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Overbuilding Fears Brewing in Student Housing Sector

Student housing developers continue to open tens of thousands new student housing beds each year, but it’s becoming increasingly difficult to fill the vacant rooms, according to a new report from the National Real Estate Investor.

“Much of the new supply in recent years has been at a significant rent premium to existing properties,” William Talbot, executive vice president and chief investment officer at American Campus Communities, a student housing REIT, told the National Real Estate Investor. “The new developments have generally leased up well in their inaugural year, despite the higher rents, but frequently struggle to maintain those rents.”

Student housing developers opened 47,000 new beds near college campuses in the fall 2019 school year. That is about the same as last year. The occupancy rate at the start of the 2019 year averaged 93.2%, which is about 10 basis points below a year ago.

Average rents were 1.7% higher than a year prior, according to data from RealPage, which tracked 151 schools. That is down from an average 2.3% growth per year during the fall 2015 and fall 2016 semesters.

“With developers opening so many new beds, it has become easy for them to misjudge existing demand,” the National Real Estate Investor reports. Any changes in on-campus residency requirements or changes in admissions and enrollment can make a big difference in demand, says Carl Whitaker, a manager of the market analytics team for RealPage Inc.

Article by REALTOR® Magazine, November 5, 2019


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