AUSTIN, TEXAS — The concept of living-learning communities, wherein students take advantage of a property’s location and amenities to share academic and personal experiences, is growing in popularity in the student housing industry.
As the property sector matures and more student housing communities become outdated, developers are finding success with new projects that capture both the living and learning sides of the college experience. This trend is visible at both on- and off-campus properties.
The subject of living-learning communities was raised during the opening Power Panel at the 2019 Interface Student Housing Conference. The three-day event, which took place from April 8-10 at the JW Marriott Hotel in Austin, Texas, drew approximately 1,400 attendees.
Bill Bayless, CEO of American Campus Communities (ACC), an Austin-based REIT, kicked off the discussion of living-learning communities by noting that, in general, America’s inventory of student housing product is aging, and not like a fine wine.
“The average age of on-campus housing at universities across the United States is 53 years old,” said Bayless. “What continues to be one of the greatest opportunities in the space is the replacement of outdated on-campus student housing with living-learning communities on campus that are fully immersive.”
Bayless was joined on the panel by a group of student housing executives that also represented the development, operations, financing and brokerage sides of the business. Rob Bronstein, president of The Scion Group; Tim Bradley, principal of TSB Capital Advisors; Marc Lifshin, managing partner of Core Campus; Wes Rogers, CEO of Landmark Properties; Cliff Chandler, senior managing director of Greystar; and moderator Peter Katz, executive director of Marcus & Millichap’s Institutional Property Advisors, rounded out the group.
Many of the projects that ACC develops are modern, purpose-built properties designed to integrate academic and social interactions through communal amenities, such as group studying rooms and fitness centers with yoga studios. These projects that aim to fuse classroom-based experiences with everyday life often serve as replacements for historical on-campus residence halls. ACC partners with universities to develop these projects.
In addition, many living-learning projects are built with first-year students in mind, as this group represents the biggest user base of on-campus housing at larger universities.
Private developers of on-campus product often struggle to attract that demographic, particularly when the project involves a public-private partnership. As this type of business arrangement is common in the student housing industry, it is often referred to as “P3.”
“When you get into any of the stumbles that have taken place, many of them have occurred on P3 apartment projects and not on first-year residence hall projects,” said Bayless. “You have to do all the market analysis, all the design, all the pricing. You have to do a full competitive analysis on where sophomores, juniors and seniors are living off campus. Just because you are on campus doesn’t guarantee success. It still has to be a good real estate deal.”
Investors Wisen Up
Following the discussion of living-learning communities, the panelists shifted to an analysis of where the industry as a whole is moving. The consensus was that over the last five years, the sector has experienced increased demand from investors and more capital flowing into the space, despite the presence of economic red flags like rising interest rates and potential overbuilding in select markets.
“We’re not going to be distracted by a little more supply or a hundred basis points,” said Bronstein of The Scion Group, a Chicago-based owner-operator. “This is a real business and it’s not going away. We’ve already talked about how serious and permanent these schools are and they are certainly not going anywhere.”
Bronstein added that he doesn’t think the market is currently maxed out in terms of investment demand. And while student housing is just as susceptible as other asset classes to larger economic ebbs and flows, the sector is also much more defined, targeted and well-understood by investors than it has been in years past.
“Student housing is very much here to stay as a very real sector that people recognize and respect,” Bronstein said.
An improved grasp on how to effectively operate and market student housing has also contributed to the increased volume of capital chasing the sector, according to Rogers of Landmark Properties. From developing strong activation programs that bring students together to promoting those events on social media to attracting a mix of upper- and lowerclassmen, student housing investors generally understand their product and customers better now than they have in the past.
“Five years ago, capital was very intrigued by the sector, but now there are people who have track records,” said Rogers, whose company is based in Athens, Ga., near the University of Georgia. “The capital has moved forward and evolved.”
The ability to truly understand the industry is helping smaller firms grow their portfolios in different markets while also elevating the overall appeal of the product type to prospective capital sources.
The industry is at a pivotal inflection point, emphasized Bayless. “With all the capital coming in, for the first time [smaller student housing owners] are attempting to become real operating companies that are scalable. Growing to be scalable operationally is the hardest part of this business.”
— David Cohen