In recent years, student housing has changed significantly. In fact, there are many housing opportunities that consist of private developments that look and feel much like luxurious apartments complete with high-end amenities opposed to more traditional campus dormitories.
Changes in Development
In addition to developers making big changes to student housing apartments, there is an increasing number of hotels, restaurants, and retail shops being built close to college and university campuses.
Today, students want to live in areas that are easily accessible to different types of services. Developers have recognized this demand and therefore, made necessary changes. As stated by Brian Veith, assistant director of student housing for Washington’s National Multifamily Housing Council, students not only want to live close to campus but also have conveniences close-by in the form of coffee shops, restaurants, and retail stores.
A prime example of changes in student housing is Sterling Frisco. This off-campus development is within close proximity to the University of Arkansas. Included are 219 units consisting of 640 bedrooms total, a computer lab, study lounges, fitness center, rooftop deck, and swimming pool with cabanas. However, Jammin Java, a 1,265 square foot coffee café is also on the property and available to students, as well as other people in the neighborhood.
Developing what are referred to as “mixed-use properties” has many advantages. According to Gary Holloway, Jr., president of GMH Capital Partners, Sterling Frisco was acquired by GHM Associates this month for $49 million. While proximity to the campus was the primary reason for the purchase, an additional benefit came from Jammin Java.
As explained by Dorothy Jackman, managing director of the National Student Housing Group at Colliers International, significant buyers will be attracted to areas they consider creditworthy as far as having both commercial and retail components and be willing to pay more money.
In the case of Sterling Frisco, it ultimately sold for $223,744 per unit, a serious premium considering the average price per unit is only $144,160.
One of the reasons that properties like Sterling Frisco command a higher than average price is the close location to campuses. These types of student housings are usually more expensive to rent simply because of the retail component that offers students an environment where they can live, work, and play. Being away from family and close friends is difficult and these apartments feel more like home so they have a huge attraction.
President and chief executive officer with Chance Partners LLC in Atlanta, Jud Bobilin, said that in the past, student housing developers wanted no connection to retail at all since they were not interested in mixing asset classes due to more difficult financing. Today, of assets being developed, up to 25 percent are mixed-use.
Without doubt, projects with the on-site retail component have a real advantage over the competition but more work is involved in getting lenders to sign on. Typically, banks will only lend money for one asset class so funding can be a challenge, although not impossible.