An Analysis by Keegan Kelly
COVID-19 SPELLS TROUBLE FOR STUDENT HOUSING SECTOR
Colleges and universities have had a major decision to make for this fall – whether or not to return to campus for in-person classes. A number of colleges (notably all twenty three of the schools belonging to the California State University system) committed to primarily online learning for the fall semester as early as this past May. As recent headlines have shown, this number may be on the rise as schools reevaluate opening plans among mounting COVID-19 case counts. UNC-Chapel Hill abruptly reversed their course for in-person classes and moved entirely to remote learning after 177 cases were reported in the first week back on campus. According to the Washington Post, the university “will take steps to allow students to leave campus housing without financial penalty.” How other colleges will in turn respond to rising cases on their own campuses, and how amenable they will be to breaking leases remains to be seen. With this in mind, the impact on the student housing sector will likely be disparate, depending on both initial plans to return to campuses and ensuing policies passed by schools if cases indeed begin to rise.
Student Housing Vacancy and Growth
Source: Moody’s Analytics REIS
At the national level, the student housing sector is expected to see vacancies rising anywhere from 80 to 210 basis points, and rents dropping by -4.5% to -5.6%, conditional on subtype. Some distress in fundamentals should come as no surprise, given current economic conditions and the ongoing threat of COVID-19. Rising vacancy and falling rents are nearly ubiquitous cross sector. Campus closures will likely have spillover effects into other sectors as well, with local retail and the missing presence of students and their families…
Keegan Kelly is an Associate Economist within the commercial real estate division of Moody’s Analytics.