Furthermore, “If you look at the average stay of students, they’re
staying longer in school, which will help keep enrollment growth
fairly robust,” Rollins adds.
The experts do agree that this is a maturing industry, and some
things need to be watched. Overbuilding is a concern, as are inexperienced developers and owners jumping into the market.
“We’re concerned because a lot of people are jumping into
the space and valuations are increasing dramatically,” Gates
remarks. “We’re concerned about how much attention the
space is attracting from a cap perspective.” These trends, combined with new construction starts and plans, bear watching
over the next couple of years. ◆
A New Potential Market
Though the traditional focus of student housing is four-year campuses, some developers and investors are eyeing potential housing on commuter college, community college and junior college
campuses. Virtus, for example, is working with San Antonio
Community College on housing. Gates points out some very good
reasons for this. While at one time, community colleges were the
domain of students who couldn’t get into traditional four-year
programs, economic realities have changed things.
“Those are no longer the schools of last resort,” he says.
“Students might go in for programs that don’t require a four-year
degree.” Also, with the costs of a four-year education increasing,
“kids might attend these schools to get the basics out of the way at
a lower cost, then transfer to a four-year program,” Gates says.
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Rather than living at home, students are
gravitating more toward campus-oriented
housing, and Gates believes this is spurring
the need for student-specific housing.
This doesn’t necessarily mean that the
next big student housing wave will be toward
the community colleges, however. “We’re
selective about where we’re going,” Gates
says. Rollins, whose company is not involved
with development on these types of cam-
puses, acknowledges that these are “fringe”
markets that can work on a case-by-case situ-
ation. “It depends on the culture of the
region,” he says. “If it’s just commuter, you
need to see if it’s transitioning to a full-time
Others are more skeptical. Larimer, for
one, points out that most kids attending com-
muter schools or junior colleges are doing so
to save money and live at home, rather than
to try to find something on campus.
Bayless also cautions that while satellite
and commuter campuses are seeing good
growth in terms of enrollment, the markets
have fewer barriers to entry and could be
impacted by more volatility than the standard
four-year colleges or university. As such, oversupply and overbuilding could occur.
Still, if done judiciously and carefully, such
on-campus living arrangements could be successful for student housing developers and
owners. “High net-worth individuals or a syn-dication group might see an opportunity in
that market, and the return on yield is higher
for them,” Epp comments. Cap rates are
likely to be higher among such housing,
since more yield is required, he adds, “But
the institutions aren’t likely to focus there.”
End Result . . .
The student housing market is not on the
verge of collapse. In fact, it’s nowhere near
collapse. Rollins points out that, despite concerns over issues such as student loans and
increasing tuition, college is still the destination for the majority of high school graduates, meaning living quarters will continue to
be supplied to students. Immigration into US
schools will continue, he points out.
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