Early Collaboration, Public-Private Partnerships New Norm For Bay Area Student Housing Developers

With California’s colleges and universities short tens of thousands of student beds, higher education institutions are increasingly turning to public-private partnerships, or P3s, to get student housing projects completed more quickly and share development risk.

Bringing student housing projects with thin margins to fruition requires a disciplined basis, collaborative delivery models and early integration with builders and subcontractors, according to panelists at Bisnow’s Northern California Student Housing and Higher Education Summit at the Grand Hyatt San Francisco on April 30.

“Everything is really about basis right now,” Nhan Nguyen Le, CEO and founder of Berkeley-based investment firm Valiance Capital, said during panel discussion at the event. “It's basis of land, construction, development costs, it's basis of all the fees. And you have to focus on that because you're also fighting against 15% to 25% of [operating expenditure] growth over the past few years as well.”

Amenity creep in modern student housing projects is raising costs and expectations as well, with enhanced public and private spaces, outdoor study areas, gyms, high-speed internet and natural lighting making next-generation housing projects even harder to pencil.

Early and continued collaboration from development, operations, design and other stakeholders hastens development timelines and allows student housing projects to advance under a more cost-effective framework, said Jon Salisbury, executive director of facilities planning for Cabrillo Community College District.

The district’s 257K SF, 624-bed Costa Vista housing project is the first student housing project on a California community college campus. Costa Vista is a P3 between Cabrillo College, Collegiate Housing Foundation, Greystar Development, Devcon Construction, WRNS Studio, JLL and Raymond James. The facility is slated to open in 2027.

“Having all those parties at the table to comment on cost, comment on the different parts of the cost structure, not just on the construction side but on the operations and management side, to have that cost input, together with the construction cost input, allowed us to quickly iterate and develop a successful feedback loop to go fast and keep costs low,” Salisbury said.

The Costa Vista project included mass timber framing panels and internal shear walls, which allowed construction teams to eliminate several hundred thousand square feet of external shear panels, according to Ben Mickus, partner at WRNS Studio.

“That's just one of hundreds of give-and-take conversations that happened throughout the very rapid-fire course of the design process to get to the end of design with something we knew we could build because all the builders were there with us the whole time,” Mickus said.

With modern student housing projects functioning more like holistic wellness centers than dormitories, the financial math becomes even more difficult, housing experts said.

The landscape for student housing has changed dramatically, shifting from a “build it and they will come” approach of past decades to one that more fully encompasses the needs of students, said Patrick Kennedy, owner of longtime Bay Area infill housing developer Panoramic Interests.

A lot of the shift has to do with increased competition in the sector, Kennedy said.

“We're paying a lot more attention to exactly what the students want,” he said.

Planning and design for modern student housing encompasses food security, mental health and wellness, and safety, according to Hamid Ghaemmaghami, executive director of real estate development for San Francisco State University.

With a growing number of first-time college students and students on financial aid, the need for service-oriented buildings versus standard housing becomes even greater, Ghaemmaghami said.

The rub is figuring out how to include a range of additional amenities in buildings when they typically aren’t earmarked in construction budgets, said Mark Davis, San Francisco-based principal at architectural firm Kieran Timberlake.

Every amenity pushes up construction costs, Davis said, placing a burden on architects and planners to find creative — and cost-effective — ways to use interior and exterior spaces.

“As designers, we're challenged with thinking about how we can make more of the circulation spaces that are in a building, how we can tie buildings to the landscape immediately outside of them to create these spaces in a way that dollars per square foot can't necessarily do,” he said. “It's really thinking about making spaces flexible and expandable so we can get a lot more out of our construction dollars.”

Often, it is easier to build student housing projects from the ground up than it is to try and reposition older Bay Area assets due to outdated building layouts that aren’t conducive to modern standards, according to Raoul Amecua, executive vice president of development for The Michaels Organization.

Another issue developers face is the need to incorporate flexibility in design so that the building can be adapted if it changes uses later, Amecua said. 

Rising development costs and materials pricing may impact which proposed student housing projects actually move forward, but those factors are slightly tempered by contractor availability, said Vincent Polhemus, associate director of preconstruction for prefab building systems supplier Clark Pacific.

With student housing projects becoming ever harder to pencil, capital has become much more selective, Valiance Capital’s Le said. Le cited a shift underway in the capital stack for student housing projects, with investors now including new entrants to the sector as well as family offices.

Equity is also highly selective, he added. 

“Capital markets, they're really taking a look at the supply-side story for every market,” Le said. “The right projects really are just tougher to define, because the question isn't, ‘Can I raise capital?’ It's, ‘Can I raise capital for the right deal, at the right market, at the right basis?’ And I think that that's the filter that is getting tighter and tighter.”