This is the first installment of a four-part series examining the student housing asset class. Upcoming articles will analyze investment and capital trends in this sector and make predictions for 2024.
When one hears “student housing,” they may think of the infamous Delta Tau Chi fraternity house from the movie “Animal House.” However, today’s off-campus student properties range from traditional apartments to newer, upgraded dwellings designed specifically for college students.
It is important to note that while off-campus student housing may resemble multifamily properties, there are distinct differences between these two types of real estate. According to Mitchell Korte, Executive Vice President at Subtext, “Student housing is a specialized segment within multifamily housing that caters specifically to students pursuing higher education. It diverges significantly from traditional multifamily properties across various dimensions.”
These dimensions include demand fundamentals and demographics as well as lease cycles and structures.
The primary target market for purpose-built student housing is obviously students themselves. Andrew Layton, Chief Acquisition Officer at Student Quarters explains that their demographic differs greatly from that of traditional multifamily tenants: “My job is to cater to 18-24 year old kids…What we’re capturing here are young adults who have different needs than those in standard apartment complexes.”
Unlike other types of real estate which rely on factors like employment or population growth for success, university enrollment plays a crucial role in determining whether a student property thrives or struggles. As Sean Baird , Senior Vice President at Colliers International notes: “The university itself acts as an engine powering the strength of this market.” Additionally,the closer proximity a property has with campus can also impact its desirability among potential tenants; Parker Champion , COO & Partner with Champion Real Estate Company states: “the closer [a property]is located near campus…the more attractive it becomes.” This sentiment was echoed by Brent Little , CEO & President Fountain Residential Partners who explained how the most desirable student housing properties are typically within a mile of campus.
Furthermore, parents play a significant role in deciding where their children will live during college. As Layton explains: “We require, as do our competitors, parent guarantors on leases unless students are self-qualified…This means that ultimately parents have the final say.”
Unlike traditional apartments which can be rented at any time throughout the year with minimal requirements and paperwork involved; student housing leasing is tied to the school calendar and generally occurs once annually. This means that pre-leasing activities must begin well ahead of move-in dates (sometimes up to 12 months in advance) to ensure full occupancy by August when classes start.
Annual turnover rates for these types of properties range from 70%-100%, making it crucial for owners and managers to have efficient teams in place who can handle high volumes of leasing activity within short periods. Additionally, unit mixes differ from those found in multifamily complexes as they are leased per bed instead of per unit; Brent Little notes how this affects metrics such as costs and occupancies: “They’re also all-inclusive…with full-size washers & dryers [and] appliances.” Korte adds how some units may offer larger floorplans like four or five-bedroom options.
Amenities also play an important role when it comes to attracting tenants – both students themselves but also their parents who often help make decisions about where their child should live while attending university. Baird highlights how amenities like resort-style pools & high-end gyms mirror those found at Class A multifamily properties but notes additional features unique among student housing communities such study lounges communal spaces along with fast internet access which is essential given today’s reliance on technology for academic success.. Korte expands upon this idea explaining how amenities not only enhance social engagement among peers but contribute towards creating a holistic living experience for residents overall.
Finally security plays an important factor since many times parents are involved in the decision-making process. Layton explains how this is a crucial selling point for student housing properties: “With these properties, you’re certainly selling proximity…You’re also selling to parents the idea that their kids will be safe and have a decent quality of life while living there.”
In conclusion, while student housing may share some similarities with traditional multifamily real estate; it is important to recognize its unique characteristics and cater specifically towards its target market – students pursuing higher education. By understanding these differences and providing attractive amenities along with efficient leasing processes; owners & managers can ensure success within this specialized segment of the real estate industry.
The post Educational Overview: Student Housing vs Multifamily Housing appeared first on Connect CRE .
