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Student Housing Development: Where are Costs Today and What Amenities Are Students Seeking?

The development landscape in the student housing sector is evolving. Students are no longer seeking amenities like movie theaters and golf simulators — they want to live in a property that provides them with tools for personal and academic success. Top-of-the-line fitness and study spaces are more sought after than ever, and that focus has shifted the look and feel of new developments coming out of the ground across the country. 

Alongside this shift in design, developers are being met with fewer land options in close proximity to campus, heavy competition for sites and higher development costs. At April’s InterFace Student Housing conference in Austin, Texas, a panel of major players in the sector gathered to discuss the state of the industry as a whole — from investment and financing, to leasing and development trends. The panel — led by moderator Bob Clark, CEO of Peak Campus — delved into the development climate today and what players in the industry should expect to see over the next few years. 

Amenities: What’s Hot, What’s Not

Elliot Tamir, co-founder of Vesper Holdings, led off the discussion on the changing amenity needs of students today. “We’ve come a long way in terms of amenities,” he says. “I recall traveling to visit sites eight or nine years ago, and what I would see is gaming — pool tables, movie theaters, golf simulators, but no one ever used any of them. I spent a lot of time polling students on what they were interested in and there were three main areas that stood out: they want to socialize, study and get fit.” 

“We’ve spent a lot of time repurposing our clubhouses to focus on those three main areas of interest,” continues Tamir. “We spend a tremendous amount of time adding to the overall experience at our properties. Having a pool is very important, and at our pool areas, we have added free towel and lotion service. Students also need great wi-fi. We even put a regulation boxing ring in one of our fitness centers and that has received a tremendous reaction from residents. Offering a unique experience that helps students achieve in those three main categories is very important to success today.”

Craig Zogby, managing director at Kayne Anderson Real Estate, concurs that amenities geared towards academic success are important for development today. “I think amenities have shifted from razzle-dazzle, sales-oriented offerings to amenities that help students achieve what they’re actually at school for,” he says. “These kids are paying a lot to live at our properties, and they are focused on their academics and want a place to study. Being thoughtful about a property’s study offerings and how the space operates and flows has been a big component over the past three years that has been included in all of our deals.”

For Donna Preiss, founder and CEO of The Preiss Group, the outlook is much the same as it has been in years prior on the amenitiy front. “Location is always an amenity, and if you don’t have a walkable location, you’re going to need to provide shuttles — students are expecting that,” she says. “At the end of the day, kids are still willing to pay more for a private bedroom and bathroom, so if you can pencil in those items, they will pay additionally. Rooftop pools and the addition of Peloton products to fitness centers are a few of the over-the-top amenities we’ve seen being added in, but in general, I don’t see a lot of change.”

Higher Costs and Competition

Great development sites are becoming more and more difficult to come by, and competition continues to heat up for land in close proximity to campus. “Our development projects are significantly more costly and complex, and there is a lot more competition for the land, so getting a great land site is a huge deal,” says Peter Stelian, CEO and founder of Blue Vista Capital Management. “It’s so hard to get a good deal these days in terms of proximity to campus with numbers that pencil. Just look at this past year — 20 percent of projects were delivered late, and it’s really a reflection of this complexity component.”

“We’re working on a development in Boston, and it’s one of the most complicated projects I’ve ever worked on in my entire life,” continues Stelian. “When all is said and done, it will take us over five years to get this up and running, but it’s an irreplaceable asset. When we go to sell it, I am highly confident it will be the largest single asset sale ever seen in the industry, and it hopefully will create more money for us and our investors than anything we’ve ever done, but it’s scary.”

Ensuring these more complex structures deliver on time is another hurtle for developers. Phasing out developments is one method for making sure delivery deadlines are met. “We’ve been breaking up some of our developments into phases,” says Barrett Lowell, director at Harrison Street. “If the site allows it, you can separate the portions of the parcel into two separate buildings and deliver the amenities in Phase I. This has worked well at one of our developments in Corvallis near Oregon State University. We were able to build a lot of interest. You can lease up to a certain point, prove out the demand profile and then circle back on Phase II of development and even correct some mistakes that you might have missed in Phase I.”

Investors are even having to decline developer’s proposals when the timeline just cannot be met. “I think the issue comes down to a simple solution that’s difficult to execute,” says Zogby. “If you’re looking at a deal, and the yield makes sense and you want to beat the new supply, you have to be disciplined to make the decision to say no when the timeline isn’t doable. We all know that the labor markets are struggling, if you don’t have the right general contractor, they’re going to have trouble bringing resources into your project, so you have to make sure you have built in time. Time is the key.”

Katie Sloan