Student housing pre-leasing in the 200 most important institutional markets reached 89.1% in July ahead of fall move-ins, up from 88.1% in July of the prior year, according to the Yardi 200 index. The figure remains below the 89.9% recorded in August of last year. Of the 200 markets surveyed in July, 117 were at or above their year-earlier pre-leasing levels.

Performance varied widely across universities. New supply is increasingly concentrated in large markets, which is dragging down performance at schools with the most beds and weighing more heavily on national metrics, Yardi Matrix director of research Tyson Huebner wrote in the report.

Harrison Street Asset Management, one of the largest investors and developers in the sector, has allocated more than $24 billion across 432 student housing properties since its launch in 2005. Its investments total more than 238,000 beds across 200 university markets in North America and Europe.

Our conviction in student housing is really high, but our conviction in every student housing market is not, Mike Gordon, global chief investment officer for real estate at Harrison Street, said. Frankly, I think that creates a really interesting investment environment.

Gordon said there are a lot of investors trying to get access to the sector, but only a limited number of managers with long-term experience in it. Specialization is more vital than ever, he said, because the differences between university markets have grown quickly due to funding cuts, enrollment and specific student demand.

Enrollment, applications, selectivity, research funding, student outcomes are increasingly concentrated at many of the leading institutions, Gordon said. He cited Michigan, the University of Virginia, the University of North Carolina and a number of the large public Power Four universities, referring to the schools that belong to the four major athletic conferences. Prospective students continue to value strong graduation incomes, alumni earnings, research capabilities, and many of the university markets that we focus on are really operating at or above 95% occupancy, he said.

Housing supply has lagged enrollment growth at universities in a number of these markets, Gordon said, specifically citing Virginia Tech, Auburn University and Penn State. I think about the best university towns almost like factory towns where the factory is never closing, he said. The university is the factory, and what it produces is intellectual capital. It attracts students, obviously, but also professors and researchers, entrepreneurs, companies that want to be close to that intellectual capital, and everyone needs somewhere to live.

Harrison Street acquires and develops assets on its own and through public-private partnerships with state universities. It has also been selling some of its assets given rising demand in certain markets. Earlier this year, Harrison Street sold a 12-property student housing portfolio for $910 million, one of the largest dispositions in the sector in recent years.