Editor’s Note: Learning Curves
- Sep 29, 2016
As we were preparing MHN’s annual student housing issue, I couldn’t help thinking about how much has changed since I went to college. Those were the unimaginable days before personal computers, smartphones or the Internet. It’s enough to make me feel like I attended school during the William Howard Taft administration.
Today’s student accommodations likewise make my college digs seem positively antique. To stay competitive, developers are creating facilities that resemble five-star resorts for 19-year-olds. The reason is clear. By 2023, some 24 million people are expected to be in college, and the promise of a large, reliable revenue stream is attracting buckets of capital. As Real Capital Analytics Inc. recently reported, student housing deal volume reached $5.6 billion by August. That beats the total for all of 2015 and represents a 54 percent year-over-year increase.
Building trophy accommodations may be the best-known trend in student housing, but luxury is not the only consideration for students and their parents. Instead, as contributing editor Jeffrey Steele points out in “Making the Grade,” location still seems to be the deciding factor. For that reason, smartly planned upgrades can help an older community near campus compete with flashy new product farther away.
This is borne out by research from the National Multifamily Housing Council. In “Hitting the Books,” NMHC’s Matthew Berger and Dave Borsos report that rents at student housing communities within two-tenths of a mile from campus commanded a 12 percent premium last year, compared to those between two-tenths of a mile and half a mile away. Surprisingly, the same doesn’t hold true for rent appreciation. Increases at communities more than two miles from campus were similar to those at properties less than half a mile away.
Presumably, developers are monitoring demand for student housing carefully and lenders are underwriting deals prudently. That analysis will be essential to determining whether new projects, especially of the deluxe variety, continue to justify the flood of dollars that are flowing their way.
Paul Rosta, Executive Editor