In a recurring Triad Real Estate Partners analysis series, we’re looking at university off campus student housing markets by athletic conference. Back in March we took a deep dive into the SEC, declaring the University of Florida the winner with the Georgia Bulldogs nipping at their heels. LSU brought up the rear with a market occupancy of just 78 percent and declining rents.
This time around, we’re headed north to the oldest collegiate athletic conference, the Big Ten. Again, we’re pulling data from Axiometrics’ University Reports for all 14-member schools, this time supplementing with CoStar data to account for the urban universities with relatively little purpose-built student housing, notably Northwestern and Rutgers. We looked at seven factors although the most heavily weighted statistics were enrollment growth, occupancy, pre-lease, pipeline and rent growth. As the saying goes, the strongest indicator of future behavior is past behavior - as such, current occupancy and prior years rent growth weighs heavily. The supply side is something that is coming up more and more frequently, so we have weighed pipeline additions as a percentage of overall supply heavily as well. On to the rankings:
At the top is the venerable University of Michigan. UM has had average enrollment growth but was way out front in rent growth, over 25 percent from 2010 to 2016. Near the top in almost all categories, we had to adjust the scale from our SEC comparison as Michigan actually exceeded 100 points. In second place you have Northwestern, something of an outlier as an urban campus environment in Evanston, Illinois, just north of Chicago. There is very little, if any, true purpose-built student housing in Evanston, as such rents per bed are quite high as most students are in studios, one, or two-bedroom apartments. Still occupancy is healthy, there is but one major project in the pipeline, and the market benefits from the Chicago proximity.
Alternatively, at the bottom of the list you see Purdue University, University of Illinois and Ohio State. Ohio State is another outlier as there is limited purpose-built student housing in the market, most apartments are smaller floor plans and there is a lot of supply in the Short North area that caters to a mix of undergraduates, graduate students, and young professionals. Thus, occupancy is on the lower end, just 91 percent, and the pipeline of true student housing is significant compared to the existing supply of by-the-bed product, but not of the apartment market as a whole. OSU gets an asterisk here. The University of Illinois has seen more development than perhaps any other school outside of the Sunbelt, huge additions to supply have kept rents and occupancy down. Purdue is something of a victim of the timing of this survey, 2010-2016 saw stagnant enrollment and flat rent growth leading to the lowest gross rents in the Big Ten. Things, however are looking up in the short term for Purdue, enrollment surged in 2017 with rents and occupancy up for both 2017 and 2018.
In the middle of the pack you see some other unique markets and outliers. Outside of New Jersey, who knew that Rutgers was growing at a rate of nearly five times that of the average Big Ten school? Developers are starting to take note with over 1,200 beds in the pipeline in a high barrier to entry market. Indiana also had substantial enrollment growth but big supply gains and low rents kept the overall score down. Minnesota is the only school to see enrollment actually decline but a super tight market (over 99 percent occupancy) and the big rents that go along with a major metro center help prop up the score. The University of Iowa probably needs an asterisk as well as there’s just so few larger purpose-built complexes in the market to track. Axio sees the supply there tripling over the next couple years with two complexes opening to supplement the existing one. Clearly that’s not indicative of the broader student market in Iowa City. An extremely deep dive into the so-called shadow market – the houses and smaller apartment buildings where many students live – might yield very different results in the more in-fill markets of the Big Ten.
A few other leaders of the pack in various categories. Sample size aside, Iowa leads the way on pre-lease at 96 percent, Michigan is next with a more complete survey at nearly 85% across the board. There are no significant pipeline projects in the Axiometrics database at Nebraska or Maryland, bolstering their future prospects. Maryland in particular seems poised to take off with strong occupancy and decent rent growth coupled with no new supply. The highest rents in the conference go to the major city markets, Northwestern and Minnesota. At the bottom of that list is the Purdue Boilermakers at just $477 per bed.
Well, there you have it, the results of Triad Real Estate Partner’s Student Housing Market Conference Showdown: Big Ten Conference Edition. While certainly a bit less exciting to most readers than the results on the football field or the hardwood, nonetheless a fascinating look into the Big Ten for the student housing investor.
— Ryan Tobias is the co-founder of Triad Real Estate Partners, a boutique student housing investment sales firm based in Chicago. Since 2005, Ryan has been involved in over $1 billion in student housing transactions across the country.
Methodology: All data from Axiometrics with the exception of rent and occupancy data for Northwestern and Rutgers which is from CoStar. Study looked at enrollments and rents for private off campus purpose built student housing from 2010-2016. Occupancies, pre-lease figures and total supply numbers from March 2018. Pipeline data for 2018-21. Weights for scoring assigned as follows: 2010-2016 Enrollment Growth: 10%, 2016 Total Enrollment: 5%, Feb 2018 Occupancy: 25%, Feb 2018 Pre-Lease: 15%, 2018-21 Pipeline as Percent of Feb 2018 Supply: 20%, Average 2016 Rent/Bed: 5%, 2010-2016 Rent Growth/Bed: 20%. Score calculated using each school’s rank in each category and weighted according with the above. That number multiplied by 9 to approximate a 100 point scale. Note: prior SEC analysis multiplied by 10.55, adjusted to 9 as Michigan exceeded 100 points.