Demand for Student Housing Development Persists Despite Economic Headwinds

by Katie Sloan

It would be impossible to write a development or design article without mentioning the elephant in the room — the state of the capital markets and the current hurdles in securing financing of any sort, but especially for new development projects. While demand for new communities exists in many markets, getting projects to pencil is the tricky part.

For those developments that can move forward, innovative architecture and design are being employed to make the projects as functional and efficient as possible. Out are some of the flashier amenities from the days of yore, and in is design that helps student residents be the happiest and healthiest versions of themselves, both mentally and physically. 

From the developer perspective, there is no question about the desire to build — especially in Power Five university markets. “Almost all of the Power Five universities have seen 7 percent to 10 percent rental rate increases over the past three years and are showing approximately 98 percent occupancy at most properties,” says Greg Faulkner, president of Humphreys & Partners Architects. “But math has to work with the rates, like equity requirements of 45 percent or higher. Hard costs have moderated, but some are still high.”

Despite verifiable demand at many campuses, capital investors have become very selective when it comes to the type of developments they will pursue, according to Mohamed Mohsen, principal of Niles Bolton Associates (NBA). “Unless it’s an A-plus location adjacent to a growing campus with strong demand for new student housing, it is difficult for developers to secure financing,” he says. “In recent years, we have seen more focus on higher density, campus-adjacent projects. The type of construction is largely driven by zoning and density restrictions, but in general, developers are looking to maximize densities and take advantage of available floor-to-area ratio bonuses to counter the rise in development costs.”

That being said, Mohsen maintains that Niles Bolton has not seen a slowdown in the number of student housing sites it is studying for clients. “Sure, financing is difficult at this time — and that may continue to be the case in the near future — but we’re optimistic that 2024 will be a recovery year that drives capital back to the student housing market, which historically tends to recover ahead of other housing types.” 

In terms of product type, demand is still being seen for both cottage and high-rise projects on a market-to-market basis, according to Dan Goldberg, president of Core Spaces. “We’re seeing a diverse mix of projects being delivered across the sector,” he says. “Since we’re seeing this variety, we’ve found that the capital markets are taking a more holistic approach to financing deals. It’s just as much about the owner and property management company’s track record as it is about the project and market.” 

“Growing demand and the maturation of the industry should continue to spur supply and development in 2024,” he continues. “There are general market risks and challenges that are impacting all industries right now, but we’re continuing to build a robust pipeline and expect our growth to continue.”


While lazy rivers and golf simulators used to be hot ticket items, amenities like flexible study rooms and delivery concierge areas have become the new must-haves. “We’re seeing more requests for different types of study rooms and flexible spaces where students can gather but also have privacy,” says Faulkner. “We’re also seeing new requests like small vending or grocery areas, ride share lobbies, food delivery areas and upgraded package solutions — drone deliveries on rooftops will be the next frontier.”

Mainstays like state-of-the-art fitness centers still remain very much in demand, but developers are also looking outside of the building — and box — for inspiration. “Outdoor amenities like rooftop terraces and pool decks are highly desired in markets with moderate climates,” says Mohsen. “Developers are looking to differentiate themselves through their amenities, whether it’s incorporating an innovation lab and recording and art studio, or simply taking advantage of views and downtown skylines. Owners can leverage these unique offerings to stand out among the competition.” 

At Core, walkability was noted as the single most important amenity that can be offered at a student housing community. “We want to put our residents in the middle of it all,” says Goldberg. “We want our residents close to the things they care about, from key academic buildings to social hubs around campus.” Beyond that, Goldberg echoes that the flashier amenities are out, and amenities that maximize resident health, wellness and academic success are in. 

With construction costs showing no sign of going down, Mohsen anticipates the trend of the future will be a greater focus on efficiency and design innovation. “The use of prefabricated and modular components is an area of focus for NBA, and we continue to take advantage of the benefits these systems offer,” he says. “We are currently working with our development partners on several high-rise projects that utilize prefabricated exterior skins to achieve elegant facade aesthetics, gain schedule efficiencies, and allow for better quality control.” 

Core Spaces expects to see aa further modernization of off-campus housing stock in most markets — much like what has been seen in the on-campus side of the sector. “Students continue to show an increased appetite to move up from 30-year-old, poorly maintained buildings to the new purpose-built communities that have been designed with them in mind,” says Goldberg. “We believe that this shadow market product will either be redeveloped into new student housing or repurposed as conventional multifamily.” 

 Whatever the type of project, demand from students, and from investors, remains for new development and design is continuing to evolve to meet the needs of the new generation of student residents. “There is something a lot of equity waiting to enter the student housing space, trying to time when and where to jump in,” says Faulkner. “Hopefully the interest rate environment will ease over the next six months. During the second half of 2024, I expect to see more equity coming over the fence.”

Katie Sloan

This article was originally published in the November/December issue of Student Housing Business magazine.

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