New York – Trepp, a provider of information analytics and technology to the structured finance, commercial real estate, and banking markets has released its Student Housing Multifamily Report which highlights the distress seen in this CRE market.
Compared to the broader multifamily market, the student housing submarket has consistently underperformed posting higher-than-average delinquency and special servicing rates. The submarket’s performance has only worsened in recent years due to overbuilding and high competition causing an “amenity arms race,” making some properties obsolete just 10 years after their construction.
“With the COVID-19 outbreak, the student housing sector is now facing even more challenges as off-campus owners and operators grapple with canceled in-person classes forcing students to vacate dorms and apartments and move back home with no clear plans of return,” said Kelvin Lin, Trepp research analyst. “This raises doubts on whether owners will be able to make timely payments, further accentuating existing concerns on the sector’s short-term viability.”
Student housing properties have experienced an uptick in delinquency rates over the past five years, climbing up to an April 2020 reading of 10.77% from an April 2016 reading of 4.13%.
Perhaps more indicative of the short-term effects of the outbreak is the rate of loans categorized as (A) “in grace period” or (B) “late beyond grace period.” For the student housing sector, this rate climbed to 4.72% over the last month from 1.25% in March, around the start of the outbreak.