While the long-term fundamentals for the sector remain strong and overbuilding appears to be confined to a few select markets, many student housing executives were shifting strategies as the sector’s performance moves from aggressive expansion to more steady growth. Many felt that most of the big rent rate growth was behind them, so they were focused on fine-tuning leasing and operations to be able to still log rent growth.
However, during some peer-to-peer roundtable discussions on rent growth, a number of executives said they were struggling to effectively use revenue management systems to help guide them in setting rent raises. In any given student housing market, it is very challenging to obtain up-to-date rental comparisons with similar properties and traditional apartment comps fail to be a good proxy. As the lease-up period proceeds, executives feel less than confident about the rent levels they are setting, primarily because they don’t get a chance to readjust until the following year’s lease up.
“The repercussions of getting it wrong are much more long lasting than, say, in the airline or hotel industry,” said one participant.
Other industry executives said it was becoming increasingly difficult to balance rent growth with renewals. Most said they targeted a solid renewal base of 30 to 40 percent but, in some cases, they pushed rent growth a little too hard and found that the base eroded.
The need to maintain good renewal rates was pushing some firms to try to figure out how to add value to keep their residents happy and in place longer. From events like Taco Tuesdays to resident happy hours, some executives said they were allocating more money to community events and resident perks.
However, a number of industry executives said it was becoming more difficult to find qualified on-site leasing help. This lack of reliable, quality workers was also spanning into maintenance and service providers like painters and plumbers. Julie Bonin, COO of Asset Campus Housing, said, “Finding talent is another horror story. It’s getting extremely challenging to find the resources to staff a property.”
Moreover, beyond the dearth of qualified talent, a number of top student housing executives also pointed out that today’s labor pool is very different than previous generations, which requires firms to manage, incentivize and compensate people in new ways.
With the industry moving into a more mature portion of its natural cycle, the next year will be critical for many student housing firms. For a pulse check on the changes and strategies student housing firms put in place to maximize their position in the market, be sure to join the NMHC student housing community for the 2014 NMHC Student Housing Conference & Exposition, Sept. 30-Oct. 2, 2014, at the Palmer House Hilton in Chicago.