5 Student Housing Trends to Watch
Want to get a jump-start on upcoming deals? Meet the major Atlanta players at one of our upcoming events!
From foreign money and student debt to bus lines and saunas, some 200 commercial real estate pros got the skinny on the top five trends facing the student housing market this morning during our 3rd Annual Atlanta Student Housing Summit at the Hyatt Regency Atlanta.
1. Here Come the Sovereign Funds
While there's plenty of money out there for student housing investments ($1B/month from life companies alone), it's foreign money that's now looking to get into the game. Place Properties CEO Cecil Phillips says sovereign wealth funds are looking to fund projects, a move that was unheard of just a few years ago. That's especially true with public universities shouldering a lot of debt (Georgia alone has $3.8B) combined with GASB changes that make bond rating agencies reflect even non-recourse debt when evaluating universities' credit ratings. Cecil says they're turning to private equity to fund student housing needs.
2. Affordability Pressures
As college enrollment skyrockets, costs to attend college escalate and student debt gets tougher to rummage, we'll see student housing operators find themselves being pressured to lower rents. Cecil says young adults 18 to 26 are bearing a $1.2T student housing debt load across the nation. “That's why I'm confident increasing affordability is going to become the mantra,” he says. Corvias' Geoff Eisenacher (here) and others say that investors may buy older student housing stock, and renovate it to a lower price point to help answer that demand.
3. Bus Line Location Non-Negotiable
Wells Fargo's Vincent Toye says it very succinctly when it comes to off-campus student housing: “If you're not on the bus line, you're dead on arrival.” Off-campus projects are only successful if in close proximity to the campus. “If you're way off campus, it's a project we're not likely going to look at or want to finance,” he says. Vincent also says Wells Fargo is hesitant to fund deals at tertiary colleges, where students may only be attending for a year or so before moving onto the larger state universities.
4. Housing Reinforces Life Skills
Both Cooper Carry's Tim Fish and Emory U's Dr. Andrea Trinklein (here) say they don't expect the traditional double-trunk dorms with shared bathrooms to disappear anytime soon. That's because they, mainly focused on freshmen and sophomores, serve a social purpose for universities. “It might be an essential skill for later in life,” Andrea says. “They find they might be developing bonds they'll have for a lifetime.” Tim says single-bedroom suites are great for upper classmen, “but some of the freshmen, they don't even know their roommates' names. They never come out of the bedroom.”
5. Amenities, Safety Prime Off-Campus Housing Concerns
Landmark Properties' Wes Rogers (here) says amenities are the big draw for prospective students at off-campus housing. For instance, Landmark is developing a $100M project at the University of Florida that includes a hotel, indoor golf lounges, Starbucks, fitness center and a VIP floor with a rooftop pool and private sauna. And Cecil (with daughters of his own) says as more than half the students are female, safety is becoming a bigger concern. Girls and their fathers “tend to want security and safety and a management company that has more of a glove than a fist,” he says. “And I don't want my girls living in a slum. I don't care how cheap it is.”