What is the Future of Student Housing?
Multifamily housing is one commercial real estate sector faring relatively well during the pandemic. But one sector of the multifamily market – student housing – is performing particularly well considering the economic downturn. What can student housing owners and property managers expect as we move into 2021? What does the future hold for student housing properties?
Student Housing Amid COVID-19
Like everything else, student housing had to adapt in 2020. For many college students, that meant either deferring a semester of school, living in dorms with tight restrictions, or living in off-campus student housing. Across the nation, college campuses took different approaches to maintain students', faculty, and management staff's educational needs and health concerns.
On-Campus Student Housing
Throughout the summer of 2020, college campuses across the nation created education and campus living plans. However, college enrollment dropped about 4.4% from the Fall 2019 semester nationwide. This drop in enrollment paired with health and safety concerns led many college campuses to change on-campus housing amenities. Some institutions refrained from opening dorms at all. Others significantly reduced occupancy levels or shut down entire buildings.
As a result, students who elected to return to in-person learning in Fall 2020 had to find alternative living solutions. For most, that meant finding off-campus student housing not owned by the college or university. This steep drop in on-campus students has financially impacted most universities, but off-campus investors aren't as worried.
Off-Campus Student Housing
While university-owned dorms may be losing money this school year, off-campus housing solutions have fared relatively well during this downturn. In fact, data suggests that occupancy rates are as high as 88% across all student housing sectors.
Most off-campus student housing is privately owned, either by investment groups or individual investors. These properties range from multi-story apartment complexes managed by property management groups to individual units (condos or townhomes) owned by individuals.
In both cases, off-campus properties are seeing increased demand as students move away from dorms and seek housing with more social distancing. For investors, this is excellent news. Off-campus student housing is traditionally a reasonably recession-proof investment. And since most students rely on parents to pay rent, owners and property managers are less likely to experience missed payments or evictions. Plus, students are constantly coming and going, so there is always a steady stream of tenants.
Student Housing Property Management
During this pandemic, student housing property managers face a unique challenge. While each college is different, many campuses see increased community spread as students fail to maintain social distancing and self-quarantine when ill. Property managers face an uphill battle to keep living spaces clean and healthy.
However, there are ways to manage these properties safely, keeping both tenants and staff healthy. First, it's essential to communicate your policies and procedures with your tenants. Property managers can utilize a variety of online tools to keep in-person interactions to a minimum. Virtual tours and maintenance calls, as well as online chats with tenants, can help keep both parties healthy.
Finally, property managers should increase cleaning protocols and restructure common areas to ensure social distancing wherever possible. Even though social gathering is traditionally a key component in student housing, it's crucial to keep students apart as much as possible to slow the spread of Coronavirus.
Outlook for School Year 21-22
Heading into the Spring semester, we're still seeing COVID-19 numbers spike across the nation. There's concern that students who travel home for the holidays will return to campus and bring the virus with them. However, most off-campus student apartments require a 12-month lease, so it's unlikely that investors and property managers will see a sharp decline in occupancy, even if the virus shuts down colleges.
Moving into the 21-22 school year, we should hopefully begin to see stabilization as an effective vaccine is widely distributed. Experts predict we could see mass vaccinations by summer 2021, meaning the 21-22 school year should resemble pre-COVID years.
For investors and property managers, however, this isn't likely to drastically impact business. As more students feel safe returning to campus, enrollment will increase. Some of these students will return to on-campus student housing, but many others will seek off-campus housing. Therefore, investors and property managers can expect stability long-term.
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