Student Housing Pre-Leasing, Rent Growth Outpace Historical Average

(Illustration courtesy of Yardi Matrix)

Student housing pre-leasing is outpacing all previous years on record and rent growth remained strong in March, according to Yardi Matrix, Santa Barbara, Calif.

The firm’s National Student Housing Report found that pre-leasing in March 2024 reached 67.7%, 240 basis points above March 2023 and more than 10% ahead of the average between 2019 and 2022.

“Strong pre-leasing is an indication of solid demand from growing enrollment and suggests the market is easily absorbing any new beds for fall 2024,” the report said.

Average rent per bed in student housing properties reached $895 in March, up 6% from a year ago, Yardi reported. “Year-over-year growth had shown signs of slowing in previous months, but reaccelerated in March as pre-leasing continued to trend above last year. Rent growth in the sector has averaged 6.2% over the course of the leasing season, making student housing one of the best-performing commercial real estate sectors,” the report said.

Yardi collected fall 2023 enrollment data from 183 colleges nationwide and found a strong rebound in growth from the previous year. Total enrollment was up 0.7% year-over-year, compared to a 0.5% contraction in fall 2022. Enrollment growth has mostly benefited large, primary state schools, which has translated to stronger performance at these schools, as well.

The report’s supply forecast projects 46,285 new beds will deliver in 2024, a sharp increase from 37,576 beds delivered in 2023 and near the peak years of 2013 and 2014. But over the next five years, supply will likely drop below the long-term average of 36,322 beds per year.

Looking at property sales, this year’s student housing sales will likely resemble 2023, with 12 properties sold in the first quarter compared to 11 in first-quarter 2023. “Although there is heightened interest in the sector, sales have been impacted by higher interest rates, which have kept sellers on the sidelines waiting for interest rates and cap rates to come back down,” Yardi said. “There have been a few high-profile trades so far, with three over $100,000 per bed and two over $200,000.”