Cottages: Aging Gracefully

by Katie Sloan

When cottage-style student housing developments began cropping up over a decade ago, they were all the rage. Students loved the privacy of their own colorful, stylish house with an inviting front porch and lots of green space for outdoor activities. They loved the security and community. The space to spread out and disconnect from the buzz of campus. The elaborate amenity package. Swimming pools as vast as lakes in many cases.

Now that the adjective “pedestrian-to-campus” has become synonymous with successful student housing projects, what has happened to these bucolic resort-like cottage communities? Are they still in demand? By most measures they are, even if they are being edged out by more vertical, urban communities. 

“Capstone is a true believer in this product type,” says John Vawter, principal of Capstone Collegiate Communities. Along with Landmark Properties, which gave birth to the cottage movement, [see sidebar] Capstone was an early developer of student cottage product. Aspen Heights and Trinitas were also early on the scene.

“I think cottages are resilient, popular and they will continue to appeal to the same resident profile they always did,” says Dorothy Jackman, executive managing director of Colliers International Student Housing Group. “There will always be that resident profile on every campus in my opinion. The product itself has some resiliency relative to enrollment trends because it’s an easy transition to multifamily, so it has sustainability in downturned or oversupplied markets.”

Colliers shared occupancy data on a sampling of seven cottage properties from the Southeast, Mid-Atlantic and Northwest. Three properties were at 100 percent, one at 99 percent, another at 96 percent and two at 91 percent.

While occupancy is usually not a problem, rent growth can depend on distance to campus as well as a few other factors. According to Christine Richards, executive director of real estate operations with Greystar, it’s challenging to isolate cottage performance because so much of an asset’s success is based on the wider market as a whole. Greystar currently owns five cottage properties, all of which were developed by Landmark. Greystar’s cottage holdings consist of The Retreat at Ole Miss (Oxford, Mississippi); The Retreat at Corvallis (Corvallis, Oregon); The Retreat at Penn State (State College, Pennsylvania); The Retreat at Louisville (Louisville, Kentucky); and The Retreat at Blacksburg (Blacksburg, Virginia).

“Cottages absolutely are still relevant today,” says Richards. “The cottage provides you that house environment but in a newer, student-centric environment. Markets where cottages have not done as well are markets where they are significantly far from campus.”

Among the upsides to cottage properties is they are not always apples-to-apples when it comes to competition with their campus-edge counterparts. “Cottages are not so much of a direct competitor, but an alternative offering of a certain lifestyle that is desired by a portion of student renters,” says Eric Frank, chief investment officer of Cardinal Group Companies.

Cardinal Group owns one cottage community, Cottages at Lake Tamaha in Tuscaloosa, Alabama, which Landmark also developed, with 342 units and 1,306 beds, that was acquired in March 2017. Cardinal Group Management manages three other cottage communities: Cottages at San Marcos (Texas), Cottages of Boone (North Carolina) and The Retreat Tucson (Arizona).

“Shared houses have always been a popular form of housing for students, and cottages took this to the next level by offering professional management, first class amenities and a consistency of quality that one-off rentals cannot offer,” says Frank. “There continues to be significant demand for this product, but it varies by market. We tend to see that cottages are most popular in markets where the student base is coming from a more suburban style of living and want the extra space and community feel. In markets anchored by students coming from large cities where urban living is the norm, we tend to see less depth of demand.”

Most owners of cottages say maintenance costs aren’t drastically different from a typical multifamily community. But having a larger site inevitably means more expensive landscape contracts than a campus-edge vertical development would have. Similarly, cottage communities can have hundreds of roofs to repair rather than just one.

“Just by design, cottages are more capex intensive, but only on the exterior,” Richards says. “On the interior, whether I have an apartment or a cottage doesn’t matter — my furnishings and appliances are the same.” Vawter says it’s important to parse maintenance costs carefully for a true comparison. “From a landscaping standpoint, it’s more costly to operate a cottage deal than it is a high density deal, which makes sense,” says Vawter. “You’ve got a lot more grass and landscape to maintain. However, if you look at the interior hallways of a wrap product and you apply what we have to spend there to keep them clean and painted and repaired, it may not be exactly equal, but it does offset the landscape costs.”

As one of the early innovators in cottage products, Capstone took great care in researching the product type, then delivering carefully planned communities.

Capstone created a construction company called Cottage Builders where talent was culled from the single-family home construction sector. Their first cottage products were Creekside of Auburn and The Retreat of Clemson. Capstone also developed cottage projects in Hattiesburg, Mississippi; Gainesville, Florida; Lubbock, Texas; and Fort Collins, Colorado. “We are working on other cottage deals that we will be presenting in the future,” says Vawter, adding that design is one of the most important pieces of a successful project. “It’s what gives longevity to cottage deals.”

Birmingham, Alabama-based Nequette Architecture & Design has designed all of Capstone’s cottage developments. The firm’s owner, Louis Nequette, says the emphasis on placemaking and community is critical. “We get to create a place, a destination that is much more powerful than any one piece of architecture,” Nequette says. “The layout makes all the difference. By being able to focus on master planning first, we are then able to apply a lot of efficiencies to the design of the cottages and consistencies that allow the construction to be a little more affordable. If we can treat these projects as a training ground or R&D for placemaking, that’s a benefit to everybody, not just the developer building those

Lynn Peisner

This article originally ran in the January/February 2019 issue of Student Housing Business magazine. To subscribe, please click here

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