Student Housing Developers Should Declare A Truce In Amenities War And Build A Culture Instead
The amenities war in student housing, which for years saw developers try to one-up each other by including many comforts and features that boost prices but frequently go unused, may be coming to an end. Panelists at Bisnow’s Higher Education Real Estate Summit on Tuesday morning encouraged people in the sector to engage closely with the new student population, discover what they truly want and do more than create properties that resemble luxury resorts.
Panel moderator Jackie Pingel, senior property manager and managing broker with Peak Campus, said she often notices new students on housing tours get enticed by the fanciest amenities, and although that helps with the initial lease-up, this wow factor quickly wears off.
“The end of their tour frequently ends their relationship with the amenity spaces,” she said.
As a result, developers may have to rethink their priorities as they design new properties, and the simple things are now key.
Millennials are essentially done with college, and the students now arriving on campus do not seem as concerned with luxury, NB Private Capital Chief Investment Officer Paul Perkins said. Instead, many now think more about schoolwork, and increasingly prefer housing that will help them succeed.
“They have a much bigger focus on how well they will do academically, so WiFi and internet services have in some ways become more important than hot water to students,” The Scion Group Vice President Mike Porritt said.
In addition to great WiFi, he believes the most successful student housing properties will provide an abundance of study space, a feature once considered an afterthought.
Perkins said his company is looking through its housing portfolio to see where additional study spaces can be added.
But simply providing study rooms won’t make properties successful, any more than including rooftop pools, skiing simulators or jacuzzis did. College students typically want to be part of a larger community, rather than isolated residents, and student housing providers should be prepared to create a neighborhood feeling in each property.
“In a typical multifamily property, you stay out of your residents’ way, but in student housing you have to build a culture,” Schwartz said.
A property may have a concentration of students studying certain disciplines such as engineering or computers, and Porritt said operators should foster relationships with those faculties, perhaps by hosting dinners and meetings with residents. The more such connections are made, the more a property will be associated with a particular discipline, giving it a character that keeps students coming back year after year.
“That reputation is built over time,” he said.
But in the age of social media, when students’ opinions about their living spaces can rocket around the internet, it doesn’t take long for a building to lose its reputation, 3L RE founder and CEO Joseph Slezak said.
His firm has staff that constantly watches what is said about its student apartments on Facebook and other sites, and makes adjustments when necessary.
“That is something everybody in student housing has to monitor and be on top of 100% of the time.”
Porritt added that providers need to know what social media sites their residents frequent, as Facebook has lost some of its popularity with the newest generation, and international students may use entirely different platforms.
“If you have a lot of students from China, and you’re not on Weibo, you’ve got a problem,” he said.
All of the panelists agreed social media has raised the stakes for student housing providers.
Schwartz said many international students never get a chance to tour properties before agreeing to a lease, and make choices based exclusively on buildings’ online reputations. Furthermore, he has seen a number of just-developed student housing properties open late, and the disruption that brings to students’ lives, especially the impact of having to find alternative accommodations on short notice, can set off a lot of online complaints that other prospective residents then read.
“It will take years to get that off the front page of Google,” Porritt said.
But for all the challenges in student housing, the sector has a major advantage over others. Unlike office, industrial and retail, strong demand for student housing may increase even in a rough economy.
"Enrollment is actually negatively related to the economy, because when the jobs market sags, more people decide to go back to school, so theoretically you will do better in a downturn than with other asset classes," Schwartz said.
But he is unsure whether robust demand for the many high-end student properties constructed in the past few years will continue in a recession.
"You can see a scenario where people who could live in the best properties instead decide to save Mom and Dad some money," he said.
How today's student housing would perform in a recession is not really known, Schwartz said. Previous generations of students frequently lived in school dormitories, and many of the high-end student housing properties opened after the last recession ended, making forecasts more difficult than for office, industrial or other multifamily rentals.
"It's the only asset class that has been created from scratch in the last 25 years."