An oversupply of student housing in college towns is prompting landlords nationwide to cut rents — some by up to 6 percent — as they worry about rising vacancies, The Wall Street Journal reports.
Private-equity firms, real estate investment trusts, and private developers have been targeting off-campus accommodations since 2010, under a belief that schools with tightened budgets would not be able to keep up with supply of on-campus housing or have enough modern options available to students.
But now, housing experts say, the sector has seen a glut in options that will cause many landlords of off-campus student housing to have to cut their rents to lure more tenants.
Nationwide, 51,000 new off-campus beds are expected to be available in college towns this year — a record number, according to Axiometrics Inc.
“There’s more supply than demand; that’s the easy way to say it,” says Jay Denton, Axiometrics’ director of research.
For example, an off-campus complex in Tempe, Ariz., near Arizona State University, had a 41 percent vacancy rate last year. The posh complex even boasted free tanning and a hot tub to lure college students. But by cutting its rents 12 percent, the complex was able to decrease its vacancy to 3 percent this year.
Off-campus housing near Florida State in Tallahassee also had to lower its rents about 4.8 percent this year due to an oversupply of options in the area.
“Developers appear to have overshot the mark in numerous markets,” The Wall Street Journal reports. “Some of them failed to take into account other construction that was planned … Others misjudged future enrollments or the willingness of students to pay up for off-campus living at the time when many families are still pressed in the aftermath of the economic downturn.”
Housing experts say an overbuilding of off-campus options was particularly evident in the higher price brackets, where rents could be above $1,000 a month. Developers had thought by offering amenities like swimming pools and even ice skating rinks they would be able to attract tenants at premium rents. However, for comparison, shared dorm rooms could be as low as $500 a month.
While supply in off-campus housing is abundant, some housing experts say that eventually demand will catch up over time. The Department of Education estimates that there will be 24.1 million full and part-time students attending colleges by 2021 — up from 21.8 million this year.
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