Student Housing Developers Infiltrate Secondary Markets
The National Center for Education Statistics (NCES) reports that about 20.4 million students attended American colleges and universities in 2017. That figure represents an increase of 5.1 million students from 2000 and is expected to exceed 22 million by 2023.
As this enrollment growth carries forward, developers of student housing properties have been holding steady volumes of new product on their books. According to CoStar Group, developers have added about 22,000 new units each year since 2010. During that stretch, vacancy for all unit types has not risen above 10 percent and rents have maintained positive growth rates, save for the 12-month period from mid-2013 to mid-2014.
Asking rents for studio and one-bedroom units have appreciated the most during this cycle. This suggests that more graduate students, who are more likely to live alone, are clamoring for student housing residences.
Larger schools often have limited enrollment, forcing graduate students to consider smaller institutions. As such, secondary markets are gradually beginning to see heavier waves of student housing development.
In Texas, this trend appears to still be in its infancy. As for the state’s biggest markets, the University of Texas at Austin is located within a very tight development grid. Lubbock and College Station have experienced huge building surges over the past few years, with the former in particular being a hotbed for development. The largest student housing property in the country, the 3,406-bed Park West, opened in College Station this past fall. Irving-based student housing firm Servitas developed that project.
“College Station is moving toward being overbuilt,” says Matt Myllykangas, senior vice president of development and construction for Servitas. “And housing projects seem to be moving further away from campus.”
Brent Little, CEO of student housing development firm Fountain Residential Partners, concurred with those notions, noting that occupancy is down and rents have backtracked in College Station. His firm sees similar levels of activity and competition in Waco, home of Baylor University.
“We looked at Waco recently and there were already five or six student housing deals under construction or in the pipeline,” he says. “And that’s for a school with just 10,000 students.”
These projects hope to tap into unmet demand in less-heralded markets.
In November 2017, Dallas-based Fountain Residential Partners teamed up with private equity firm HC2 Capital to break ground on 8FOUR8 Mitchell, a property that will serve the University of Texas at Arlington.
The school’s enrollment grew by 8.5 percent from the spring semester of 2016 to that of 2017. Total global enrollment now exceeds 54,000 students, about 42,000 of which take physical classes. Nearly 30 percent of those are graduate or doctoral students.
The property will be situated on 5.1 acres just off Cooper Street, one of Arlington’s main thoroughfares. In addition to being within a block of campus, the property enjoys proximity to AT&T Stadium and Globe Life Park.
8FOUR8 Mitchell will feature 687 beds across 298 units. According to the developers, this bed-to-unit ratio indicates an effort to attract older students.
“The unit mix definitely distinguishes the project,” says Jonathan Clayton, executive vice president at Fountain Residential Partners. “We offer more living options and price points than other developments, and we recognize that this school has a fair number of grad students — an older audience who hasn’t really been targeted yet.”
The property offers a pool, fitness center and 9,000-square-foot clubhouse. But it’s the common areas that capture promote the sense of community. The living rooms and gathering spaces are equipped with large TVs that encourage residents to get together for sporting events or TV shows.
“Today’s students have many choices for housing,” says Little, Fountain’s CEO. “It’s not enough to build a pool and install equipment. So we created gathering places and study spaces throughout the corridors instead of just in the clubhouse.”
The property’s management company will also use social media to promote events and programs that bring people together.
“There’s always something going on here,” says Clayton. “Schools tell students that living on campus is better because they can get involved in all the activities. When you’re 100 yards from campus, you can do that and be ingrained in the larger community.”
8FOUR8 Mitchell is expected to be open for the fall 2019 semester.
The Armory at Sam Houston
Located about 70 miles north of Houston in Huntsville, Sam Houston State University was the 14th fastest-growing college in the country between 2003 and 2013 according to a ranking from The Chronicle of Higher Education, which covers trends and news in the university world.
That growth peaked in fall 2015, when total enrollment leapt above 20,000. As of the fall 2017 semester, it was just shy of 21,000 students.
In December 2016, Atlanta-based Stonemont Financial Group broke ground on The Armory at Sam Houston. The 502-bed community, located just off the southwestern edge of campus, will be the first infill student housing development in Huntsville.
“A truly pedestrian campus trumps all,” “says Neal Moskowitz, an associate at Stonemont Financial. “We were drawn to this market because of its strong barriers to entry for similar projects. In Huntsville, there are very few options for developers of mid-rise pedestrian student housing product.”
Moskowitz adds that Huntsville saw a boom in development of purpose-built student housing between 2005 and 2011, but that only one new project has hit the market in the last six years. The slowdown in deliveries, combined with the school’s growing enrollment, has allowed occupancy and rents to grow steadily.
In addition, Moskowitz notes, most of the competing product is three-story, garden-style construction. The Armory at Sam Houston will be the first mid-rise community in Huntsville with a parking garage, an amenity that residents value for safety purposes.
The property will consist of 145 units, giving it a bed-to-unit ratio of approximately 3.4. In addition to the seven-story parking deck, The Armory at Sam Houston will offer a rooftop deck, resort-style pool, a 10,000-square-foot clubhouse and a putting green.
The property is also equipped with more than two gigabytes of high-speed internet service with fiber running directly to units. “Modern students care a lot about convenience and technology” says Moskowitz.” We’re going to have the fastest internet in the market.
The Armory at Sam Houston is expected to be open for the fall semester.
Blinn College Residence Hall
Fresh off completing Park West, Servitas is developing another property with ties to Texas A&M. Construction is underway (and ahead of schedule) on a 464-bed residence hall at the Brenham campus of Blinn College, a two-year school located about 40 miles south of College Station.
Enrollment at Blinn College grew by 37.5 percent between 2006 and 2014. Total enrollment as of the spring 2017 semester was about 18,000 students.
The 152-unit, on-campus project is valued at roughly $34.4 million. Houston-based Kirksey Architecture designed the four-story project, and Florida-based Moss & Associates is serving as general contractor.
Blinn College, which also has campuses in Bryan, Schulenburg and Sealy, is a feeder school for the Texas A&M network. Students who aren’t initially accepted into Texas A&M can attend Blinn College for two years and then be automatically enrolled at the parent school’s main campus.
“The genesis for this project was an 800-person waitlist for housing,” says Myllykangas of Servitas. “Many students want to live on campus, but there’s not much purpose-built student housing and much of the school’s housing is too small to accommodate them.”
Like at Texas A&M, engineering is a major course of study at Blinn College. The new residence hall will feature a hands-on engineering classroom with six-person workstations equipped with computer monitors. Students can connect their laptops to the big screen and share information with classmates and their professors.
Engineering students will be expected to live in the building, which despite its lack of kitchens, a pool or fitness center, still aims to encourage students to get out and mingle.
“It’s more of a dorm and less of an apartment,” says Myllykangas. “But the goal is still to get students out of their rooms and interacting with their classmates and the community.” ν
The new residence hall at Blinn College is slated for fall 2018 completion.
— Taylor Williams