As Campus Housing De-Densifies, Private Student Housing Owners Reap The Benefits
The pandemic summer of 2020 has been busier than usual for student housing owners and operators. They are preparing their properties for student move-ins under strict cleaning protocols, adjusting amenities and common areas to the new realities and helping universities find student beds as they de-densify on-campus dorms.
In a way, now is a boom time for off-campus student housing, according to the speakers at Bisnow's Boston Student Housing Update webinar Tuesday.
"De-densifying on campus is creating opportunities to further strengthen off-campus communities," Campus Apartments Executive Vice President of Development Warren Burke said. "Our properties are tracking at 95% on rent collection, and pre-leasing is down just a tick or two from last year."
Burke said he has been in daily discussions with seven universities about availability at Campus Apartments properties.
"We're offering them first opportunity if possible to take those leases," he said.
Surveys show that students want to go back to campus in the fall, and universities want them to, if it can be done safely. About 85% of universities are planning in-person classes or hybrid models that also include both calls and remote learning for the fall 2020 semester, according to a Chronicles of Higher Education survey. Only 10% were going to go all remote, with 5% undecided.
The question is how to accommodate them.
De-densifying dorms is beneficial to off-campus student housing markets, Peak Campus Vice President of Development Mike Paluga agreed, noting that his company's properties are pre-leased at the same level as last year.
"The kids want to go back, and it seems like the middle-of-the-road is a hybrid approach," Paluga said, with some students in class some of the time and attending virtually some of the time.
Gilbane Development Co. Senior Development Director Jeffrey Resetco likewise reports that all of his company's properties are over 95% leased for the fall, including its four new properties.
"Whatever we haven't filled, we've gotten requests from universities for additional beds. It's been an active summer, more active than typical," Resetco said.
Those figures are higher than average. As of June, 75.8% of student beds nationwide were pre-leased for fall 2020, RealPage reports, which is about 390 basis points lower than in June 2019.
Getting all the space ready has involved extra effort, Burke said, as his teams have been working since March to make sure touchpoints and other space are clean and that common spaces can accommodate social distancing with the installation of partitions and signage.
The speakers said that development of new student housing has become more complicated because of the pandemic, but even so, they anticipate strong demand in future years, and deal flow has mostly been uninterrupted.
Deals take a little longer, and relationships with lenders are more critical than ever, Paluga said.
"We're looking forward to working with universities in the fall, and we're engaged in several procurements, so [development] hasn't stopped, even in these virtual times," Resetco said.
Some institutions have placed projects on hold, Burke said, but at the same time, he said he is in discussions with other institutions about other opportunities.
"Deal flow is out there, though it has slowed down some," Burke said. "We've raised a lot of capital for deals. Our core focus is still strong markets and strong institutions."
Gilbane Development is currently working on two on-campus projects, a process that Resetco said is giving useful feedback on costs and materials. Sometimes there have been unexpected bumps along the way because of material interruptions caused by the pandemic.
"We delivered a project at Kennesaw State [in Georgia], and we get a call from our appliance supplier who said its appliance factory was closed," Resetco said. "When has a project not been delivered because of appliances? Never. Our team scrambled and used their contacts and was able to source the appliances for the project. It was a mad scramble — and unexpected."
The speakers expect Boston to remain a strong student housing market, with strong demand, tight supply and relatively high barriers to entry.
Peak Construction recently completed Overlook at St. Gabriels, an adaptive reuse of the old St. Gabriel Monastery in Brighton that offers 555 market-rate apartments. Though not exclusively for students, Paluga said he expects it to do well with that demographic.
"Our product is market-rate, with a high concentration of graduate students nearby," he said. "We manage over 90 properties, and we know how to meet student needs."
Student housing design is changing in the face of the pandemic. None of the speakers say they have backed away from plans to provide double-occupancy student housing in the future since the reality is that not everyone can afford single-person housing. Yet adjustments are being made.
"We're designing for functionality and flexibility, getting creative in offering separate space in the rooms, including partitions between beds, double vanities in bathrooms, separating sinks from bathtubs," Paluga said.
"In student housing, we have two clients: the residents and parents," he added. "We have to make sure they're both comfortable."
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