One of the most crucial questions in today’s development market is the question of location. A number of prominent companies have made the ability to be walkable to campus a big issue when it comes to a property’s resale value. Other developers, meanwhile, eschew walkable locations in favor of value for tenants.
For a time, a big industry trend was amenity-laced properties located a few miles from campus, selling a lifestyle, and typically an oversized pool, in exchange for a slightly longer campus commute. More recently, a countertrend has emerged, with builders catering to students looking to walk across the street to class. “Beachfront property” is often the preferred term for developers of this mindset.
Is close proximity still the dominant trend? A group of student housing developers and architects debated the topic during a panel discussion at the 11th annual InterFace Student Housing conference, held in April in Austin, Texas.
David Senden, principal of KTGY Group Architecture + Planning, served as moderator and opened with a simple question: What exactly is urban infill, and what is cottage product?
Todd Gaines, vice president of development at Austin-based Aspen Heights Partners, answered that his definition of urban infill is product that’s walkable to campus, noting that going forward there will be very little garden-style product near campuses due to high land costs.
But those acquisition costs are going up even for far-out development, according to Mohamed Mohsen, an associate principal with Niles Bolton Associates.
“Even cottage is starting to get denser,” he said. “The lines between the two are starting to get blurred a little bit. Cottage product is now starting to incorporate a slightly more dense type of construction.”
Mohsen added that some cottage developments are starting to incorporate small parking garages, something unheard of just a few years ago. A related question to the density debate is amenities. Typically, developments farther from campus include fancier trappings — movie theaters, tanning beds, game rooms, etc. — both because of more available space and to compensate for the inconvenience of the commute. With infill projects, the campus itself is the most important amenity.
David Pierce, a principal with Parallel Co., said the size of the pool is often one of the most noticeable differences between the two.
“The pool is probably the amenity that gets smallest fastest, or even goes away sometimes,” said Pierce. “We’re building water features where people can sit around on the roof of a building 18 or 20 stories high, or even on top of a parking garage. Priority-wise there’s not a lot of room for golf simulators with infill development. Most of the same amenities are present [as with cottage], they are just smaller and more compact.”
Andrew Wiedner said his company, Core Spaces, included 40,000 square feet of amenities in its first project. Since then, as land and construction prices have spiked, they’ve been forced to “sharpen the pencil” and evaluate what amenities students are actually using. The result? Fewer movie theaters and more study spaces, and projects that are generally both smaller and smarter.
Landmark Properties Executive Vice President of Development Jason Doornbos says his company initially focused on cottage product and has since moved into more infill projects. Doornbos added that over the last 10 years what’s considered a cottage product has changed, typically becoming smaller and denser. At the same time, he agreed that cottage still tends to mean more amenities and a bigger pool, and infill site feature fewer amenities and a smaller pool.
Need a Lyft?
A major shift for all commercial real estate developers, student housing included, has been the advent of rideshare companies Uber and Lyft, plus shared scooters and a growing demand for more walkable and bike-friendly spaces.
Senden asked the group if any of those factors has affected parking ratios at either urban or suburban projects. Wiedner said ridesharing has been “one of the biggest” technology disruptors in recent years, and that his company is passionate about low parking ratios.
“In almost every deal we’re pushing the envelope,” he said. “Parking is a killer to your pro forma because it never pencils. You’re never getting rents to justify the construction costs of parking.”
Wiedner predicted that some parking structures will be repurposed in the next five or 10 years as fewer people own cars. Younger people in particular are delaying not only getting cars but even driver’s licenses. According to the University of Michigan, the percentage of high school seniors with a driver’s license dipped from 85.3 percent in 1996 to 71.5 percent in 2015. However, most cities still carry zoning ordinances dictating minimum amounts of parking.
“A lot of times zoning codes require one parking space per bed,” said Mohsen. “We’ve studied parking decks that can later be converted to units, or where the top half could be converted to a wrap-style product. To a large degree we’re having to take into account rideshare. We’re designing a lot of projects with dropoff and pickup locations.”
Though not part of the panel, Aptitude Development Principal Jared Hutter said his company recently developed a project serving Syracuse University with zero onsite parking that is 100 percent leased for the coming school year.
“Uber and Lyft are having an impact, but also scooter companies like Lyme and Bird,” he says. “When I visit campuses there are scooters all over the place. I think it’s a phenomenal way to get students around.”
But old concerns still linger, with some developers reporting neighborhood concerns about students taking up parking elsewhere if on-site parking isn’t sufficient.
“Students who have cars want the luxury of being able to store the car where they live,” said Doornbos. “They want to drive to a grocery store and back to their apartment with groceries. If we don’t have parking for them, they’ll find somewhere else.”
Doornbos mentioned a deal where the city government wanted 0.5 parking spaces per bed, and his company had to take the unusual step of arguing for more parking.
With the ever-rising cost of college and student loans continuing to make headlines, affordability is a constant question for student housing developers. Panelists were asked about double-occupancy bedrooms and their ability to make projects affordable for students with fewer resources. Pierce said the ideal way is to get beds separated by a partial wall or furniture in order to provide a measure of privacy. Double-occupancy rooms can mean a big savings for students, potentially turning a $1,200-per-month bed into an $800-per-month bed.
Double-up bedrooms may also have a place in cottage product. Gaines estimated that at least 5 percent to 10 percent of bedrooms in most projects could be dedicated to double-occupancy rooms. Such a floor plan can be advantageous for a group of friends who want to live together, but come from a variety of financial means.
The size of the project is important when considering how much price differentiation to offer, according to Hutter. A new development with 300 or 400 beds might not need a lot of variation, while a 650-bed project will in order to fully lease. When doubles are paired with singles, builders risk creating potential angst between roommates. Those in doubles may resent the students in singles, and the students in singles may not want to live in a unit that includes doubles. Doornbos said Landmark makes sure there are at least two double-occupancy rooms in units that have them, rather than just one, and that it does not build double occupancy in its cottage product.
Location, Location, Location
So, are developers moving closer to or further from campus? It depends on who you ask. The panel agreed that it’s very much a market-by-market question. In more urban centers, it’s important to be close. But on more spread out campuses, proximity is not as important.
One counter example is the University of Central Florida, which sports nearly 70,000 students and is so spread out that even students living across the street from campus drive. At urban schools, it’s important to be within a quarter mile of the university’s academic core in order to appeal to students who want or need to walk. Regardless of location, a good way to appeal to students is to build properties with an attractive architectural layout.
“Design definitely sells,” says Mohsen. “Students are savvy these days, they understand and appreciate good design.”
Mohsen also said great design can be a differentiator in a crowded market with lots of properties to choose from. Pierce echoed Mohsen’s thoughts, adding that good design doesn’t always have to be tremendously expensive.
“We demand good design,” he said. “I don’t believe it always has to cost a lot more. Yes there’s a premium to it, but I don’t think you’ve got to break the bank to do good design.”
Gaines added that it’s important for developers who don’t have an architectural background to partner with accomplished architects and designers. A great design can lease a project for years, he says. From the perspective of the resident, leading-edge design can include making sure common areas, and sometimes individual bedrooms, offer plenty of natural light. The term “daylighting” refers to student housing properties with lots of natural sunlight and is considered a plus when it comes to leasing.
Senden asked the panel if daylighting really matters with individual bedrooms, especially for students who may want to sleep late or play video games in their free time. Doornbos acknowledged that buried bedrooms can be very efficient from a design perspective, and that Landmark looks on a market-by-market basis to assess where they have shown to be accepted. Pierce said daylight is important for common areas like living rooms, but not always as much in bedrooms. For students who prefer small windows, a modest discount can be offered compared to a room receiving lots of light. When planning a project, another important aspect is thinking through ahead of time how the all-important leasing tour will be laid out.
“How will you walk them through the building? How will you end up at the amenity deck that overlooks the city skyline?” Mohsen said. “How will you get back? That’s a critical part of the process.”
In the end, the panel agreed that the future is in both high-end urban infill projects and cottage product, depending on which students are being targeted and in which markets the housing is being developed. They also agreed that in either case student housing is much more luxurious than it was just a decade ago, when plastic laminate countertops, stained concrete floors and wood overlay cabinets were standard. Recently renovated projects now feature upgrades of those finishes, with kitchens and bathrooms accounting for most of the touchups.
— Haisten Willis. This article originally ran in the May/June 2019 issue of Student Housing Business magazine.