Performances have varied quite a bit among Texas universities during the COVID-19 pandemic, though, like the U.S., the Lone Star State has reported encouraging metrics in the last couple months.
As of June, the pre-lease rate across Texas universities averaged 73.7%. That ranks slightly below the 76.9% of beds across the core 175 universities RealPage tracks nationwide that have been leased for Fall 2021. But the Texas pre-lease rate in June ranks above the year-ago showing of 72.5%, further indicating that students are preparing for a more normal school year ahead. June 2021’s pre-lease rate still falls below June 2019’s pre-lease reading of 76.7% in Texas schools.
Texas Christian University claims the strongest pre-lease rate in Texas. As of June, 92.4% of beds at TCU were leased, after announcing in March the intention to have a fully in-person school year. Also logging pre-lease rates at or above the state average were Stephen F. Austin State University, Texas Tech University, Texas A&M University, Baylor University and the University of Texas at Austin.
Texas schools with the lowest pre-lease rates as of June tended to be commuter schools, such as the University of Houston, the University of Texas at Arlington, West Texas A&M University and the University of Texas at Dallas.
In-place occupancy suffered in 2020. Across U.S. universities, occupancy lagged normal levels at 87%, compared to 2019’s rate of 91.6%. Texas universities followed a similar trend. Occupancy at Texas schools hit 85.2% in Fall 2020, compared to 91.7% in 2019. Prompting this performance, fewer students showed up to their leased apartments due to remote learning.
Rent change across the nation and in Texas schools stumbled after March 2020 when the impacts of the pandemic were first felt, but the market didn’t turn to rent cuts until July 2020. Fall 2021 rent change has been lackluster, with mild cuts throughout the pre-lease season, but has improved notably in Texas since the low point in April when vaccines and re-opening plans were more solidified.
Year-over-year rent change is at its most stable level since July of last year. While mild price cuts are still the norm, the performance appears to be stabilizing.
As of June, effective rents in Texas schools were still being cut 0.5% on an annual basis, but that’s an improvement from every other month so far in the pre-lease season. That compares to a national norm of 1.2% growth in June.
As is usually the case, rent change varies widely by school. The state’s top performer – Angelo State University with 5.5% annual effective asking rent growth – is doing just about as well as the state’s bottom performer – Texas State University with 5.1% rent annual rent cuts – is doing poorly. Though most Texas schools fall in a middle category of either modest rent cuts or marginal growth. Ranking in the middle performance category are Texas A&M, UT Austin, TCU and the University of North Texas.
Texas overall offers good opportunity for student housing owners and operators. Demographic tailwinds are arguably stronger in Texas than anywhere else in the country. The biggest challenge facing Texas schools is new construction.
Texas continually sees a lot of development, and that can cause slower leasing and weaker rent change at individual schools. Texas generally claims about one fifth of the national off-campus student housing supply in any given year. In 2021, Texas claimed 19.3% of the national supply, equating to about 5,800 new beds.
Texas has averaged about 8,900 new beds annually since 2010, though that rate has hovered closer to 7,000 beds since peaking at nearly 19,000 new beds in 2017.
UT Austin claimed the most supply in the state (and in the nation) in 2021 with over 2,100 beds delivered. St. Edwards University – also in Austin – also delivered a lot of new supply in 2021. Texas State and UNT also claimed a few hundred new beds each.
In 2022, UT Austin, Tarleton State University, Sam Houston State and Texas Wesleyan University are all forecasted to see at least one new property deliver. Overall development levels will likely pull back in Fall 2022, although Texas-based universities are poised to continue to attract a large share of overall construction.