René Nelson, CCIM, CRE with Pacwest Commercial Real Estate and Zoe York, MAI Appraiser with Duncan and Brown, discuss the role the University of Oregon plays in vacancy and rent trends for multifamily properties in Eugene–Springfield. They look at trends on campus and the impact on the larger market.
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René Nelson: One thing that I find interesting is how the University of Oregon plays into vacancy and rent trends in Eugene. The university is the second largest employer in Eugene, and when you look at the U of O’s population, there are around 23,000 undergrads. I think about 80 percent of those students live off campus, so that really creates that healthy, robust renter pool that most property owners are looking for.
What Are You Seeing on Campus for Rent Trends Right Now?
Zoe York: The occupancy rate I’ve seen in those projects has been as low as 80 percent to as high as 98 percent, and I don’t see that being market-derived occupancy because these projects are very similar. It doesn’t seem to be that the highest rents or worst located projects are the lowest occupancy. I do a survey each year of campus properties in September, including all those purpose-built properties. What you have is a 3 percent vacancy in campus still. We’ve had this larger market under-supply, and so students who previously lived off campus to have cheaper housing have moved more on campus because the rent levels have really grown off campus. The rent growth has been much smaller year after year just in the past few years. On campus has really been more in line with historic averages at 2 to 3 percent per year.
René Nelson: I’ve had four to five national student housing developers contact me in the last couple of months, but I think one trend that I’ve noticed is that every time they’re changing a building on campus, they’re putting classrooms in place. That tells me that the student population is probably going to start to grow. I see the trend where the economy and the market will be able to support more student housing projects. Would you agree with that?
More Student Housing Projects
Zoe York: I would agree with that. As long as our larger market stays under-supplied during the timeframe where enrollment is stagnant, I don’t think we’re going to have a problem with the demand for these new units. I think over the next few years, if enrollment is able to continue to increase, I don’t see a problem with adding new supply because our broader market is going to interact with that student population market.
René Nelson: That makes sense. I know one of the benefits for the multifamily owners that I work with that are off campus and own complexes from the 1970s to 2000s is that they love the graduate students, and the students that come from the university because they’re employable. I think that living in a campus area is one of the reasons that a lot of multifamily owners are holding onto their properties right now and not transitioning out of them at this point. Would you agree?
Zoe York: Yes. I do think that it’s also important, when you’re talking about student rentals, to recognize that there are some demographics within the student population, differing demographics. The folks that are looking to rent the brand new, by the bedroom, purpose-built projects are generally not the same tenant pool that is looking to rent the older 1970s projects a little bit further from campus, or even on campus. But they’re looking maybe for the lower rent levels, and maybe something a little quieter. They don’t need as many amenities. We tend to think of that as first-stage and second-stage students, but it also has to do with the larger demographics of the student population. And those demographics can shift even if enrollment stays steady.