As students prepare to head back to campuses in the coming weeks, preleasing velocity and rental rate growth for student housing has fully recovered from the impact of the COVID-19 pandemic and is far exceeding pre-pandemic levels. Berkadia’s 2022 Student Housing Preleasing Report shows that Fall 2022 prelease rates are up 960 basis points from last year to 86.3%.
Preleasing rates for student housing properties across the U.S. for this academic year are 6.5 percentage points higher than the 2019/2020 academic year, the last leasing cycle pre-COVID.
Rent Continues to Rise
In addition to robust preleasing rates, rental rate growth for student housing properties across the U.S. have never been stronger. The average rent per bed is currently at $771, putting rental rate increases at an average of 5.7% since last year. When looking at proximity to campuses:
- Communities less than half a mile away from campus have seen a 5.5% increase since last year with average rent per bed at $836
- Communities 0.5-1.5 miles away from campus have seen a 6% increase since last year with average rent per bed at $664
- Communities more than 1.5 miles from campus have seen a 6.2% increase since last year with average rent per bed at $618
Regional Hotspots
The Rocky Mountain region exhibited some of the strongest growth with properties preleasing at 89.9% on average and displaying an average rent increase of 7.4% since last year.
Student housing properties on the West Coast have also demonstrated significant growth with preleasing at 85.7% on average and rent increases up 6% on average in the last year.
Home to two of the top four universities with the highest enrollment levels in the U.S. ahead of the 2022/2023 academic year, it is no surprise that the Southeast region has also continued to experience considerable growth. Properties in the region are preleasing at 86.3% on average and displaying an average rent increase of 6.3% since last year.
Increasing Investor Interest
The recovery of the student housing market is indisputable with the 2022/2023 leasing cycle being on pace to be the strongest in the last decade. We have seen a steady pick up in the market over the last year as Berkadia Student Housing completed $1.4 billion in volume across 49 transactions in 2021.
Though we’ve seen a slowing of transactions in Q2 and Q3 – directly related to the volatility in the bond market and its impact on interest rates – student housing owners continue to enjoy the benefits of significant revenue growth from historically strong operating fundamentals.
Based on its strong operating fundamentals and its ability to provide some of the best risk adjusted returns in all of real estate, investors can no longer ignore the student housing industry.