New records for rents and preleasing set in March, but transaction activity drops
SANTA BARBARA, Calif., April 13, 2023 – The student housing sector continues to outperform other real estate verticals during challenging economic conditions, according to the latest National Student Housing Report from Yardi® Matrix. Rents increased seven percent year-over-year in March to an average of $829 per bedroom, a record high.
March preleasing rates also surpassed last year’s record. As of last month, 69.7 percent of beds at Yardi 200 universities were preleased for the fall 2023 term, a 7.8 percentage point increase compared to a year ago.
“A sector that often performs better during times of economic volatility, student housing continues to achieve record-breaking rent and preleasing levels,” say Matrix analysts.
Demand is strongest in the most competitive universities where enrollment is increasingly concentrated, producing demand for housing. The need is exacerbated at schools located in downtowns with largely conventional multifamily markets.
However, there are some limitations to the rosy report. Higher interest rates, reduced debt-market liquidity and weakening investor demand are slowing development and sales. Investors backed off of purchases dramatically in Q1 2023, with only $148 million in sales completed, down substantially from the $1.5 billion recorded in the first quarter of 2022.
At the start of the second quarter, there were approximately 70,000 bedrooms under construction, an increase of 20,000 beds over last quarter. However, the number of beds in pre-construction phases remains unchanged from Q4 2022, so as projects begin to deliver, there may not be as many developments to backfill demand.
Gain more insight in the latest Student Housing Report.
The student housing data set includes over 2,000 universities and colleges nationwide, including the top 200 investment grade universities across all major collegiate conferences. Known as the “Yardi 200,” it includes all Power 5 conferences as well as Carnegie R1 and R2 universities.
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