July 27, 2023 |
Updated July 31, 2023
Explore what makes student housing communities stand out as the return to campuses nationwide commences amid rising occupancy rates.
Students are learning an important life lesson before they graduate: Getting a bed in a desired building requires timely decision-making as occupancies at purpose-built student housing (PBSH) rise.
Since the pandemic ended, these buildings near but off campus are filling up quicker as students have returned to universities, classes and activities. Those who can live off campus—typically after freshman year—find that if they want a certain building or apartment layout with a specific number of beds, they must plan early.
Part of the reason is that occupancy rates have increased post-pandemic after falling off and then slowly inching up to about 40,000 beds, which is still below the 2010s-decade norm, according to a blog on the RealPage Analytics site.
At the same time, undergraduate enrollment, which had also declined during the pandemic, has picked up at many universities and colleges, particularly at top-tier schools. Applications were up substantially—21% over 2019-20—for those using the common application for next year’s class. “Returning students are eager to be back and incoming students, some of whom delayed matriculation due to COVID-19, also want on-campus interaction,” says Scott Orphan, Senior Vice President of Houston-based Asset Living, which manages 125,000 beds in 40 states.
Exacerbating the housing problem is that some universities don’t have enough on-campus housing or have very old inventory and look to PBSH developers to help students secure beds, says KrisAnn Baker Kizer, Vice President of Leasing and Marketing at San Diego-based Pierce Education Properties, which operates 8,300 beds in six states. The company divested 10,000 beds from its portfolio in 2021 and is again in growth mode.
Pierce Education Properties has found the problem particularly acute in its target markets, which typically focus on Tier 1 universities that have become very popular, says Frederick W. Pierce, CEO and President. “Leasing velocity and timing have changed over the last few years, with this year ahead of last year and last year ahead of the year before,” he says.
A new trend takes hold
Pierce Education Properties has also found that a new trend is taking hold: While timetables vary at different schools, generally, the commencement of the pre-leasing cycle has become October rather than November for the following school year. Some leases are even being signed earlier in September or August when students arrive or soon thereafter. Pierce’s company sees leasing earlier near the University of Indiana in Bloomington than by the University of South Carolina in Columbia, where PBSH options are more limited.
Louie Colella, Vice President of Leasing and Operations for St. Louis-based CRG, which has 2,500 beds in six states, is also seeing earlier leasing, typically in fall or a few months after students arrive, he says. “The goal is to give current residents as much time and notice to resecure their beds before opening them up to others,” he says.
His company also sees the variations in timetables at different universities. “Some markets like Penn State University are super early about renewing. It takes less convincing to get students there to sign, sometimes even before they move in,” he says. His firm is also working harder to communicate what’s going on to students and parents so there’s no misinformation, he says.
Philadelphia-based Campus Apartments, which has almost 23,000 beds in 16 states, also finds that students lease ahead, either after they move in or some cases even before they do, says Miles Orth, Executive Vice President and COO. Differences are usually due to local supply-demand
ratios for those seeking off-campus housing, he says. His firm’s occupancy rate also grew across its portfolio despite the pandemic as more students relied on off-campus housing when their universities went remote and shut down campus housing, he says.
Asset Living has found that occupancy has soared as some non-students, including young professionals, look to its products as a good place to live, Orphan says. It’s also seeing the leasing cycle begin earlier, which may mean new developments will be available in August 2024, he says.
Atlanta-based Landmark Properties, which manages almost 60,000 beds at 49 Tier 1 universities in 26 states, says it has also seen faster lease-ups at approximately 80% of its portfolio versus the prior year. Two of the locations where this phenomenon is happening are in Knoxville, Tenn., where it has three properties, and in Raleigh, N.C., where it has four assets, says Rob Dinwiddie, Executive Vice President, Marketing and Management Services. He attributes its occurrence near Tier 1 universities because the big public universities have been able to keep up and increase their number of acceptances, even during the pandemic.
Whenever students sign, the overall goal of developers and managers is to attain 95% occupancy, which helps them achieve budget stabilization, though the nationwide occupancy rate hovers closer to 93.7%, Colella says.
The 5 keys
Five key factors help make certain buildings more desirable to students than others and trigger faster leasing.
1. Proximity to campus
Even though some students may not want to live in campus dormitories, they want to live close by, says Dinwiddie. What’s considered close is one-half to one mile away or within walking distance to the main part of a campus, Pierce says.
Orth says some want to live even closer and be near shopping, dining and entertainment options. Those who are willing to drive, bicycle or take a shuttle service are willing to live farther away, sometimes three to four miles, Orth says. In either case, prime parcels to construct or acquire and rehab are becoming harder to come by, Kizer says.
Rents vary, with the main drivers being supply and demand and competition. Great demand now is leading to rent increases. Asset Living’s portfolio of managed properties has seen, on average, rent growth in excess of 10%, says Orphan. Pierce’s company saw growth of more than 9.5% in several markets like Athens near the University of Georgia, and Ames near Iowa State University. At the same time, more developers entering the student housing niche are making prices more competitive in certain markets, Orth says.
Other factors also come into play, such as a building’s age, number of apartments and beds in each unit, amenities, size of the apartment and distance from campus, with those closer usually commanding a higher price. “For most students, being able to quickly get to campus and home is worth paying a premium,” Dinwiddie says. Yet, others prefer less density or a more affordable rate, he says. When students sign can affect the price, with earlier dates sometimes leading to concessions, which depend on factors like the market and might range from a $550 gift card to a month of free rent, Colella says. The overall economy factors in less, however, Pierce says. “Most families have planned forever for this expense,” he says.
Both interior and exterior amenities help attract residents in the same way they do in the market-rate sector but also are influenced by campus culture, location, size of the building and weather. Among key priorities are spaces that encourage interactions, whether to study or socialize since many didn’t have that ability when studying at home. Students also care about curb appeal, safety and cleanliness,
Among the most common choices, according to a variety of sources, are fitness facilities with state-of-the-art equipment and more rooms of different sizes for group and smaller workouts, which can be opened to adjacent outdoor areas; study areas for private and collaborative work, outfitted with printers, computers, white boards, TVs to make work more purposeful; outdoor amenities of pools, fire pits, barbecues, TVs, table tennis; high-end finishes such as granite and quartz countertops, designer cabinets, light fixtures and hardware, stainless steel and energy-
efficient appliances; sustainable features such as recycling programs; smart-home features of thermostats and light controls; onsite spaces for bicycle storage, 24-hour package lockers/rooms, pet grooming stations and parks, ride-sharing services; and parking—usually outdoors in surface lots but sometimes in covered areas. In buildings closer to campus or in a downtown core, typically smaller footprints may mean forgoing some amenities such as a resort-style pool or putting one on the roof or constructing a smaller fitness center, Pierce says. “The best and most robust amenity packages remain at ‘drive’ properties when compared to their ‘pedestrian’ counterparts,” he says.
Certain locations and student populations dictate other choices. At Canvas, an 826-bed building developed by Toll Brothers Campus Living and opened near Arizona State University in Tempe two years ago, the area’s temperate climate inspired a movable wall that opens to an interior courtyard, says Mary Cook, whose firm Mary Cook Associates, a Chicago-based commercial interior design firm designed the project. The building also features a variety of social zones such as a main level “uber lounge” with a café with a cold brew tap and a top-floor clubroom and hammock lounge that opens to a pool deck with views of the campus. The building also includes spaces that reflect the generation’s interest in technology with a podcast recording studio and for relaxation an e-sports gaming lounge, nail bar, sauna and spray tan booth.
Amenities these days also help make life easier by offering residents items to rent such as bicycles and vacuum cleaners, Colella says. Having the strongest bandwidth throughout a building is now considered a given rather than an amenity.
4. Apartment layouts
Most students favor bed/bath parity, particularly after the pandemic, and 95% of buildings constructed in the last five years reflect that trend, Colella says. But that’s not always possible with older products, which were designed for sharing a room, he says. Some students are willing to do so to cut expenses, particularly in more expensive markets. And some buildings try to offer both singles and doubles to cater to a wider pool of students, which CRG did in building housing near the University of Nevada, Reno. The community has apartments with six rooms with five designed for single occupancy and one for a double to help lower costs, Colella says. Some developers also build in flexibility to be able to increase the number of double occupancies and adjust pricing, Orth says. The majority of newer buildings are designed with between three and six rooms, according to Dinwiddie. Other features that make an apartment appealing are that it comes furnished, has large windows for natural light and an in-unit washer/dryer.
5. Social media influence
Word of mouth has become a huge boost to encourage students to choose one building versus another. It’s more important in the student housing sector than in other real estate niches, Pierce says. “If they’ve had a good experience in a building, they’ll share that on social media and with their friends,” he says. Adds Dinwiddie, “Students want to live in the places they consider trendy and popular, which is why exposure on social media is incredibly important.”
Dinwiddie expects student demand to continue to outpace new stock, at least in the short term during the next few years. “New housing deliveries are going to continue to lag the demand for quality purpose-built student housing, which means higher occupancy levels and continued rent growth at major university markets across the country,” he says.
Barbara Ballinger is a frequent contributor to units.