Student Housing is Strong
Some of this slowing was expected considering several years of year-over-year gains and record increases. Despite slowing velocity in certain markets, the state of student housing is strong according to most observers.

In the coming years, expect near campus and on campus housing demand and leasing activity to remain relatively high. Market watchers are keeping an eye on the looming problem of oversupply in top end student housing. Developers are looking to slow or reduce rent pricing over the coming years by building more affordable student housing.