For years, the student housing amenities race catered to the needs and wants of Millennials: features like tanning beds, lazy rivers and housekeeping services. Now, student housing is taking a more modest direction. That’s because Gen Z students, those born between 1995 and 2008, are savers—not spenders—thanks to the trauma they experienced watching their parents struggle with the recent financial crisis.
Gen Zers seek affordable living spaces in close proximity to campus that provide amenities that will help them succeed in school, rather than distract them from their studies. “What constitutes luxury is a moving target, so it doesn’t necessarily follow that a shift away from what was considered luxury in prior development vintages means doom and gloom for the industry,” notes Todd Benson, managing director of development and asset management, PEBB Capital.
Indeed, quality is still important, but luxury will not be as important as long as the property feels comfortable, notes Jeffrey Resetco, senior development director at Gilbane Development Co. Instead, collaboration and “see-and-be-seen” spaces within developments—not just study rooms—appeal to Gen Z.
“Sustainability will continue to be very important,” Resetco added. “No developer should create a development without multiple bottle-fillers.”
Wesley Rogers, CEO of Landmark Properties, is confident that as long as his team continues to listen to residents’ preferences and adapt accordingly, rents and occupancy rates will remain strong. “Over the years, as construction costs rise and urban land becomes even more scarce, we have made strategic shifts in the types of amenities featured in new projects.” Through resident surveys, Landmark Properties has determined that some of the top amenities include quality internet and study areas.
A recent Fitch Ratings statistic found that around 3.9 percent of student housing-backed CMBS debt was more than 60 days past due at the end of November, a 1.1 percentage point increase from last year. But, Rogers notes, the majority of the strongest operators in student housing have very little, if any, CMBS debt. “Generally, we are cautious of investment opportunities that include CMBS debt,” he said.
Rogers sees demand climbing in Landmark Properties’ strategic markets. “It’s certainly true that there are some markets here and there where developers have quickly saturated the area, and this has led to lower occupancy rates in those areas,” he said. “But on the whole, we remain bullish on the future of student housing as we see demand climbing in our strategic markets.”
And, as student preferences change, buyers may be presented with value-add opportunities to repurpose common areas, reevaluate unit mixes and rebrand properties to re-orient to better align with current tastes.
Sector Insights rotates among market rate/luxury housing, workforce housing, low-income housing, student housing, senior housing and mixed-use.