The outlook for the student housing construction market is excellent; not only are construction rates rising, the quality of the buildings is improving. And, within the last five years, the amount spent per bed has doubled.
Accounting for the increases are redesigned and feature-laden facilities. Apartments and suites are replacing the double-loaded corridor and bathrooms shared by 30 students. New facilities for freshmen are rarely planned with more than eight students to a single bathroom, and private baths and kitchens abound in the effort to lure upperclassmen back to the campus. And, in today's information age, all rooms feature wiring for voice/video/data.
Private developers/managers have done much to help colleges rethink student housing. The reason: private developers working with state regulators and the finance industry to create a comfortable climate in which to partner with public universities-private colleges, tending to tradition, have not sought out private firms at the same rate as public
The introduction of off-balance sheet, non-taxable debt to the industry, allows schools to financially partner with private developers and still maintain their tax-exempt status. Off-balance sheet financing has since become standard practice and, next to the delivery speed offered by private firms, has become a primary appeal to colleges even though the institution can arrange it without a developer.
Barely 10 years old, the new student housing market continues to mature, and both the institutions and the developers are asking better questions than just a few years ago when some colleges started to overbuild, rushing to construct a second phase of apartments based solely on the success of the first.
A few years ago, amenity-filled apartments were being built more than suites and, while colleges and universities continue to take this route with success, apartments have lost their edge to the less expensive suite setup-typically, two double rooms with a bathroom in the middle, housing four to six students.
And, because not all existing housing is of the poor quality associated with 1960s dorms, renovation and remodeling also has its place in the building boom. Grand old facilities are being outfitted with new necessities: private telephone lines, cable TV, and high-speed Internet connections.
Schools need to be clear about their objectives before going to a developer. Market research on both the students and the local housing market is necessary to determine what kind of housing to build and what kind of financing options are best. The model should be developed from an economic standpoint, but schools are not always so thoughtful.
Private developer/managers often act as the prod to get colleges thinking about their student housing as a source of revenue, providing the rigorous accounting schools often lack. |