College towns need a lesson on how to recover during the pandemic

John Allen

What's the true value of the college experience? That's the question that millions of current and incoming college students have asked themselves this year due to the shutdown of university campuses nationwide. Some, 4% of undergraduates and 2.7% of graduates to be exact, have decided not to attend college this year due to the unfortunate situation that tuition at many schools remained consistent with previous years yet all of the perks of going to college essentially faded into thin air. In-person classes? Yeah, think again. Office hours with notable professors? Certainly not in person. Partying with your new friends? Ha. Nope.

This situation is hurting colleges and is therefore hurting the surrounding real estate markets. These markets where historically growing 4.7% in value year-over-year, yet due to the decrease in university attendance, that rate is now down to -0.5%. This year marks the first in a while where the value of real estate in college towns was less than the previous; the drop this year is massive — 5.2% in a single year. To make matters worse, the decrease is trending, meaning, this drop could continue to fall throughout the coming months and potentially years.

Landlords are shaking in their boots, developers are nervous about their planned projects, and real estate fix & flippers don't exactly know when they should install some new stainless steel appliances. But let's not forget about students, many of whom are desperately trying to get out of their leases. Everyone is scrambling to make moves and this makes maintaining business rather difficult.

Forecasting is equally as challenging. Some landlords predict that their vacancy rates, which normalize around 1% annually, could hit well above 10% in 2021. But who knows, maybe we will get a COVID vaccine and everything will go back to normal — including those fragile college town real estate markets. Everything is up in the air at the moment.

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