Student Housing Solutions: Purpose-Built vs. Competitive

Rent Difference Depends on Market

Originally posted by

Taylor Gunn | March 2, 2016

Although student housing development – on- and off-campus buildings designed specifically to provide college students with living space – has taken off in recent years, about half of enrollees still live in some other type of housing.

One of these alternative student housing solutions is conventional market-rate apartments, also known as student competitive properties. Axiometrics defines student-competitive properties as “conventional properties that lease by the unit, but are located within three miles of a university.” These apartments are sometimes, in certain markets, priced comparably to purpose-built student housing properties.

Performance Comparison (November-January)

Examining how comparable these properties truly are to purpose-built student housing, Axiometrics’ student housing research found that monthly effective rent at student competitive properties averages $300 more on a per-bed basis. This could result from student competitive properties’ propensity to include more studios and one-bedroom apartments in their unit mix, while purpose-built properties have more three- and four-bedroom units.

While, on average, student competitive properties achieve higher effective rents per bed than purpose-built student housing properties, this varies by university. The universities seen in the first chart below illustrate this trend, while the universities seen in second chart below show the opposite trend.

Student competitive properties at the University of Southern California average $755 more per bed than student housing properties. On the other hand, student competitive properties at the University of Michigan average $432 less than student housing properties.

With universities located in urban areas, like many of those seen in the top chart, there tends to be more high-rise projects and a higher concentration of jobs. Thus, permitting higher-priced properties.

However, the universities seen in second chart are mostly located in “college towns,” where we see garden and mid-rise properties more commonly and the population consists largely of students. In college towns, the properties located closest to the university are typically purpose-built student housing properties and the student competitive options are farther away. With close proximity to a university, student housing properties can charge a premium.

In addition, student housing properties’ occupancy in January averaged about 96%, while student competitive properties averaged about 95%. Student housing properties’ occupancy increased by 31 basis points (bps) from January 2015, while student competitive projects’ recorded a 135-bps occupancy increase.

One thing to note: Average rents for conventional, market-rate properties historically are lower during the winter months due to seasonality. The difference may not be as pronounced at student competitive properties due to the difference in its leasing cycle.

Breakdown by Distance from Campus

There is typically a direct correlation between proximity from campus and higher rent levels, leasing velocity and occupancy for purpose-built student housing properties. The correlation isn’t as strong at student competitive properties.

Student competitive properties located within a half-mile of the university have higher occupancy, on average – 95.7%, compared to 94.7% for properties between a half-mile and one mile from campus and 94.8% for those more than one mile away. Purpose-built properties less than a half-mile from campus were 96.0% occupied, compared to 95.5% occupancy for those a half-mile to one mile away and 94.6% for developments more than one mile from campus.

The student competitive properties located closer to the university see higher occupancy rates because they have a higher concentration of students. As you get farther from the university, the resident population includes fewer students, and you typically see fewer purpose-built student housing properties and more student competitive.

Average effective rent levels for student housing solutions more than one mile from campus tend to be less than those located between a half-mile and one mile away. Student competitive properties located less than a half-mile from campus had average effective rent levels of $1,053 per bed, while those located between a half-mile and one mile away charged an average of $1,067 per bed. Those located more than a mile from campus averaged $886 per bed. Comparatively, the average rent was $669 per month per bed for student housing properties less than a half-mile from campus, $556 for those a half-mile to one mile away and $535 for a bed more than one mile from school.

Student competitive properties located closer to the university may see less of a seasonal impact on effective rent levels than conventional market-rate properties or even student competitive properties located more than a mile and a half from campus.

The rent comparison between purpose-built student housing properties and student competitive apartments differs depending on the university, no matter what kind of property, closer-in units will likely cost more than those farther away from campus.

This article was originally posted by AXIOMetrics Inc. and can be found HERE.