Nelson Brothers prefers to focus on markets where university enrollment growth and collective occupancy have been consistently strong, especially in larger cities like Cincinnati where there are typically high physical and market barriers to entry in well-established, in-fill locations. Since 2009, the U of Cincinnati has experienced an average of 2.7% annual enrollment growth adding over 7,000 new students.
High Demand, Limited Supply
The percentage of total housing options to enrollment is 51% with university housing providing only 14% of enrollment with beds. Due to these conditions, the market occupancy rates remain very strong. The current collective occupancy rate amongst the purpose-built student housing properties is 100% and student competitive is 95.8%.
Nelson Brothers believes CP Cincy is well-positioned with an excellent location in a tight market. A key advantage to housing for universities in larger cities is the inherent lack of shadow or alternative markets. NB believes most students prefer to live near campus and around other students. In a market where designated student housing is underserved, students may have other alternatives, but they tend to be expensive and less attractive.
While the market is expecting new supply – both for dedicated student and for student competitive – NB believes demand growth will continue to outpace supply. As new development is expected to be constructed at a substantially high cost, we expect new entrants to come in at a full cost premium; helping to push the rents upward for the entire market. We expect many of any new projects to be developed near the pricey central business district — roughly 2.5 miles from campus.
Strong Market Forecast (2017-2022)
Due to the strong supply and demand characteristics, occupancy and rent growth for privately owned student housing properties are projected to remain solid from 2017 to 2022 even with the addition of 4,000 new beds anticipated to be delivered. However, most of the planned beds are student competitive and located in the central business district of Cincinnati with an average distance of over two miles from campus.