TEXAS & FLORIDA: Where's the New Product?
As student housing gets more attention from developers, the largest concentration of new product has been focused around Texas, Florida, and the Southeast, says Axiometrics research VP Jay Denton. The University of Texas had one of the strongest rent growth rates despite competition from new supply and lack of enrollment growth, Jay says. Of course, Austin has been one of the strongest conventional apartment markets over the last three years, too. (It's the only way to find a room for SXSW.) Michigan State and North Carolina State were also strong performers. Florida State was the weakest of the top universities he tracks.
The average effective rent growth rate for the top 30 universities was just 1%, but those universities had a mix of properties with strong growth (less than 3%) and weak growth (flat or negative). Success is really measured on a property and submarket basis, Jay says. The average occupancy rate of the top 30 universities was 94.1%. Typically, new deliveries filled up quickly, he says. And, the properties close to campus tend to lease at a faster rate than those further away; those usually fill up later in the leasing season. For this year's deliveries, approximately one-half of them were delivered within a quarter-mile of campus.
The hard thing about this business is that some universities can have four or five properties deliver and it still have strong rent growth and occupancy rate, Jay says. Another university can have fewer deliveries and better enrollment growth, but still wind up in the oversupply category. Enrollment growth, or lack thereof, does not equal the same performance from one university to the next. Jay says there's no definitive number of beds slated for '14 delivery, but one he's watching: Florida State. There are seven off-campus properties delivering this year on top of the five that delivered last year. The bad news about this previous leasing season is most properties experienced negative effective rent growth, he says. The good news is most properties were still able to achieve an occupancy rate of 97% or greater. Of course, there were several that had an occupancy rate below 90% that pulled down the overall university average.