Inflation may be a handy — and valid — excuse for escalated costs, but that doesn’t mean students will simply sigh, sign on the dotted line and move on with a lighter bank account when faced with today’s escalating rents.
“There is no doubt that higher rental rates have significantly increased the expectations from our current and prospective residents,” says Jason Fort, executive vice president of Asset Living.
Yardi’s National Student Housing report, released in the third quarter of 2023, noted June marked the fifth consecutive month of annual rent growth over 7 percent at the 200 universities it tracks. June logged a 7.2 percent growth.
“Given that 2022 held the previous rent record for student housing, obtaining more than 7 percent growth off of previous record-high numbers is exceptional,” the report states. “The average rent per bed at Yardi 200 universities was $846 at quarter-end, a new all-time high.”
“We have never seen leasing strength close to what we are currently experiencing,” says Tadros ‘Teddy’ Abdelmalek, national director of business development at Campus Life & Style. “Our industry normally provides steady rent growth of 2 percent to 4 percent per year with occupancies in the low 90s percentile-wise. For the school year that begins at the end of August 2023, we are on track to achieve double-digit rent growth and occupancy that exceeds 95 percent on average.”
Brandon Smith, vice president of operations and development at the Tailwind Group, notes that parents and students are aware inflation and supply-and-demand factors are causing student housing rents to go north across the board. As the stats show, they’re continuing to pay these higher rates, but both students and parents do expect an enhanced student living experience for their higher rental rate.
“While most of the revenue growth we are experiencing in the student housing industry can be tied to positive supply-and-demand metrics, that is not at the front of our renter’s mind,” he says. “They are going to correlate paying an increased rate to receiving an increase in service, quality of their unit and quality of life. This becomes especially prevalent when asking our current residents for renewals. They think, ‘If I am paying ‘x’ this year, what update is going to happen that I should renew and pay ‘y’ next year?’”
Demand for More
Chelsey Harper, regional vice president of The Preiss Company, sums up the rent-expectation dynamic nicely.
“Luxury rates yield luxury demands,” she says. “Tenants with higher rates expect luxury amenities, upgraded units, high-end finishes and concierge services.”
Though physical amenities are nice, Harper adds that location is still the amenity of choice as students want to be closer to campus. A premier location in a bustling college town is always a huge plus, notes Alex Rippy, national director of leasing for GMH Communities.
“A property’s appeal is bolstered by its proximity to nearby grocery stores, bars, shopping centers and wellness facilities, aligning with the unique preferences of its tenant base,” she says. “The higher the rate, the more focused we become on true service-based offerings.”
Vanessa Pacifico Young, vice president of management services, leasing and marketing at Landmark Properties, cautions that owners shouldn’t overlook the value of on-site parking even if their asset is in the center of it all.
“Most of our communities are pedestrian to campus, but in saying that many students still opt to bring their vehicle near their community or remain social with their friends,” she says.
Pacifico Young also believes convenience and easy access are important features given today’s rent increases.
“It’s common for our student demographic to expect a high level of customer service with ease of amenity use at their fingertips, but we are also seeing more demand on an access control front,” she says. “Students are normally comfortable paying a premium when they know the building has a certain level of access control measures in place, such as controlled gate and garage access, in addition to secured access measures for pool amenity use, for example.”
Study spaces and fast internet speeds are also essential. Pacifico Young notes it’s a common trend nowadays for Landmark’s on-site study spaces to be full, with its private study rooms booked consistently throughout the lease term. High-speed internet may be a no-brainer amenity nowadays, but Pacifico Young argues its importance in a student’s life must be appreciated by the student housing operator.
“Students require assurance that they’ll be able to test take from home, study online, join their online classes, surf social media or actively partake in gaming with little to no disruptions,” she adds.
Amenities that make life more convenient are certainly in demand as rents creep up, but that doesn’t mean operators should overlook perks that go above and beyond, Abdelmalek says. On the luxury front, this might include a rooftop deck with a pool and/or spa, e-bike rentals and fully stocked refreshment stations.
Abdelmalek notes operators don’t even have to go that big to make an impact on residents and justify their current pricing. A little thought can go a long way.
“To align the increased rent with value, communities can introduce new services or amenities that directly benefit the students,” he says. “These could include upgraded fitness facilities, study lounges, tutoring services, social events or increased security measures.”
Servicing the Customer
There isn’t one, singular amenity that will necessarily justify today’s rental rates to residents, according to Fort. Instead, it’s the culmination of what they perceive their experience will be, or in the case of current residents, what their experience has been so far — and whether that’s likely to change.
This, Fort believes, is what makes customer service the most crucial amenity of all.
“Today’s customers are more demanding, more educated, more discriminating, less patient and less apt to be loyal than ever before,” he says. “Can you blame them? Lots of organizations seem more concerned with cutting costs than creating value, with caring more about their bottom line than about what’s right for customers.”
Fort notes that Asset Living trains its staff to understand loyalty must be earned. The program subscribes to pillars that include “a customer is not dependent on us, we are dependent on them,” and “a customer is not an interruption to our work, they are the purpose of it,” among others.
Many student housing operators and managers, including Landmark Properties, Campus Life & Style and the Tailwind Group, conduct surveys to ensure students’ expectations align with what the asset and staff are delivering. After all, this will be a crucial metric when it comes time to renew, particularly if rates continue to increase.
Landmark, for example, solicits feedback on its “You Speak, We Listen” customer service platform twice a year.
“We’ve been able to aggregate this feedback, locate commonalities, and enact change to ensure we’re making progress and a meaningful impact during the life cycle of any one resident,” Pacifico Young says. “The key components of the platform include routine resident surveys, incentivizing team members to cure any issues raised during these surveys and effectively communicating those improvements to the larger resident population.”
The Tailwind Group pairs its regularly sent resident surveys with on-site team coaching so the staff is prepared to consistently interact with residents and obtain feedback from them.
“It’s taking the opportunities to conversate when a resident is picking up a package or grabbing coffee,” Smith explains. “It’s our maintenance teams asking how things are going while completing a work order. It’s greeting our residents by name. By doing these things effectively, the ‘sticker shock’ of rate increases seems to dissipate.”
Still, there’s no question some of those surveys and interactions will produce a negative response — as in a “I’m not happy with you or your property” type of response. This is inevitable, but the way these critiques are handled can dictate more than your starred review score on Yelp.
“Negative experiences cannot be undone and are directly tied to our ability to grow rents,” says Casey Petersen, COO at PeakMade Real Estate. “We have learned through our own resident focus groups that our residents’ rental rate tolerance is directly affected by their experiences. They expect the basics to be done well and their apartments to feel like home. If any issues arise, they must be handled quickly and efficiently.”
It is also inevitable that some issues take longer to solve than others. That happens, Abdelmalek notes, but it’s how (and when) you address the student and complaint that makes a big difference.
“We are seeing that Gen Z expects instant gratification, whether in communication or service,” he says. “It is important to be available, prompt and when things cannot be addressed immediately, communicated clearly. Further, if something cannot be instantly addressed, what can we do for them in the meantime should a solution not be immediate?”
Being proactive is another way to ensure complaints are kept to a minimum and, when things do happen, that an owner or manager is ready to address it. A broken air conditioner during a particularly hot stretch, for example, is a scenario that can easily be planned for and, therefore, mitigated.
“Being proactive means looking for a need to fill, a gap to close, a favor to do, a new way to create value, and a faster, better and more ‘user-friendly’ way of doing business,” Fort adds. “It’s about doing. It’s about taking action rather than waiting for things to happen. Ask yourself, ‘Do I regularly look for additional things I can do for my residents — without being asked?’”
Fort further notes anticipating a resident’s needs can sometimes be a tough job, but it can be made easier by empathizing with the student population and providing enhanced or customizable services that make them feel special.
“Every student housing complex and operator, for the most part, has the same set of amenities or services that they offer their resident base,” he says. “Our focus at Asset Living is to sell value or nothing at all. Every resident defines value in their own way, so look at the property and services through your residents’ eyes. The whole process by which you create and deliver your product or service must support the creation of resident satisfaction and loyalty.”
Creating Value
Chris Richards, COO of Core Spaces, knows rents are high. She also knows these numbers are typically tied to what a property is offering.
“In my two decades of operating student housing, we’ve never seen rent increases of this magnitude unless a community underwent a value-add component where the offering was of a significantly greater product quality than in a prior year,” she says.
In many ways, what Fort is proposing is exactly that — except the value-add component doesn’t have to pertain to the actual building. This is a sentiment Rippy is on board with.
“The value proposition goes beyond the physical space, extending to the opportunities for social engagement, personal growth and community involvement,” she says. “Higher rental rates are now seen as an investment in a richer college experience. Students are willing to pay a premium when they believe it will lead to enhanced amenities, services and overall living standards.”
This is where programming and events can really shine. Harper notes Preiss has added custom and individual events to its offerings since COVID. These include ‘Brew to You’ coffee and food delivery events to the resident’s door, as well as pet-specific programming.
“We’ve also added concierge-level amenities, such as valet trash, dog washing stations and package delivery services in some locations,” she says.
Once again, it’s not necessarily about the specific amenity, but upgrading that offering and, therefore, upgrading the resident experience that matters. “For instance, a pet park might be considered a basic amenity, but providing an accompanying pet walking service sets a property apart from its competitors and delves into making life easier for the renter,” Rippy adds. “Rather than simply reacting with amenity add-ons, we make decisions based on what our on-site team believes is achievable and what our community truly needs to thrive. Higher rents mean offering services that enhance our residents’ lives and give them more time to enjoy their passions.”
Fort believes these types of creative, personalized services can set a community apart from its competitors in a landscape where rents — and amenities — look the same across the board. Communicating where a community’s value add lies is critical in ensuring these efforts aren’t wasted, Petersen notes.
“Our renters are becoming more sophisticated,” he says. “They understand our marketing practices and the nature of our business and recognize their buying power. To that end, we train our teams to create value and showcase the value in our communities — by having advocate and loyalty programs and continuously asking for their feedback and implementing changes based on their wants and needs.”
PeakMade has a ‘Customer Knowledge’ program to do just that. The program is the company’s way of discovering what is changing with its residents. The group meets with senior PeakMade leadership quarterly to ensure that the dynamics of its customer are consistently communicated, and that its business is evolving accordingly. “Creating discipline around continued learning about our customer has been a game-changer for us and has allowed us to make the adjustments necessary to meet our customers where they are,” Petersen says.
Richards adds that the expectation of more is the same whether students are looking at high-end offerings steps from campus or more modest accommodations with fewer bells and whistles. “The expectation from the students is similar,” she says. “They want what was promised: a well-kept product, amenity functionality and transportation that delivers what was promised — be it parking space availability or shuttle service.”
Abdelmalek agrees that, with rents generally up across the board, these higher expectations aren’t solely placed on high-end communities. This makes the student housing experience pivotal for everyone, not just the student.
“As the saying goes, ‘you get what you pay for,’ and we truly believe that if you pay a higher rental rate, yes, there is an expectation of service and hospitality,” he says. “From the affordable options to the most affluent markets, our customer service is elevated to show our residents that we respect and appreciate them being a part of our student housing community.”
—Nellie Day
This article was originally published in the July/August issue of Student Housing Business magazine.