The global pandemic has strengthened an existing trend in student housing giveaways. The days of profligate incentives to sign residents has decreased more drastically in the Fall 2021 pre-lease season, and the use of gift cards has increased.
While concessions are still common in student housing – more so during the pandemic – giveaways are also utilized. Giveaways can range from raffle prizes to Apple products to free parking.
In the recent past, an increasing number of properties experimented with off-the-wall giveaways like vacations or cruise tickets. But that trend had already been shifting back towards cash-like giveaways (like gift cards) before the COVID-19 pandemic.
About 82% of student housing properties offering giveaways for the Fall 2021 school year are offering gift cards as incentives. Besides gift cards, the most common giveaways are raffle prizes (9.7%), parking (4.5%) and electronics (2.6%). A negligible amount of properties offered cruise tickets, Yeti cooler products, fitness trackers or GoPro cameras.
Gift card amounts vary. Of the properties that offer them, the most common amounts range from $100 to $500. About 16% of gift card giveaways are for over $500. About 10% are between $51 and $100 and only 3% are for $50 or less.
Often, the higher the value of the gift card, the more the potential resident has to do. For high-dollar giveaways, prospects must sign a lease by a certain deadline or for a certain floorplan. Many gift card giveaways increase in value for larger floorplans. For gift cards less than $50, the potential resident often only must take a property tour.
Giveaways – while not exactly the same as a concession – can be thought of in a similar manner as they are used to help drive additional leasing traffic to a property. While a concession translates to a lower rental rate when pro-rated through the full course of a lease and a giveaway doesn’t, the giveaway still comes at the expense of the property owner and operator. From that perspective then, it can be useful to compare a giveaway amount to that of a concession – although with the understanding that there is no true apples to apples comparison.
A $100 giveaway prorated through the course of a student lease would essentially equal a value of $10 per month. Assuming the average asking rent for a bed runs at approximately $725, then a $100 giveaway prorated over the course of a lease would equate to a 1.4% discount. In real terms, that’s about one week free. A $500 giveaway prorated over the course of a lease is just shy of a 7.0% discount, or almost four weeks rent free.
Giveaways may also have some additional benefit beyond concessions. When residents are up for lease renewal, an expiring concession effectively raises rents and can result in sticker-shock for a renter. After all, a concession equal to one month free (or about 8.7% off asking rent) results in rents increasing by that same amount upon lease renewal. And additional pressure to achieve further rent growth in line with the market’s broader growth rate only exacerbates that burden for the renter.
During the pandemic, concession discounts have tracked in the normal range of about two weeks free rent, but the share of properties offering concessions is up notably. The share of properties offering concessions has jumped over 10% from last year’s share.