Student Housing Rent Growth Overtakes Philadelphia’s Market-Rate Apartments

 By Brenda Nguyen CoStar Analytics

Student housing rental rates in the Philadelphia metropolitan area have experienced a significant increase, rising at a rate surpassing that of traditional market-rate apartments.

This trend really began to take effect at the end of 2023 and has resulted in the widest rental rate spread between the two market segments since 2010 following the Great Recession.

As of the third quarter, student housing rents across the Philadelphia region had increased by an average of 3.8% compared to market-rate apartment rent growth of 2.4%—a 140-basis-point spread.

Student housing properties near Widener University, Penn State Abington, Drexel University and Saint Joseph’s University have led the region with an average rent increase of 2%. Average rents at student housing near other universities in the Philadelphia region, including Villanova University, Temple University and La Salle University saw slower rent growth averaging below 1%.

Historically, rents at market-rate apartments have outpaced student housing in terms of increases. Between 2015 and 2019, conventional multifamily rents across the Philadelphia metropolitan area increased by an average of 40 basis points above the rent growth of student housing rentals.

A confluence of factors has contributed to the current market conditions. First, student housing development activity in the region has declined since peaking in 2013. This pullback, coupled with pandemic-related construction delays, has led to a constrained supply of student accommodations at a time when universities have fully reopened and demand for housing near campuses has increased increased, driving up rental rates.

Only two off-campus student housing developments hit the Philadelphia market this year. The York, a 324-bed complex near Temple’s campus, and The Nest, a 76-bed luxury complex near the University of Delaware’s campus, were completed this summer and are in lease-up for the upcoming school year.

No other student housing project is underway in the Philadelphia region. The constrained student housing supply and a resurgence in rent growth have recently captured the attention of investors and lenders.

In July, Goldenberg Group closed on a $285.5 million refinancing of two student housing projects, Vantage and The View at Montgomery, by Temple University’s campus. Walker & Dunlop, a new party on the portfolio, arranged the refinancing, taking a preferred equity position on the new loan.

With little to no proposed student housing projects in the pipeline, rent growth may continue to perform better than it has historically. However, the long-term outlook is very school-specific, dependent on factors such as enrollment trends and nearby market-rate housing options.

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