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Fears of oversupply in student housing sector

By Mike Wheatley | November 8, 2019

Student housing construction is booming with developers adding “tens of thousands” of new units each year, but experts say the market could be in trouble from oversupply as many beds remain vacant.

A report in the National Real Estate Investors notes that student housing developers opened 47,000 new beds in or around college campuses in the fall 2019 school year, roughly the same as in the previous 12-months. But the occupancy rate at the start of the 2019 year averaged 93.2%, which is about 10 basis points below a year ago.

Moreover, average rents this year were up 1.7% compared to a year ago, according to RealPage data. That’s down from the average 2.3% growth per year seen in 2015 and 2016.

“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.”

The National Real Estate Investor said the problem is that developers are opening so many new beds that it’s become difficult for them to judge the level of demand for their units.

Changes in on-campus residency requirements, admissions and enrollment rules can also have a big impact on demand, said Carl Whitaker, manager of the market analytics team at RealPage.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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