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The student housing market appears to be poised for continued moderation. This year has seen a slowdown in leasing velocity and compression of rent growth, though there have been bright spots.

Overall rent growth for U.S. student housing has compressed to 1.4 percent from 1.8 percent since last fall, according to the latest data. Peaks in new supply or supply/demand imbalances have tempered leasing performance at many schools. At the same time, steady flow of new inventory and a good footing for enrollment growth have proven better for others.

Through the second quarter, Auburn and Bowling Green were hovering at or near 8 percent rent growth while the University of Southern Mississippi approached 7 percent. On the other hand, Texas A&M, which has been a consistent leader in adding new beds, lagged at -6.6 percent resulting from concessions.

The landscape looks similar for 2019.

New supply levels at around 45,000 beds annually should mirror inventory that arrived last year and is coming in similarly in 2018. Florida State University should top deliveries while overall development will be steady, according to RealPage analysts.

Beyond 2019, the student housing landscape may be headed for change. Recent slowdowns in job growth nationally suggest that student enrollment could climb, therefore sparking greater demand.

For now, investor interest still appears to be hot with an increase of about 12 percent year over year in transaction volume to about $225 billion. The influx of foreign capital has been healthy in recent years at larger state universities.

Being prepared and acting on what the market brings

While the data may suggest things are going to be status quo for the short-term, student housing operators have to be prepared for whatever the market brings. That requires knowing the market and understanding how revenue management and business intelligence can maintain the financial health of student housing apartments.

“The student housing landscape can change very quickly, even if a moderate block of new supply comes on or if on-campus housing selection or requirements shift,” says Ryan Kimura, a RealPage industry principal for Asset Optimization, during a recent student housing market update. “So having the right tools to help provide that insight is paramount.”

The use of technology and market data is defining how student housing operators are preparing for future lease-ups. With the fall lease-up behind, focus is shifting to next year. And lease transaction data and other market metrics provide insight right now on how to stay ahead of the game, Kimura says.

Understanding student housing trends

At the end of the second quarter, RealPage student housing analyst Taylor Gunn and Chief Economist Greg Willett gave a thorough student market update that focused on rent growth, leasing trends, inventory and other factors that weigh into market health. Kimura says it’s not only important for operators to understand the market but also have deep knowledge of asset performance.

“Know your assets,” he says. “Their unique character influences each student housing market campus by campus. Most of our successful clients have an external view of the competition and internal view of performance.”

And having the right asset optimization toolkit is important.

Investing in business intelligence

A business intelligence platform provides insight into developing trends and indicators key to market and operational performance of assets. Business intelligence dives deep into many factors that drive performance based on lease transaction data. The metrics − along with a 360-degree view of operational, financial, marketing, accounting and demographic metrics – enable company stakeholders to better execute on objectives, improve efficiencies and increase effectiveness.

It’s not rocket science. Just having key information at hand – like identifying student renters by class − can provide key insight into future leasing, Kimura says.

“The makeup of the students within your property can help with marketing for renewals,” Kimura says. “Those seniors might not requiring having to spend as many marketing dollars because they may not be coming back. But with freshmen and sophomores, you might want to spend more marketing dollars so they’ll renew.”

Revenue management drives confidence in establishing rents

Marrying the art of property management with revenue management optimizes asset performance.

Kimura says RealPage has proof that concessions and traditional pricing mechanisms designed to increase velocity may not be best for the bottom line. In a recent joint case study between ReaPage and CampusAdvantage, revenue management outperformed the market up to 14 percent. The case study found that the preoccupation with occupancy in student may not be the right focus for optimal revenue, he says.

“Should a leasing staff feel confident pushing rents 9-14 percent past the market average with occupancy decreasing?” Kimura asked. “Revenue management helps provide the confidence to your community managers that they can push, and that’s the performance that Campus Advantage saw with two of their assets.”

Whether the market moderates or fluctuates, technology assists in helping student housing operators get the most out of their assets.

Source: propertymanagementinsider.com

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