Consumer worries about the economy are impacting student housing markets more than ever. Recent data from Yardi reveals that rent increases have slowed significantly, hitting just 0.9% in July across 200 universities. The average asking rent has dropped to $905 per bed, down from the peak of $918 in March. This slowdown is a stark contrast to a 2.8% average growth from October to July last year, which was more than double the current pace.
Robert Bronstein, CEO of Scion, a major player in student housing, explains this trend. “We’re observing a decline in both low and high-end markets,” he notes. Some students and their families are retreating to more affordable accommodations on the outskirts of campuses. Even those with more money are reconsidering their options, often opting for slightly older buildings that are 30% cheaper.
The shift in priorities is also notable. Students today favor practical amenities like co-working spaces and interview rooms, rather than luxury features like golf simulators. Cost is now at the forefront of decision-making.
Scion has focused on large public universities, including Florida and Oklahoma, where enrollment is booming. Bronstein states, “These flagship schools are growing year after year. They can’t keep up with housing demand.” This trend is accelerating as students gravitate toward these larger institutions, leaving smaller schools struggling to fill their dorms.
Standing out in today’s market means thinking big. Scion plans to invest heavily in a few sizable properties rather than numerous smaller ones. “In a high-interest-rate environment, scale gives us an edge,” he says.
According to a report by Walker and Dunlop, the student housing sector is expected to have a “dynamic” year ahead. After a dip in transactions due to economic challenges, there’s optimism as interest rates stabilize and universities continue to attract students.
Interestingly, the Southeastern Conference (SEC) remains the hub of student housing investment, while the Big Ten is also making strides. The emphasis is shifting from high-end luxury to more practical, affordable options that prioritize functionality.
In summary, student housing is evolving as student preferences and economic realities change. This sector is poised for intriguing developments, making it a key area to watch in the coming years.
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