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A recent Yardi Matrix webinar offered perspectives on the effects of enrollment, demographics and other aspects of student housing. This is one of the markets for which Matrix provides comprehensive market intelligence.
The preleasing rate of 67.1% in March indicates that “the sector is returning to normal” after two years of underperformance, according to Tyson Huebner, director of research for Matrix. While rent growth that month dropped to 2.5%, the lowest month-over-month decline in several years, the average rent per bed still reached a record high. “New supply should be a tailwind over the next few years,” Huebner said.
Declines in college enrollment
One key element affecting the sector is the college-age population. This group is expected to peak this year and begin a slow decline over the next five years. An even sharper decline is expected after 2030. “This will have some noticeable impacts for college enrollment and is already in evidence in some secondary and tertiary student housing markets in states like Illinois, Michigan, and Pennsylvania, where college age population has already been declining,” Huebner said. Another factor is the potential reduction in international students under changes in federal immigration policy.
The impact of a reduced foreign student population remains to be seen. “The large primary state schools with big off-campus student housing markets should be concerned about the potential dip in foreign students,” Huebner said. For example, the University of Illinois is located in a state that has seen a decline in the number of high school graduates. And in fact, just 22.5% of the student body are international students.
Full-time freshman enrollment outgrew total enrollment in fall 2024, representing a bright spot in the enrollment trend. Such growth “is really important, because freshmen have at least four years ahead of them. They’re more likely to live in off-campus housing as undergraduates,” Huebner noted.
State schools on the rise
Many of the fastest growing schools in 2024 were primary state schools, which attract a large share of both in-state and out-of-state students. This trend presents a potential opportunity for student housing investors. After all, only about half of such schools saw new supply deliveries over the past three years.
Leaving room for optimism
Turning to student housing investment, Huebner reported that the estimated sales volume totaled around $7.6 billion in 2024. This is an 85% increase from 2023, meaning that “student housing outperformed all other commercial real estate types in 2024. The sector remains in favor with investors coming off two years of record high rent growth. This growth has helped push the sale price per bed to a historical high.”
View the complete webinar recording featuring Huebner and Matrix Vice President Jeff Adler. Then read a new Matrix national report for more insight into the student housing market.
