2021 Student Housing Market Overview and 2022 Outlook - Flipbook - Page 22
Market Metrics
Market metrics across the student housing sector displayed characteristics of strength and resiliency through the tested macroeconomic
rate of $614 per bed, a 2.3 percent increase over
environment posed by the various waves of the COVID-19 pandemic. Prior to the recent pandemic, pre-leasing cycles in many
the Fall 2020 average rate. The result of the overall
submarkets began earlier transitions as owners sought to quickly secure their projected revenue for the following academic year. Much
rent growth in the sector is derived from substantial
like 2020, 2021 pre-leasing was wedged in a waiting game as schools announced at various times throughout 1Q21 and 2Q21 their
enrollment increases, spillover from conventional
intentions for in-person classes for Fall 2021. Advantageous to the sector, the economic repercussions of keeping students in virtual
tenants attempting to escape double-digit rental
learning led to prompt decisions from universities to announce on-campus operations earlier than they did in 2020. As of March 2021,
rate escalations, and historically low incoming
48 percent of student housing beds were pre-leased. Per AxioMetrics Data, March 2021 pre-lease figure represented an 11.7 percent
development supply.
decrease over March 2020 pre-lease numbers. It is important to note that the double-digit decrease in pre-lease velocity is inflated due
AVERAGE PRE-LEASE PERCENTAGE
Yearly
45%
40%
35%
to the early months of the 2020-2021 AY pre-leasing season not accounting for COVID-19 uncertainty. As off-campus student tenants
With static pre-leasing velocity for the first half of the
began responding to university announcements for full-time in-person classes in Fall 2021, 92.5 percent of beds were leased-up by
2021 pre-leasing season, investment-grade student
30%
August 2021. This pre-lease figure reflects a 4.5 percent increase in pre-leasing over August 2020 and is in line with pre-pandemic data
assets proved to the investment community its
25%
from August 2019. Overall, leasing metrics for September 2021 finalized at 94.2 percent compared to 88 percent in 2020 and 92.6
ability to fully rebound through accomplishing record-
percent in 2019, representing a 160 basis-points increase over pre-pandemic figures.
setting effective rent growth in addition to stabilized
occupancy. The 280 basis-point positive differentials
31.3%
30.1%
24.4%
20%
15%
Dec-19
Dec-20
Dec-21
Nationally, effective rental rates averaged $740 per bed for Fall 2021, which equates to a 4.2 percent increase over Fall 2020 effective
from the previous year’s accomplishments proved
rental rates. Despite the challenges of the 2021 pre-lease season, Tier-I assets located pedestrian to Power-5 universities achieved
the mainstay institutional status of the industry.
sizable increases in rates and healthy pre-lease velocity. Properties located less than a half-mile from campus had an average rental
Long-term rent growth and stabilized occupancy
rate of $780 per bed, an increase of 4.1 percent from the previous year’s average. Most notable was the increase for properties located
are foreseen to remain healthy as the population of
between a half-mile and one mile from campus. These purpose-built student housing assets garnered an average rate of $652 per
college-aged 18 to 24-year-olds continues to climb
bed, up 5.2 percent over the previous year’s average. Finally, assets located more than one mile from campus had an average rental
and the number of beds to be delivered is estimated to remain at record lows over the next several years. Finally, 1Q22 has only
Source: Axiometrics/RealPage
accelerated the positive tailwinds from 2021 with pre-leasing velocity approximately 13 percent ahead of 2021 and a record effective
RENT METRICS BY DISTANCE FROM CAMPUS
rent growth of 5 percent.
In Miles
Buyer Profile
$900
8.0%
$800
7.0%
$700
6.0%
$600
5.0%
$500
4.0%
$400
$300
$200
4.2%
4.1%
2.0%
2.3%
$100
$0
3.0%
5.2%
National
1.0
1.0%
0.0%
The buyer profile saw greater diversification in 2021 as new entrants from a broad spectrum of capital sources entered the space,
strengthening the competitive environment, particularly for sought-after Tier-I markets. With historically low interest rates and, as a
result, significant cap rate compression, foreign, private, and institutional capital looked to gain quick scale in what has become one
of the best performing alternatives of the real estate industry. Following 2020’s hyper-focus on well-performing, newly built pedestrian
assets at Power-5 schools, 2021 saw a continuation of pre-pandemic norms with capital sources able to leverage readily available
financing to allocate pent-up funds across value-add and opportunistic yield profiles.
Maintaining the trend of years past, private capital buyers made up the most significant portion of market share in 2021 with
approximately $6.9 billion, or 58 percent of total transaction volume. In the previous year, private capital accounted for 29 percent of
the market share, roughly $4.9 billion less than what was accomplished in 2021. A contributing factor to increased transaction volume,
outside of COVID-19 fears dissipating, was the focused capital efforts from a variety of lending institutions to capitalize on what
conventional multifamily had early access to in the second half of 2020. In tandem, these driving forces allowed for an unprecedented
record year for private capital – marking a 221 percent increase over their 10-year acquisition volume average. Driving contributions to
private capital’s increase of market share is Scion’s $1.5 billion portfolio acquisition from Harrison Street, as well as a multitude of high-
Effective Rent Growth (ERG)
priced one-off single asset and portfolio transactions. Of the one-off transactions, a meaningful portion of trades were new entrants
looking for stronger entry-point yield compared to conventional multifamily. Interestingly, the student housing sector in 2021 saw a
Source: Axiometrics/RealPage
2 0 2 1 S T U D E N T H O U S I N G M A R K E T O V E R V I E W A N D 2 0 2 2 O UT L O O K
trend of older purpose-built student housing assets with favorable unit mixes being purchased to capitalize on a student to conventional
NEWMARK
23