New Supply Hurts Preleasing in 2017
Digested from Axiometrics
The 2017 leasing season remained strong despite a dip in velocity. But another 45,200 student housing beds are expected to come to market in 2018 with 7,600 beds still in the planning stages.
Leasing season was strong in 2017, but off-campus leasing experienced a slight decline compared to 2015 and 2016.
Early on, pre-leasing for the 2017 school year outpaced the previous two years, but it started to fall off in March, according to Axiomterics’ Taylor Gunn.
New supply played a big role in this drop-off.
“Off-campus leasing velocity declined by almost 250 bps from August 2016 at properties located in new-supply markets,” Gunn writes. “Leasing velocity increased by more than 20 bps at properties in markets that did not have any 2017 deliveries.”
Despite the decline in pre-leasing numbers, rent levels improved 1.9 percent per bed. Gunn also points out that student communities located in high-supply markets actually pushed pricing more in 2017, achieving annual effective rent growth of 2.7 percent. Markets without new supply only achieved annual effective rent growth of 1.6 percent.
Student housing owners and managers should expect to see more supply coming online into fall 2018. Axiometrcs identified 45,200 student housing beds to come to market, with 7,600 beds still in the planning stages. Gunn writes that this supply is anticipated to be delivered across 67 universities, compared to 73 universities this fall.