In Search Of Funding, Colleges Are Turning More To Mixed-Use Student Housing
Student housing increasingly resembles other sectors of real estate, combining uses in an attempt to both create a sense of place and better underwrite student accommodations.
In an environment when funding for public universities is constantly shrinking and the financial pressures of college on students are more prevalent than ever, student housing has become both a recruitment tool and an easy place for schools to lessen financial risk, in the latter case thanks to the growing ubiquity of public-private partnerships.
With public-private partnerships, or P3s, universities enlist private developers to do anything from finance, develop, manage and/or lease college buildings. With student housing not as high-priority a target for affluent alumni donations, they are the easiest building type to bring in outside capital for. By enlisting developers with a wider breadth of experience, colleges have felt more emboldened to reimagine what can go in a residence hall.
“If you’re talking to a commercial real estate broker, depending on where you’re trying to develop the mixed-use component, developers are willing to take a risk on financing,” UMass Building Authority Executive Director Patricia Filippone said.
“What we’re seeing as colleges and universities look to bring the mixed-use philosophy onto campus through P3s is tying student housing to other amenities such as maker spaces, retail-centric opportunities and academic uses like classrooms and faculty offices,” Balfour Beatty Campus Services Division President Bob Shepko said. “It enhances the facility for students, and it maximizes the ability to fund those projects.”
Shepko and Filippone are among more than two dozen experts in student housing real estate scheduled to speak at the Bisnow Annual Student Housing event at The Westin Hotel in Center City, Philadelphia, June 12. Every aspect of the market’s present and future will be discussed, and the hybridization of these buildings is at the forefront of the discussion.
The simplest and most common form of mixed-use student housing is with classrooms, study and media spaces and faculty offices. Such combinations depend the least on P3s, but have strong correlation with increased student performance and decreased transfer rates, Filippone said.
“If students are learning within their residences, they’re being retained,” Filippone said.
Making students feel part of the campus community is a priority for every school, and it is easier to do so if a student lives on campus. Residence halls in urban and denser suburban schools need to compete with off-campus housing, and amenitizing is one way to do so — but the sort of luxury amenities associated with multifamily buildings do not make financial sense.
A well-executed retail component, however, can be revenue-neutral while adding value for students, Shepko said.
“If we’re going to do [student housing] as P3s, we want to provide amenities for students but we’d need it to pay for itself,” Filippone said. “You’ll always need the fitness centers and the learning space, but if it’s a pizza shop or something like that, it would need to generate revenue to pay for itself.”
To prioritize such projects as money-savers, either for the college or for students by keeping rents down, is a risky maneuver, according to EdR Senior Vice President Jason Taylor. Better to focus on the good such buildings can bring on their own merits and accept the financial windfall as a bonus.
“We have to be careful as an industry about viewing retail as the end-all be-all to keeping student rents down, because so much goes into that equation, such as square footage and what type of retail you can attract,” Taylor said. “Yes, it can be used to lower student rents, but there are tons of examples out there where it hasn’t been done thoughtfully and has failed to help student rents.”
For significant retail components, a big component of that thoughtfulness goes into exactly what kind of retail is appropriate, and where on campus it can be successful. While retail in these buildings is an amenity for students, its ultimate success rests on how much business it can attract from the greater community.
Virtually all significant, retail-inclusive, mixed-use residence halls are on the edge of campuses so that non-students can easily patronize them, Taylor said. Because campuses are only active for eight to nine months of the year, off-campus business needs to sustain a store for the summer months. For that reason, more rural or isolated campuses don’t have the environments to justify such projects.
“Campuses that don’t have a robust enrollment or the ability to capture a big number of other customers make it harder to survive those lean months,” Shepko said.
Still, for systems such as UMass with locations in Boston and the bustling towns of Lowell and Amherst, market fundamentals are such that with the right partnership, retail can be something approaching a bankable revenue generator. Filippone and UMass sent out a request for information from developers last year about how to go about building profitable retail.
UMass is also exploring mixed-use student housing beyond academic and retail mixes, into possible office or lab spaces to bring potential internships and future employers as close to students as possible. EdR has seen considerable success including student unions and rec centers in residence halls at certain colleges, and has noted more diverse interest as well.
“We’re starting to see mixed-use with other campus components such as a hotel, where campuses want to bring in a national hotel chain,” Taylor said. “Other campuses have approached us about incorporating parking above and beyond the needs of that immediate residential building. Still others have approached us about integrating the recruitment facilities with the [residence halls], as a great way to put the college’s best foot forward with prospective students. So there are any number of university uses that campuses are really taking a close look at now.”
The usage of P3s and the adoption of mixed-use buildings is accelerating across the country, Taylor said. As that happens, the variations will only increase, student housing will look less and less like it did in the past, and universities and private developers will become ever more inextricably linked.