Student housing CEO says luxury is losing its appeal

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Consumers are increasingly concerned about the state of the economy, and that is affecting yet another real estate sector — student housing. 

Rent growth in the sector slowed to just 0.9% in July across 200 colleges surveyed by Yardi. The average advertised asking rent fell to $905 per bed, a 1.4% decrease from the $918 peak in March “as operators struggle to lease remaining inventory,” according to the Yardi report.

For perspective, from October through July, rent growth averaged 2.8%, less than half the 5.7% recorded during the same period a year earlier and well below the 6.9% seen a year before that.  

“What we’re seeing is fall-off at the top and the bottom,” said Robert Bronstein, founder and CEO of Scion, one of the country’s largest owners and operators of student housing.

Scion owns roughly 95,000 beds across 83 schools in 35 states, with over $10 billion in assets under management. 

Bronstein said the lower end of the market, that is, students and parents who were struggling most to afford student housing, is now going back to the more historic, cheaper rental homes on the outskirts of campuses. Higher-end students and parents are also changing course. 

“I think that people are saying, ‘You know what, there’s a building that’s three years old, and it costs 30% less than a brand new building, and I wasn’t going to use the hot tub on the roof anyhow. I’m going to go with the less expensive option,'” said Bronstein. 

Students, he said, are increasingly serious about their living spaces and prefer co-working spaces and remote interview rooms over golf simulators and movie theaters, which were all the rage a decade ago. High-end amenities, he said, no longer drive occupancy. Cost savings are now paramount.

Scion plays in the middle market, acquiring properties mostly at large schools, including the University of Florida, University of Alabama, University of Oklahoma, and University of Mississippi, as well as Texas A&M and Clemson University. 

“We were very active last year. We’re very active this year. This may turn out to be the most active year,” said Bronstein.

He said that after Covid, there’s been a shift in investment toward large, flagship public universities — and it’s accelerating. 

“The top-tier, 40, 50, 60,000-student flagship public schools, they’re…