Last week, we highlighted the top university markets for student housing demand, but it’s also important to assess how much new student housing supply is being delivered in those markets, if any.
While enrollment growth drives demand for student housing, new and existing supply gives you a true indication of available demand in a market and the ability of new beds to be absorbed. Additionally, not all universities projected to see the most demand receive the most supply.
The universities below have the most off-campus housing supply delivering this fall. Many of these schools are larger state universities, so supply volume is expected to be larger. However, the impact of new supply varies by size of the university and market fundamentals.
Of these 15 universities, seven have ranked among the top universities at some point over the past three fall semesters, including Texas A&M, Baylor, University of Florida, University of Alabama, University of Georgia, University of Oklahoma, and Arizona State. Only three of these universities are currently expected to rank among the top again in 2018.
As mentioned throughout the leasing season, Texas Tech and Texas A&M rank No. 1 and No. 2, respectively, for most off-campus housing supply. Both universities have experienced rapid enrollment growth in recent years, but not enough to keep up with the amount of student housing supply.
Existing off-campus housing at Texas Tech (based on three year same-store figures) averaged 78.8% leased in July, down more than 1,000 basis points (bps) from July 2016. At Texas A&M, same-store properties averaged nearly 81% leased in July, down 600 bps from July 2016. Both universities are seeing an impact of this new supply on leasing velocity and annual effective rent growth (both averaging around -4.5%). However, demand is projected to continue growing at similar levels over the next few years and supply is expected to moderate.
The University of Houston, surprisingly, ranks No. 3 with more than 1,600 beds coming to market. The university has seen strong enrollment growth in the past few years, but minimal student housing supply growth outside of the beds delivering this fall. On the other hand, Baylor University, which ranks No. 4, has had several consecutive years of supply growth. Since 2014, more than 2,800 beds have been delivered and an additional 1,500 are coming to market this fall. This is causing existing assets to experience slower leasing velocity.
The University of Missouri ranks No. 5 for most new off-campus student housing supply this fall. However, Mizzou’s enrollment is projected to decline by more than 2,000 student for the second year in a row. Additionally, the university has temporarily closed several on-campus residence halls due to declining demand.
But this has not stopped student-housing developers from building off-campus with 1,400 new beds opening over the next few weeks. And while these new beds are being absorbed, existing properties in the market aren’t leasing at the same rate.
Despite ranking No. 9 with more than 1,100 off-campus beds opening over the next few weeks, same-store properties at Clemson University were more than 97% leased as of July. While these figures are slightly down relative to the past two years, it is still strong compared to the rest of the market.
New supply is projected to outpace new enrollment growth this fall for some universities, but the future could tell a different story. As development activity moderates and enrollment growth is sustained, student housing supply and demand will become more in balance.