Around this time last year, I wrote a post entitled “The Truth about Student Housing in Ann Arbor” that was something of a response to all the comments I was hearing about the new developments cropping up around town. I work in the student housing industry to a certain degree so had first hand market research at my fingertips and was able to share some cold hard facts on the subject.
The down and dirty was that student housing development had not remotely kept up with demand as enrollment growth and decades of limited (essentially zero) additions to the student housing market had created significant pent up demand even aside from any population gains in the student body.
Occupancy was over 99%, the highest of any of the 50+ university markets we have polled over the years with rents continuing to grow.
However, 2018 brought the most significant additions to the private student housing scene in the university’s history, 1,247 beds in three new complexes opened in August. Thus, time for an update on the scene.
Despite a huge addition on the supply side, occupancy stayed an extremely healthy 98.32%. Overall rents were up 4.64% from a year ago but that is skewed by such a large swath of new, higher priced housing. Apples-to-apples rental rates of existing buildings increased a more modest 1.81% buoyed by huge increases in Studio and 1 Bedroom units, 12.52% and 10.50%, respectively. Most of the new developments have been focused on larger unit types as they are seen as more profitable (4+ bedrooms, only 1 kitchen) which has put serious pressure on the relatively few studio and one bedroom residences.
The three newest properties, Hub Ann Arbor, The Yard, and Six11, opened at 98.40%, 100%, and 96.00%, respectively.
Anecdotally, I did see more advertised specials and discounts, particularly for Six11, so it is possible that effective rents did not increase as much as asking rents. However, smart money would bet that any minor hiccups experienced in lease up this year will be smoothed over next year when only the 253-bed Vic Village North will open (replacing Ulrich’s).
Enrollment continued to grow, up 1.55% this year to 46,716, so demand shows no signs of slowing. What may be interesting to see is the effect of the university’s efforts to improve socioeconomic diversity on the private housing market. Notably the Go Blue Guarantee which officers free tuition to families with incomes under $65,000 and significant support to families earning under $180,000. Obviously lower income students will be less likely to bite off on the premium rent levels being charged at newer developments.
Thus, another year, another very healthy lease up in the student housing market in Ann Arbor. As I have noted before, it’s hard to even imagine a scenario where these buildings were not built. By necessity there would be nearly 4,000 students living elsewhere around town, moving further out into the neighborhoods or commuting in from the edges of town.