The student housing market was once a niche in the commercial real estate industry, but recently, it has become its own sector and continues to see strong investment growth from both foreign and domestic investors. This sector differs from the multifamily industry as it charges by bed, or room, rather than a single unit.
While the interest in student housing communities increases, there are significant difficulties when it comes to affordable housing opportunities for students. Accommodation represents a large portion of total costs for students, but amenities are still high on the list when they choose a place to live. Although students’ needs in amenities have changed in the past years, some requests continue to remain the same.
“We see study lounges and collaborative workspaces continuing to trend and expect it to be a critical component of students’ housing decisions moving forward,” GMH Capital Partners Executive Vice President of Acquisitions Jim Kirby, told Multi-Housing News. In an interview, he talked about challenges in the industry and the impact of technology, but also revealed details about a new trend in student housing: Amenities that complement a healthy lifestyle.
Name 2019’s major trends in student housing development.
Kirby: There is a move toward more studio and micro units, as some students are seeking private living spaces with the ability to come out of their rooms for collaboration, study and amenities. That being said, students who are seeking lower rents are often willing to double in a property that has first-class amenities and is truly pedestrian to campus.
How have student housing projects changed in the past few years?
Kirby: There is more need for study lounges and collaboration in working spaces versus game rooms and traditional social activities. Students take their studies and time management, in that regard, seriously and want spaces conducive to learning.
Tell us about major challenges you come across when developing student housing projects.
Kirby: Increased construction costs continue to be a major challenge and when factoring that into the lower yields, developers are willing to “settle.” Also, the high prices that landowners want for their locations and returns continue to get thinner.
Kirby: When it comes to studying, students want flexibility, whether it be a collaborative setting, or a quiet space for individuals. A second critical issue is the receipt of packages. This generation of students shop online and package delivery has evolved into an amenity. Students want their packages delivered to a safe, secure environment that also promotes expedient and seamless delivery. Therefore, amenities like package lockers will likely evolve (…). Package lockers eliminate the need to use leasing staff to retrieve packages, as students will be able to key in a code—sent via text message—to retrieve their packages 24/7.
How did technology impact the student housing market so far?
Kirby: Technology has evolved tremendously. Once considered an amenity, Wi-Fi and internet connectivity are now a high expectation. Students are attending colleges and universities with multiple devices and the need for online classwork, collaboration, social media and entertainment (i.e. gaming, movie and television etc.) continues to increase. Therefore, our communities must feature strong signals and easy connectivity, yet still be secure and manageable during peak hours.
What type of amenities are now trending in student housing development?
Kirby: We think “flexible” amenities will be trending. Spaces that can be manipulated by our residents will be critical. An example of this is retractable walls that can turn five linear study lounges for four residents into a large conference room for 20, or more people.
We are also seeing students’ focus shift toward physical wellness that includes technology. Because of this, fitness centers are crucial and will evolve with online fitness features and cardiovascular machines with interactive abilities, so students can run/ride with their friends nationwide. Further adding to the wellness point, vending machines that once contained soda and chips are now featuring healthy snacks—like pita chips and fresh salad bowls—vitamin water and sports drinks.
What can we expect from the student housing market in the year ahead? What are your predictions?
Kirby: We think the flight to quality in terms of service, amenities and most especially location will continue. The market will continue to adjust to welcome students at all pricing levels to accommodate this. Students will reside in a location that provides opportunities for overall physical and mental wellness and is conducive to their overall collegiate experience.
Image courtesy of GMH Capital Partners