At the start of 2014, many analysts were expressing deep concern about the number of new student housing developments scheduled for delivery in time for the Fall 2014 semester. With the new academic year well under way, it seems safe to say their fears about potential oversupply were wrong.

About 65,000 new beds were delivered to the privately owned, purpose-built student housing sector this fall - approximately 6,700 more than last year - and the overall performance has proven stronger than it was one year ago. 

Occupancy in already existing off-campus properties averaged 95.8% in September 2014 on a same-store basis, some 190 basis points (bps) higher than the 93.9% recorded in September 2013.

At times, media have reported that properties were struggling to fill beds, with too much supply being the supposed culprit. As seen in the chart below, those low occupancy rates are outliers, as most properties achieved an occupancy rate greater than 90% by September 2014, even those more than one mile from campus. Similar outliers can be found in other real estate sectors, and there is often an underlying reason for the performance that has little to do with supply.

Anyone following prelease occupancy rates throughout the leasing season saw the hints of stronger performance for Fall 2014. It was obvious in November and December last year that beds were being leased at a faster clip than the previous year. While the spread in outperformance narrowed during the spring months, properties made a late push in July and August.

The prelease rate in August 2014 was 95.2%, a hefty 420 bps above the August 2013 prelease rate of 91.0%. This is a same-store figure for properties undergoing the preleasing process in both the November 2012-August 2013 and November 2013-August 2014 periods.

A strong occupancy rate for this school year could lead to more pricing power for Fall 2015, especially at universities with growing enrollment and relatively small supply totals.