An Insider’s View of the Student Housing Business

Campus Advantage’s Michael Orsak and Josh Greenleaf discuss the best markets to invest in and their expectations from the sector going forward.
Michael Orsak, senior vice president of investments, Campus Advantage
Michael Orsak, senior vice president of investments, Campus Advantage

Campus Advantage is one of the most active players in the student housing market. Over the last decade, the company has acquired more than $1.5 billion in student housing assets through its partnerships and invested about $525 million in equity through several joint ventures. In addition, Campus Advantage manages more than 60 communities across the country.

The firm’s Michael Orsak, senior vice president of investments, and Josh Greenleaf, vice president of investments, revealed the major trends and challenges in the business. The two also explained what attracts today’s residents and what makes them stay.

What were the most sought-after markets for student housing assets in the first half of this year?

Orsak: I don’t think particular markets were sought after. The focus has generally been on acquiring/developing pedestrian-to-campus properties at large state schools. We’ve seen some large acquisitions at University of Michigan, University of Washington and University of Georgia. We’ve also seen strong interest in development at University of Texas, the University of Florida and Georgia Tech.

What about markets we should keep an eye on going forward?

Orsak: Without tipping our hat to a particular market, we tend to focus on markets that haven’t seen a lot of press. As you can imagine, there’s a bit of herd mentality in the development world and developers tend to focus on university markets that have had press around enrollment growth.

Josh Greenleaf, vice president of investments, Campus Advantage
Josh Greenleaf, vice president of investments, Campus Advantage

What financing sources do you think will become more prevalent this year?

Orsak: Fannie Mae and Freddie Mac will likely still provide the majority of permanent debt going forward. On the construction side, with the loosening of capital requirements for High Volatility Commercial Real Estate for smaller banks, we should see construction financing become less expensive on spread although we don’t believe recourse will be reduced.

What types of student housing amenities are proving to be the most in demand this year?

Orsak: Unfortunately, consumers still go for the “wow” during the leasing process—bowling alleys, rooftop pools, golf simulators. However, it’s the functional spaces that will insure the property maintains long-term occupancy, particularly study spaces.

How have residents’ needs changed in the past few years and what do you anticipate going forward?

Orsak: Consumers are demanding location and are willing to pay for it. I don’t think this will change until the financial feasibility of the cost of construction changes faster than rent growth, which may occur with tariff on materials.

Could you single out one trend that is gaining popularity in this sector?

Orsak: The biggest trend in the space is the influx of capital. We’ve seen several billions of dollars of transactions being backed by foreign capital in the last 24 months and do not expect that to change.

What are your predictions for the student housing market?

Greenleaf: Transaction volume should end up similar to 2017, with a continued demand from buyers and sellers looking to hedge possible upward interest rate/cap rate trends going forward.

Images courtesy of Campus Advantage