Leasing Drops Faster Among First-Year Students, Developer Says

September 15, 2020

One of the country’s largest private student housing companies reported leasing rates falling by about seven percentage points between this fall and last, with properties primarily housing first-year students seeing a sharper decline than those for upperclassmen.

Austin, Tex.-based American Campus Communities Inc. reported about 90 percent of the properties it owns as leased for the 2020-21 academic year. The company released the figures Monday in an interim update for investors.

“Throughout June and July we were encouraged by leasing trends and consumer sentiment reflecting students’ desire to be in the college environment with their peers, regardless of universities’ ultimate plans for curriculum delivery being online or in-person,” Bill Bayless, American Campus Communities CEO, said in a statement. “Since that time, as universities have toggled between methods of curriculum delivery in response to COVID-19, we are pleased to have seen that sentiment continue among sophomore and upper-division students and have continued to make leasing progress at our properties which primarily serve these experienced college students.”

First-year students were more reluctant to relocate while online instruction is prevalent, Bayless said. Many universities responded by relaxing housing requirements for first-year students, leading to a decline in leasing rates at properties primarily housing them.

“We applaud and concur with universities taking this action, as the relaxation of these housing policies has resulted in most of these first-year students still enrolling at their universities, which should mitigate material longer-term enrollment impacts beyond the current COVID-19 crisis,” Bayless said.

Most of the data released by the company covered properties the company owned both last year and this year, allowing for relatively clear comparisons.

Beds at properties mostly housing first-year students with leases beginning in August were 79.5 percent leased as of Friday, down from 95.7 percent as of Sept. 30, 2019. Properties housing sophomores and older with leases beginning in August were 92.8 percent leased as of Friday, down from 97.7 percent last year.

In addition, American Campus Communities owns properties with about 7,000 beds primarily for sophomores and upperclassmen with leases beginning in September. They saw some erosion of leasing rates, dropping to 82.4 percent as of Friday from 97 percent at the end of September last year.

American Campus Communities owns properties with far more beds geared toward sophomores and upperclassmen than toward freshmen. More than 83,000 beds are at properties mostly housing sophomores and upperclassmen, compared to about 12,000 for first-year students.

“Moving forward, we are focused on continued execution of our COVID-19 operational plan that has already allowed us to welcome back over 80,000 student residents at ACC owned communities and on completing the lease-up of our communities with leases commencing in September,” said Jennifer Beese, American Campus Communities chief operating officer, in a statement. “We also believe the start of this academic year represents a less final completion of the annual lease-up, as some students may continue to make the decision to return to campus and rejoin their peers regardless of university curriculum delivery methodology. This could provide the opportunity to execute additional leases and improve occupancy during the fall term as we hope to progress toward a return to normalcy throughout the 2020-2021 academic year.”

The company is monitoring 1,000 leases -- about 1 percent of beds -- for which students paid August rent but requested their beds be rented to new tenants. That’s about twice the typical amount. Another 1,100 leases -- 1.2 percent of beds -- are held by students who paid August rent but delayed arrival because they are not required to be on campus at the start of classes.

American Campus Communities has so far agreed to about $1.5 million in refunds for the fall semester for on-campus properties, far lower than $17 million in total over the spring and summer terms.

The company owned 166 student housing properties with nearly 112,000 beds as of June 30. Including properties it manages but does not own, it manages 201 properties covering about 138,000 beds.

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