Branson Powers, Inc.
The economy, the commercial real estate industry, and higher education are simultaneously facing an era of fundamental change.
Branson Powers, Inc.
The economy, the commercial real estate industry, and higher education are simultaneously facing an era of fundamental change. Although most people believe that the credit markets will improve, few believe that easy and plentiful leverage will be a fact of life for some time to come. Not only will it continue to be tough for student housing to be built and managed profitably with less leverage – it will be tougher for students to obtain as much debt to fund their education and living expenses.
This economic shift comes at a time when the very nature of a college education is changing. Accelerating costs and constantly improving communications technology are prompting many universities and students to question fundamental aspects of how one obtains an education – all of which impact the nature and potential volume of the housing. How much real estate is actually needed to provide education? Does someone have to be physically present? How can students fund their educations? How can they better manage living expenses?
The need for student housing will continue to grow, especially considering the still overwhelming amount of obsolete stock, the strong demand, and the growing necessity for higher education in every individual’s career. What it looks like, where it’s located, and how it’s paid for, however, is almost guaranteed to change.
The landscape has already changed for many developers, owners, and operators of student housing. The sophistication of technology and access to the Internet is no longer an amenity, but a requirement. The use of social media such as Facebook for marketing to students is a given. The sensitivity to sustainability issues is less a niche concern, and more a mainstream necessity. But what will happen next? How can smart operators anticipate the innovation to come?
Consider the notion of “Desire Lines.” Originally described by Gaston Bachelard in his 1958 book, The Poetics of Space, a desire line is a path left by people’s use of space. A particularly graphic example is the erosion created in the ground as people walk over vegetation towards their destination. Most college campuses have desire lines etched in the grass lawns – areas where people took short cuts off the carefully designed, planned and constructed concrete footpaths. Frustrated groundskeepers have long tried to keep people from destroying the grass and flowers by creating fences and other obstacles – but they rarely work, as people tend to simply walk around those obstacles, creating new desire lines.
Instead of fighting those desire lines – it may be possible to put them to use. Many designers will intentionally delay the building of walkways for several months and instead just plant grass around and between buildings. After a few months, the natural traffic of students will create desire lines in the grass that can be “read” as a plan for final concrete walkways. A wider path is built in the deeper areas of erosion and a smaller path in the light areas because the desire lines illustrate where more or fewer people walk.
By building on the desire line – it is possible to outsource the design to the hundreds of people who use the paths every day and unconsciously improvise their own course.
Desire lines can be found everywhere – not just on the ground. Whenever people move through their lives, interact with others, buy things, change things and improvise things, they leave a path. Everyone doesn’t always follow precisely the same path, but the desire lines can be read and understood.
A company that sells products to customers can often find desire lines right in their own balance sheet. A clear customer desire line was found when accounting discovered that one of their most profitable and steadily growing areas of business, despite falling new bike sales, was their after-market parts business. In other words, customers were changing their Harley Davidson motorcycles themselves, using parts provided by the company.
Up until the 1970s, Harley Davidson focused primarily on supplying transportation to military and police organizations. The motorcycle gangs and tough guys that were modifying surplus bikes to their own needs were seen as an annoyance, and perhaps even a threat to their core business. Much as an eroded path through a field could threaten the beauty of a college campus.
Harley Davidson followed the desire line. They started to sell more customization, club membership and the romance of an old-fashioned, rebellious, and incredibly loud experience that had been developed by their customers. Motorcycle sales moved upwards, along with branded clothing, accessories, tattoos, and of course, after-market parts.
Harley Davidson built its new business model on the desire lines laid down by their customers. Despite some difficulties in recent years, this remains one of the more innovative re-inventions of a company in great part because, instead of trying to stop the desire lines, they followed them and strengthened them.
So how can developers, owners and operators find desire lines? The first place to look would be to find out how students are improvising their own off-campus housing. By analyzing the leasing habits of the off-campus population, there are several desire lines that should become apparent.
The first desire line to focus on is – Where are they locating? Where are students living? Are they close to campus, close to social activities, or close to work opportunities? As more and more students have to work their way through education, they may be locating themselves in different places than students did twenty years ago.
Second – how are they living? What kinds of layouts are they improvising? What kinds of apartments appeal most to their needs? How are they furnishing those makeshift apartments? How and what are they storing? With most students unable to experience or perhaps even uninterested in the traditional four year college, the layout of their home has to accommodate a different set of activities.
Third – how are they studying? Are students completing their entire education on one campus? How often are they moving? What are the paths taken in a four to six year period of time? With education stretched out and flexible, there may be opportunities for longer leases, for time-share arrangements with other campuses and other locations, and for more flexible arrangements.
How to anticipate change and innovation? Look for desire lines. Your tenants’ desires have changed already – the smart operators will learn to read the lines and deliver successful student housing for our fast-changing world.
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