The Thin, Thin Line Between Dorms and Apartments
Student housing has grown up fast since institutional capital entered the game, and students and parents are responding in kind with demands related to amenities, technology and security.
More than 150 of you joined us yesterday at Bisnow’s 3rd Annual Chicago Student Housing Summit, held at the Trump International Hotel and Tower. Our panel of experts agreed that business is up compared to this time last year, citing must-have amenities like rooftop pools, fitness centers and lobby coffee shops. Green initiatives seem to be more important than actual LEED certification, they say (though institutions like to get things registered), since LEED can be cost prohibitive with older properties. Mixed-use additions to new projects can be a great way to boost returns, panelists say, recommending hotel, parking or quick-service retail.
We asked VOA principal Bill Ketcham, one of our speakers, his Thanksgiving plans. He expects “prime rib and controversy” in South Bend. On a recent institution-led residence hall project for UW Oshkosh, the design process started with the building’s character, its role in the master plan, unit typologies and amenities, he said (LEED Gold came later). When building new product, you have to consider the demographics. A freshman residence hall will have very different offerings than an off-campus building for upper classmen, he says, just like an urban project will differ from something in a small town. (We suspect freshman need storage units for their abundance of idealism--something long gone senior year.)
Harrison Street VP Justin Gronlie says they’ll have oysters at his Thanksgiving meal with the in-laws in Virginia. While some consider student housing’s yearly lease-up a risk, it also means every year you can re-price, and much more quickly than multifamily, Justin says. (Meaning if interest rates go up, student housing can promptly take advantage.) The sector’s dynamic investment climate continues to feature new capital: Harrison Street just sold a 3,400-bed portfolio to Candlebrook Properties and Lubert Adler for $230M-plus: "it was a long diligence process which allowed a new entrant to get comfortable with the space and a complex portfolio of assets," he says.
The Scion Group CIO Avi Lewittes is heading to the West Coast for the holidays. He told the crowd his firm targets markets with large, top-tier public state universities, which have shown consistent enrollment growth and strong international brand recognition. Scion’s seen success with lifestyle and service-based amenities, playing to students’ social consciousness and creating a cultural mission. The firm’s been working on startup labs and philanthropic opportunities, as well as Zipcars and retail on-site. It’s been a tricky market for developers, Avi says, since traditional players like the REITs have retreated (so you better be sure of your exit strategy).
CA Student Living COO JJ Smith plans to spend the holidays visiting construction sites. CA has done nearly 40 student housing projects in the last seven years, and cap rates are getting pretty close to multifamily levels in urban core markets. JJ focuses on location first—students want to roll out of bed and get to class in three minutes. He’s noticed multifamily giants like EQR and UDR building product in student housing markets and says CA is trying to cast a wider net with its high-density projects by using broader multifamily terminology to attract a wider base of renters.
AJ Capital Partners VP Ben Gottlieb doesn’t have any travel plans. He’s busy launching the firm’s new Graduate Hotels brand, lifestyle hotels in college and university markets. (They’re in Tempe and Athens, with five more on the way.) While RevPAR in the top 25 MSAs dipped 20% during the downturn, college markets dipped only 15%, Ben says. And the current hotel product leaves a lot to be desired (think limited service brands by the highway). Graduate products provide an emotionally charged stay (for college drop-offs, graduations, reunions, etc) and value revenue-generating lobby areas, curated art programs and rooftop bars, Ben says. They also push for community buy-in. (Students in Tempe designed and installed an ant farm behind the front desk. What other amenity could last 100 years?)
Nove International SVP Janice Johnson moderated the panel and says she’ll be at home in Seattle this winter. Janice asked panelists about the “education bubble,” and the effects of rising tuition costs and flagging job opportunities. It’s market specific, they say, but all agreed the value of a college degree is still very real. She also asked about the latest in tech and life safety. Whether its an app for guests to check in or building balcony railings a foot taller than code, panelists say protecting students is the top priority. (Even if it’s from themselves and their Animal House antics.)