Student housing remains a strong investment market. Major metropolitan cities are usually the best locations for student housing, and currently the top markets include San Diego, Los Angeles and San Francisco, along with Houston and Dallas in Texas as well as the Southeast in Tampa, Orlando and Atlanta. Top markets for student housing, however, are also focused on the school, sports and student population.
"In student housing investment, we always start by focusing on the anchor university. We believe the strongest opportunities are at large, public, power five football conference universities, as well as at group of five universities that are located in major metropolitan areas," says Frederick W. Pierce, IV, president and CEO at Pierce Education Properties. "Within those subsets, we seek universities with 20,000 or more undergraduate students or 25,000 total enrollment. Individual market dynamics will be unique as to opportunities for core, core plus, value-add and/or ground up development."
Because the school is so important to the success of a student housing development or investment, Pierce recommends that investors work alongside the school. However, that can often be a challenge and not always a necessity. "We endeavor to build a strong relationship with local universities in all instances," he says. "That being said, it is the exception rather than the rule that there would be some type of formal cooperation or master lease arrangement with the nearby university. Such a contractual relationship is not required to have a very successful off-campus student housing community."
Even when developers can forge a relationship with the school, the developer should have a cooperation agreement. "Where formal relationships exist, such as a ground lease, cooperation agreement, master lease or other occupancy arrangement, this most typically occurs in new on-campus developments procured through an RFP process," says Pierce. "In those instances, there is great value to the developer/owner in that relationship with the university. The super majority of off-campus student housing projects are completely independent from the university."
The good news is that enrollment at public universities is at an all-time high and growing. "At those strong universities—most of which are high profile, public universities—admissions demand remains at all-time highs and enrollment growth in the 1% to 2% per year is the norm," says Pierce. "In fact, for most of those universities, application volumes clearly indicate that enrollment growth could be even more robust, but many are choosing steady enrollment growth and selecting an increasingly more qualified student base."
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Kelsi Maree Borland
