Jet McGuire, Norman Eastwood: Baylor University — Building Up, Not Out

by Katie Sloan

Walkability is the latest industry term entrenching itself into the lexicon of nearly every student housing investor and developer. Not only is it changing vocabulary, it is clearly a market driver. Add to the mix, the increasing desire for luxury, purpose-built communities geared towards students. The net result of the two trends is altering both Waco’s student housing market and skyline, as developers shift their views from the ground to the sky to meet the latest demands of the student population.

The property credited with kicking off the “build up, not out” trend is the View on 10th. Constructed in 2014, the purpose-built, mid-rise community is only two blocks from campus, commands premium rents near $900 per bed, and current occupancy is 94 percent. Prior to construction, students wanting the luxury and amenities offered by purpose-built communities had to look further from campus. After the View on 10th’s phenomenal success, mid-rise construction is shifting into high gear, and older, garden-style communities near campus are being demolished and replaced with new, five-story purpose-built structures. The one caveat to the demolition of existing properties is developers must go vertical in order to recover the cost for redevelopment. As more developers are reacting to market demands, students have more options when deciding which trend they value more, living close to campus, student-specific amenities, or both.

In order to support the “build-up, not out” trend, three factors should be examined; university enrollment, new construction or redevelopment, and the value students are placing on the desired amenities.

University Stats

At the beginning of the 2015-2016 school year, Baylor University reported an enrollment of 16,787 students and above-average applications. Officials of the private, nationally ranked, Christian university credit the low student-to-teacher ratio and small class sizes as the cornerstone of their success. In an effort to maintain the balance between the surge in popularity and their core values, university officials are tightening admission requirements. The student population will remain steady and under the watchful eye of university administrators.

One component of university policy not changing is the on-campus living requirement for all freshmen. The 4,939 on-campus beds are contained within 13 buildings, six of which allow residents to have their own room. For the 2015-2016 school year, occupancy for all on-campus housing was 100 percent. Approximately 90 percent of the remaining student body resides off campus. Comparably, on-campus living options are more expensive, the average effective rent per on-campus bed is $1,165 versus $608 for off campus. At this time, no additional on-campus housing is slated for construction.

Market Data and Trends

As mentioned earlier, the two data points heavily influencing rental growth and occupancy are amenities and location. Communities offering the greatest number of student-focused amenities are commanding the highest rents per bed in the entire market, regardless of location. Properties built in 2010 or later report the greatest rental increase of nearly $235 compared to the last school year, bringing the average rent to almost $820 per bed. However, properties situated 0.75 miles or less from campus are reporting 100 percent pre-lease occupancy figures. Properties within this radius also demand the highest rents at an average of $697.50 per bed. Properties not offering the highly sought-after amenities and not considered walkable, are suffering the greatest losses. Specifically, properties in the one to 1.25-mile radius lacking the desired amenities are reporting average rental decreases of $250 per bed, compared to last year at this time. Despite efforts by owners to offer private shuttle services to and from campus, fall pre-lease totals within this radius are down from 100 percent to 95 percent from last year.

A feature unrelated to location and unit amenities worth mentioning is security. Students and their parents want the added benefit of safety. Throughout the entire student housing market, gated communities command higher rents, averaging nearly $700 per bed, compared to their ungated counterparts at an average of $485 per bed. The difference between the two rents is more than $200 per bed, and many parents and students will accept the significant cost increase for the added peace of mind.


With the completion of Haven South, the total number of beds in the Waco student housing market will increase to 12,079 beds for the 2016-2017 school year. By 2017-2018, the market will grow by 1,428 walkable, luxury beds, shifting the market total to 13,507 beds. As more beds are coming to the market, Baylor University’s enrollment will need to remain consistent or begin to increase in order to absorb the new beds. Developers will need to continue to closely monitor the number of incoming and outgoing students, while balancing the market trends. Owners will also need to pay special attention to the number of beds becoming available and the location of the new housing options. In previous years, purpose-built properties located 0.5 to 0.75 miles from campus attracted students wanting hyper-focused, student-driven amenities and dominated the market with the highest rents and pre-lease totals. Now, as new purpose-built luxury student housing becomes available within walking distance of campus, these properties could begin to suffer drops in rents and pre-lease percentages. Owners in the one- to 1.5-mile radius from campus have already reported falling rents of an average of $250 per bed from last year to now. This year, the radius will widen to include properties 0.5 to 0.75 miles from campus. Going forward, owners within a half-mile or more from campus will need to continue to either reduce rents or increase concessions to combat the location and amenity trends. As for the future of Waco’s skyline and student housing landscape, it will continue to grow taller as developers focus on “building up, not out” as the race to construct purpose-built properties continues closer to campus.

Norman Eastwood and Jet McGuire of the Eastwood Multifamily Group of Marcus & Millichap compiled the Student Housing Watch Waco Market Update for Summer 2016. For questions or further discussion, please contact either at [email protected] or [email protected]

You may also like