Real Talk About The Student Housing Outlook for 2021

Real Talk About The Student Housing Outlook for 2021

While 2020 threw a deluge of uncertainty onto the student housing market, things are beginning to look up for student housing in 2021. As vaccinations increase and communities across North America are seeing the light at the end of the tunnel, we’re glad to report that student living communities have something to be optimistic about in the coming months.

Wondering what the market trends signal for student housing in 2021? We’ve rounded up current insights on leasing, demand, and new development that can help you make informed decisions going into 2021 and 2022.

Student Housing Leasing and Demand:

With universities announcing movement toward in-person semesters in the fall, student housing communities are seeing an overall increase in applications. That means that for most, it’s a good time to resume or increase marketing efforts to drive more leases. After all, as schools announce in-person classes, there is a direct correlation in leasing numbers. And some schools have also changed freshman living requirements due to the pandemic, so in many cases, there’s a larger pool of students looking to live off-campus.

Even when campuses are staying remote, there’s plenty of hope for student housing communities. Communities located near campuses that have gone remote have only seen about a 10% dip in leases on average, likely because many students want to stay on campus and have a student experience as close to normal as possible.

However, the numbers also vary based on the size of the school. Markets with larger schools expect to exceed leases from last year, although smaller schools in smaller markets could be impacted more heavily in lease declines.

Overall, market leasing is behind, but leasing incentives can help achieve a stable leasing percentage. Make sure you clearly display special rates on your website so that more prospects are motivated to reach out for a tour or application start. It’s also smart to use Google My Business posts and digital ad campaigns to highlight your special rates.

Student Housing Development:

While rebrands were common in 2020, new developments were down, not surprisingly. The good news is that investment demand is still there and has actually increased due to pent-up demand. Investor involvement has also been a common cause of rebrands as interested investors are more selective about finding the right partner in the right market, resulting in more investor relationships that are more…well…invested.

Some new developments are now working to stay ahead of anticipated changes to on-campus housing inspired by the pandemic, which could bring on-campus housing design more in line with off-campus student apartments. For example, some campuses are working to offer more “private” housing options like townhomes or cottages, which would avoid the downsides of the communal bathrooms and kitchens that are common in dorm-style living.

High-quality assets have had luck in finding stable lenders, but overall lenders are being more selective, although capital is plentiful. Still, student housing is more attractive post-pandemic because of the low volatility cash flow nature of the business and consistent sustainability in revenue.

Insights from the Multi-Family Market: Investor POV

Unsurprisingly, multi-family sales volume was down 28% in 2020 vs. 2019, but there was significant rebound in Q4. Overall, multifamily was comparatively one of the least-impacted sectors. Although apartment vacancy did rise during the pandemic, CBRE expects a full recovery by early 2022 with affordable housing as one of the star verticals. CBRE Research also expects to see multifamily investment volume rebound with 33% growth.

The seasonal nature of student leasing means this rebound could be delayed for student housing communities, but overall we can expect a similar timeline for things returning to normal for student housing communities. Offering more flexible lease terms could help student housing properties see this rebound sooner, as lingering hesitancy among students in spring and summer of 2021 could fade away by winter and we could see an influx of students looking to move into an off-campus apartment for the Spring 2022 semester.

Trends To Watch: 

New developments and established communities alike should be anticipating changes in the wants and needs among student renters. We expect to see a preference for large units and outdoor amenities, for example, which could make now a good time to implement renovations and upgrades, especially while vacancy remains higher.

Some investors who had been pursuing commercial assets (e.g. office, hospitality, and retail assets) are now looking to deploy equity in apartments; increased demand has created lower yield requirements and increased valuations.

Finally, it goes without saying that amid an economic recession, student renters will be looking for affordable housing—a trend that may prove to be at odds with the desire for larger units. Highlighting the affordability of smaller units could therefore be a promising way of overcoming the preference for more spacious units. Again, offering special rates and advertising “starting at” prices will be a strong tactic for the upcoming leasing seasons.

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