As the student housing sector continues to mature, there is opportunity in the development of living-learning communities on- and off-campus to replace outdated product on many university campuses. This subject came up during the opening Power Panel at the 2019 Interface Student Housing Conference at the JW Marriott in Austin, Texas, on Tuesday
“The average age of on-campus housing at universities across the United States is 53 years old,” said Bill Bayless, CEO of American Campus Communities. “What continues to be one of the greatest opportunities in the space is the replacement of outdated on-campus student housing with living-learning communities on campus that are fully immersive.”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 by a group of student housing CEOs on the panel that included 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 Institutional Property Advisors.
Many of the projects that ACC develops are modern, purpose-built replacement housing designed to integrate academic and social learning through community. Often, they are replacements for historical on-campus residence halls, which the company partners with universities to develop.
As well, many of the projects are targeted to attract first-year students, who are the biggest user of on-campus housing at larger universities. Some of the struggles encountered by private developers on-campus have been caused by public-private partnership projects that have failed to target that demographic, according to Bayless.
“When you get into any of the stumbles that have taken place, many of them have taken place on P3 apartment projects and not on first-year residence hall projects,” Bayless said. “When colleges and universities approach building apartments, you have to do all the market analysis, all the design, all the pricing. You have to do a full competitive analysis on where sophomore, 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.”
As for what direction the student housing industry as a whole is moving, the panel agreed that in the past five years the sector has become more defined as more investors and capital have flowed in even through potentially turbulent economic headwinds.
“We’re not going to be distracted by a little more supply or a hundred basis points,” said Bronstein. “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. I don’t think this is the peak or that we will see a peak three years from now. There will obviously be ebbs and flows but I think student housing is very much here to stay as a very real sector that people recognize and respect.”
“Five years ago, capital was very intrigued by the sector but now there are people who have a track record,” added Rogers. “I think the capital has moved forward and evolved.”
“I think we are at a pivotal reflection point,” said 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