Each year, the D.C.-based Student Housing Conference helps senior execs avoid mistakes — and fire up profits — in the sizzling student housing niche.
At the event, sponsored by the National Multi Housing Council, pros talk trends, cite specifics and swap sworn advice. This year, the September event clocked in at a time of seemingly irreversible prosperity for the industry.
Just look at the data: plenty of the 75 billion “Echo Boomers” — those born between 1976 and 1994 — have started college since 2000. About 30 percent of today’s U.S. population is college-educated compared to less than 10 percent in 1950. Enrollment continues to skyrocket.
WHAT CAN PROPERTY PROS LEARN?
The news is mostly good. This year, panelists projected big numbers and a severe student housing shortage; they broke down by-the-bed versus by-the-unit advantages and disadvantages. American Campus Communities CFO Brian Nickel detailed his challenging joint ventures with schools — and even enlisted a rep from the University of Colorado at Boulder to comment. The operations panel addressed Postal Service headaches. “What do you do when your carrier opts to drop bulk, not sort, and says it’s a new regulation?”
More than 200 execs scribbled notes — many of them were property owners already involved in student housing. Others were looking to perhaps make the leap.
Jim Arbury, senior VP of government affairs for NMHC, oversaw a survey of 132 schools, which projected an 8.4 percent increase in enrollment between now and 2010. The top five universities, in terms of greatest projected percent increases, are the Georgia Institute of Technology with 58 percent growth expected, the University of Maryland, 45 percent, Drake University in Iowa, 44 percent, the University of Arkansas at Fayetteville, 37 percent, and the University of Idaho, with a 34 percent projected increase.
High numbers mean more tuition but also expensive problems for schools — most universities will require lots more beds. These numbers indicate long-term opportunity for multi-housing firms.
Another costly issue: today’s students expect all sorts of amenities. Many university buildings were constructed in the 1970s or earlier — they lack laundry facilities, high-speed Internet, and much more, if you ask Echo-Boomer students accustomed to lush comfort.
Joint ventures between schools and private firms, another panel topic, can be a lucrative way to go. According to Nickel of American Campus, this business is intricate, and property pros must do their homework conscientiously. Since 1996, Nickel’s company has landed development contracts for 43 on-campus, privatized student housing facilities, consisting of over 20,000 beds. American Campus works with Arizona State University, UC Irvine, the University of Colorado at Boulder and others.
Nickel says his list of privatization goals aims to increase on-campus supply of affordable housing, construct quality, build in a short time, limit the impact on university financial resources, structure the transaction to support the school’s mission, and address the needs and preferences of upper-division and graduate students. Developers, Nickel says, have rushed to the market hastily. Only four or five companies have thrived. What’s his best advice? Do not begin discussions with a school until you have a thorough understanding of the industry.
When you’re ready to plan the build, whether through joint venture or as an off-campus competitor, should you opt for trendy bed-by-bed construction or by-the-unit mode?
David Materna, CEO of Paradigm Group, Gary Blumberg, president, DMC Man-agement Company, Raymond Barrows, principal, First Worthing, and Jared Schenk, principal, Schenk Realty Group, talked single-bedroom shop.
The top five markets with the most bed-by-bed properties are Florida State, Georgia Southern, the University of Virginia, North Carolina State University and the University of Florida. Bed-by-bed is spreading across the country. Still, this trend has achieved significant market share in only two out of 64 college towns surveyed by the consultants.
In by-the-bed housing, a student is responsible for one room in a suite, a lock on his own door. All residents share responsibility for the common area. The security is appealing. And most by-the-bed buildings are new and therefore offer the amenities college kids seek — high-speed Internet, cable television, a private bathroom, preferably connected to the bedroom.
WHAT HASSLES MUST A BED-BY-BED OWNER ANTICIPATE?
Leasing is a great deal more complicated in by-the-bed agreements. The lease should address how each resident will contribute to utility charges. It must stipulate that roommates don’t have the right to sleep in a bedroom they aren’t leasing, and it should contain a disclaimer regarding roommate selection. (In many cases, the owner matches roommates in a bed-by-bed arrangement. Insider advice: claim no responsibility for compatibility.)
With bed-by-bed, move-out and unit-turn logistics become more complicated, as well. The veterans’ collective advice: deal with bedrooms individually. Set rules for residents remaining in the space during a “turn.” Across the board, aim for clear communication with residents. And aim to build a linked community for these ultra-connected high-tech students, though they live lock-to-lock.
WHAT ABOUT THE MAIL TROUBLE?
If the Postal Service suddenly refuses to deliver your mail individually to by-the-bed residents and instead drops bulk, citing a new regulation, is there anything you can do? The team is still working on that one. At the moment, they have a stopgap suggestion: remind the mail carrier that the USPS promises not to cease any service it has provided for more than 90 days.
Author: Betsy Boyd