Two years after COVID-19 lockdowns shuttered universities and sparked momentary doubt over the future of student housing, both enrollment and housing occupancies have rebounded to pre-pandemic levels as schools have largely returned to some sense of normalcy. Most universities have either rolled back or continue to relax mask mandates, gathering restrictions and other safety measures that have affected college life and housing for the past 24 months.
“We are continuing to see colleges and universities adjust policies back toward pre-COVID ‘norms’ across campuses, including in housing,” reports Gregory Dandrea, a director in the asset management group of Harrison Street. “While the Omicron surge caused some to pause or temporarily reverse their progress on those adjustments, the trendline has definitely re-emerged.”
Looking ahead, student housing experts don’t anticipate any of the COVID protocols that affected student life and housing to become permanent. However, they do expect the pandemic to usher in broader housing changes related to the renovation and replacement of community bathroom-style dormitories, marketing efforts, move-ins, heating and air conditioning upgrades, and designs that will foster social distancing and online classes in case of future virus outbreaks.
In the short-term, reinstating precautions in reaction to a new variant and infection surge remains top-of-mind, suggests Jay Pearlman, senior vice president, advisory services, for The Scion Group.
“The relaxing of restrictions across the country this spring means a return to a more normal campus life and rites of passage that are important to institutions and students alike,” he states. “Still, we were in a similar situation last summer before the proliferation of the Delta and then Omicron variants.”
Community Bathrooms Become Focus
Echoing observations about the pandemic across other industries, Pearlman and others note that COVID simply accelerated development trends that existed prior to the health crisis. Most notably, universities have intensified their focus on housing needs broadly, whereas prior to the pandemic, many were addressing deferred maintenance issues, says Jeff Turner, an executive vice president with Brailsford & Dunlavey, a planning, development and management firm that works with universities, K-12 schools, cities and sports venues.
Much of the emphasis today is on modernizing housing, which means replacing residence halls that feature community bathrooms. This housing type began falling from favor several years prior to COVID as a growing number of students from smaller families that grew up without having to share a bathroom — or at least, minimally — began to make up a larger percentage of the institution’s enrollment, says Patrick Martin, assistant vice president of real estate, public partnerships and compliance for Louisiana State University.
Renovating older residence halls can often be more complex and costly than new construction, Turner says, but a roughly 20 percent increase in construction costs over the past six months has made any type of development difficult. Still, in some cases, colleges are choosing to renovate their community bath dormitory stock instead of razing it by creating new private bath configurations, notes Dandrea. Harrison Street recently began working on some of those projects that COVID had stalled, he says.
“While new development is often the most practical way to meet the needs of our campus partners, in certain cases renovations are a great way to deliver strategic upgrades to on-campus inventory with a lower cost and a much lower environmental impact than a full ground-up development,” explains Dandrea, who manages an investment portfolio comprising off-campus and public-private partnership on-campus housing. “But it certainly requires the right design-build team.”
Leveraging Public-Private Partnerships
By bringing the need to modernize facilities to the forefront and creating financial stress at universities, the pandemic has pushed more universities to adopt public-private partnerships with student housing developers to fund new housing and repurpose assets with off-balance sheet financing structures, according to a presentation given by American Campus Communities. In ACC’S target markets alone, the average age of on-campus housing is more than 50 years.
In 2015, LSU entered a public-private partnership with developer RISE: A Real Estate Co. Most recently, the partnership developed three properties totaling nearly 1,300 beds and renovated two historic housing halls containing 277 beds. That followed the development of two new residence halls totaling 1,953 beds.
“We expect to do all of our development through public-private partnerships,” Martin says. “Community bathrooms are a big issue, and we stopped designing them 15 years ago. But it doesn’t make much financial sense to redo dorms built in the ’60s.”
COVID also provided universities with a chance to pause and think strategically about their needs, points out Michael Reighter, regional vice president of student living for The Michaels Organization, a multifamily and student housing developer based in Camden, New Jersey. Since then, many schools have created new master plans and are considering strategic partnerships to address deferred maintenance, right-size their housing portfolio and generate revenue.
“The last point is critical to many schools right now, as the COVID year decimated their fund balances and reserves,” he adds. “Public-private partnerships generate significant income, and schools need that revenue right now.”
It’s also important for schools to enhance their competitiveness, Pearlman says, as some institutions have experienced a decline in enrollment since COVID. Over the past two years, for example, fall enrollment has dropped 6.6 percent compared to 2019, according to the National Student Clearinghouse Research Center, a nonprofit provider of educational data.
What’s more, forecasts call for enrollments to continue to decrease throughout much of the country through 2029, with the Midwest and Northeast shouldering the brunt of the downturn, as the number of high school seniors begins to decline significantly in 2025, according to the Higher Education Demand Index.
“University leaders recognize that fulfilling capital needs and modernizing or updating their spaces are not only about asset preservation,” Pearlman explains. “It’s also about preserving the competitive position of the institution at a time when revenue streams, available resources and debt capacity may be stretched thin.”
Sharpening that competitive edge is becoming even more critical for small- and medium-sized universities, which are losing enrollment share to large flagship universities and elite schools. Enrollment has grown 7 percent at Power Five and research-intensive Carnegie R1 schools while decreasing 9 percent overall since 2016, according to ACC’s research. With the millennial population beyond college age, no longer are all schools benefitting from robust enrollment numbers, and students are gravitating toward bigger and more appealing schools, observers say.
“As a student housing developer, we continually see a lot of enthusiasm for the campus experience, and students were excited to get back to in-person classes after COVID,” says Joe Shivell, vice president, architecture and engineering, for The Michaels Organization. “It will be interesting to see if these enrollment numbers continue to trend this way or, with the rising cost of higher education, if enrollment stagnates once the post-COVID energy dissipates.”
Either way, Martin anticipates that smaller colleges will continue to struggle to fund amenities that larger campuses offer, which will further fuel a flight to larger institutions. Likewise, most developers are already focused on larger institutions, suggests Turner, who oversees Brailsford & Dunlavey’s higher education practice. Schools that had the ability to flex their admissions over the past two years likely maintained or increased enrollment versus institutions that did not, adds Dandrea.
“Many of the schools we have partnered with in our public-private partnerships are expecting record first-year classes this year, so the trend seems to be continuing,” Dandrea says. “This is encouraging for not only near-term demand for our on-campus beds, which are largely targeted toward first and second-year students, but also for the long-term strength of the off-campus market.”
Operational and Design Refinements
While not something anyone wants to think too much about, student housing professionals anticipate that colleges could reinstate temporary mask orders, distancing practices and online classes in response to future COVID or viral
outbreaks. But they also expect universities to be more strategic: Instead of a full lockdown, schools will be smarter about switching to hybrid in-class and online models that keep students connected to the campus.
This is leading to amenity, design and material tweaks. Developers were already emphasizing some, from the continued ramp up of digital marketing and lead generation processes to creating a more robust Wi-Fi experience amid the explosive growth of devices and streaming services. In particular, the latter has become even more critical as campus organizations and clubs, as well as services like telemedicine and counseling, have begun to hold more meetings and consultations online, Pearlman says.
Similarly, the prospect of hybrid classrooms is sparking some changes in common space and room configurations to provide students with more privacy when taking classes online and studying, Turner states. Schools are also focused on indoor air quality and ventilation.
“Many on-campus dorms don’t have air conditioning, and some schools are using CARES Act funds to make upgrades,” reports Turner, referring to the trillions of dollars of stimulus doled out to individuals, families, businesses, institutions and various jurisdictions in the Coronavirus Aid, Relief and Economic Security Act.
Moreover, The Michaels Organization has explored measures such as replacing carpet products with luxury vinyl plank flooring to enhance cleaning, upgrading air filters, and adding ultraviolet light and bi-polar ionization treatment to purify air, but the urgency to make broad alterations has subsided along with the pandemic, Reighter states.
“Each of these comes with a cost impact to the project budget,” he continues, “so careful consideration is necessary as it may affect bed rent or the allocation of dollars to other program features.”
From a logistics and administrative perspective, the pandemic helped expand a staggered on-campus fall move-in process that will likely become permanent at many universities. The change has brought more order and structure to what were previously a chaotic couple of days marked by congestion around elevators and in hallways.
“Students and parents seemed to like the change, so it is continuing,” Dandrea says. “We’ve been taking that approach with our off-campus properties for years, and it is interesting to the see the pandemic drive that shift on campus.”
This article was originally published in the March/April 2022 issue of Student Housing Business magazine. To subscribe, please click here.