As summer ended and fall move-in was on the horizon, students, universities and the student housing industry looked forward with anticipation towards the hopeful return to a more normal college experience after a challenging 18 months due to the COVID-19 pandemic. But while students eagerly prepared for their return to campus, new problems arose for student housing owners, developers and operators in the midst of the busy turn season and fall move-in.
Labor and materials shortages ranging from the availability of cleaning crews and healthy on-site staff members, to furniture delays and unpredictable shipping timelines for appliances, made an already stressful time even more challenging. Operators had their hands full and creativity and flexibility were the name of the game as heightened cleaning protocols and proper distancing also remained top of mind.
But it hasn’t been all doom and gloom. A strong pipeline of new projects were delivered ahead of the start of the new academic year, and properties across the country saw a robust uptick in leasing and occupancy percentages versus levels seen last year — all signs bolstering optimism regarding the year ahead for the sector.
A Turn to Remember
“If you go to a restaurant right now, you’ll see signs that say, ‘be patient, we’re understaffed,’ and I felt like the entire industry needed that sign during turn this year,” says Alex O’Brien, CEO of Cardinal Group Cos. “There were such challenges on the operations side — from maintaining labor, to unit walks and shortages with items like furniture, which were difficult to get through the ports and into communities on time. There was also a paint shortage coming out of Texas due to the freezing temperatures earlier this year.”
“It almost felt like someone had asked, ‘describe the most difficult possible situation for student housing turn,’ and that is what we went through,” he continues. “We saw a very impressive and remarkable performance by managers and on-site teams, not just within our company but across the industry as a whole. They deserve so much credit. It was as challenging as I’ve ever seen in terms of turn.”
The largest of those obstacles for PeakMade Real Estate was the shortage of labor, according to Chief Operating Officer Casey Petersen. “Obviously, student housing is not immune to the broader labor market shortages and the services that are performed during turn were particularly impacted,” he says. “We had to work very closely with our vendor partners to ensure that we had appropriate redundancies in place in the event that those vendors weren’t able to deliver. We also had to share internal resources around the portfolio to fill gaps. It was definitely an ‘all hands on deck’ mentality this year.”
The labor shortage also had a major impact at Redstone Residential, according to President Jake Jarman. “There was a shortage of product, there was a shortage of people, and we made it through, but it was not easy,” he says. “We had a number of healthy, vaccinated team members that contracted COVID-19 ahead of turn. We had one property in California where the entire staff tested positive for COVID and we had to fly our corporate team out to handle turn at that community.”
Creative problem solving was needed at almost every level to keep turn on schedule this year, Jarman notes. “We had to find appliances from other vendors, and in some cases even rent U-Hauls and drive to neighboring cities and states to find the appliances we needed,” he says. “To sum it all up, it was a test in adaptability. I’ve never seen turns like this year where we had prepared well, and still there was nothing we could do about an issue at hand, like not having appliances or our cleaning companies getting COVID and not being able to clean. It was experience after experience like that across the country.”
And while face-to-face interaction was seen more than last fall, heightened cleaning protocols and touchless move-ins were still an important part of the turn process. “We continued our partnership with Lysol, sanitizing units prior to occupancy,” says Jennifer Beese, president and chief operating officer with American Campus Communities. “This program analyzes community cleaning and disinfection protocols; provides our community staff with cleaning guidelines, procedures and training on the proper products to use; and educates residents on appropriate cleaning and healthy living practices.”
“We plan on continuing to implement this program moving forward, utilizing these cleaning and best-practice protocols to help empower residents to do their part when it comes to mitigating the spread of illness,” she continues. “In addition, we continued conducting our digital and curbside move-in process similar to last year.”
Petersen agrees, noting that many of the same safety practices enacted in 2020 were utilized again during this fall’s move-in. “For 2021 we kept nearly all of our new protocols from last year in place — touchless move-in, sanitization and streamlined operations — because our residents liked them,” he says. “The changes also made our teams more efficient and kept them focused on executing the most important aspects of the turn and move-in process. Our post move-in resident survey results have been very positive across the board.”
Fall 2021 saw a flurry of new deliveries that brought development numbers closer to historic levels. CA Student Living opened four student housing communities ahead of the 2021-2022 academic year, totaling 2,241 beds. Deliveries included HERE Atlanta, a 784-bed property located near the Georgia Institute of Technology in Atlanta; Uncommon Flagstaff, a 587-bed community serving students attending Northern Arizona University in Flagstaff; HERE Tuscaloosa, a 430-bed property located near the University of Alabama campus; and IDENTITY Davis, a 440-bed community serving students attending the University of California, Davis.
“The successful delivery of these communities despite the countless challenges faced over the past year is a direct reflection of the caliber of talent, dedication and passion our team brings to the table,” says Michael Hales, president of CA Student Living. “From the on-time delivery of more than 2,200 new beds, to being 95 percent leased portfolio-wide, we have a lot to celebrate as we enter this next academic year.”
Landmark Properties opened eight communities ahead of the fall 2021 semester comprising 5,390 beds. The company’s new developments are located near the University of Georgia in Athens; the University of Texas at Austin; the University of California, Berkeley; the University at Buffalo in New York; the University of Miami in Coral Gables, Florida; Kennesaw State University in Georgia; the University of Central Florida in Orlando; and Penn State University in State College.
“Our research indicates this may be the largest off-campus student housing portfolio delivered in terms of beds and valuation at one time in the U.S. and perhaps globally,” says Wes Rogers, president and CEO of the Athens, Georgia-based firm. “These projects were delivered on time and on budget despite challenges presented by the global pandemic, and that is a credit to our team.”
At ACC, significant demand is being seen from universities to modernize their on-campus housing, according to Beese. “The pandemic highlighted the need for universities to accelerate housing revitalization, especially of older traditional community bath residence halls,” she says. “During the third quarter of this year, we were awarded new third-party developments with Emory University and The University of Texas, and in October we started a new third-party development on the campus of Princeton University. In all, we are tracking more than 60 universities that are evaluating privatized residential projects — a significant increase compared to pre-pandemic levels.”
Leasing percentages were back to healthy levels this year after an uncertain season last fall, with many last-minute housing decisions moving numbers close to historic levels.
“We are beyond proud of our leasing team this year,” says Jarman. “We hit 98.4 percent occupancy as an entire company for this fall. It would have been 99.4 percent, but we had two properties that we were assigned management of late in the leasing process to make much of a difference. What’s also amazing is our year-over-year growth in terms of rental rates. We executed really well on our pre-leasing numbers without a massive amount of concessions in most situations.”
As of Sept. 30, 2021, ACC’s 2022 same-store portfolio was 95.8 percent leased with 3.8 percent average rental rate growth over the prior year, resulting in rental revenue growth exceeding 9 percent. “Ultimately we were able to drive an excellent finish to the lease-up with significant leasing activity continuing into August and September, which allowed us to increase our guidance midpoint by 4 percent,” says Beese.
Leasing numbers were also stronger than last year at Cardinal Group. “We were ahead of 2019 across our portfolio, which was a great year, so we’re kind of seeing a full rebound,” says O’Brien. “Because leasing this year was stronger — and stronger earlier — we had room to start pushing rents again, which was impossible to do in most cases during 2020. Across the whole commercial real estate industry, student is looking like the belle of the ball again — very resilient even against a global pandemic.”
Despite these stronger leasing numbers, uncertainty still remained in certain university markets. “Students definitely waited until the last minute to lease at many of our communities,” says Brittany Pieper, director of leasing and marketing at Capstone On-Campus Management (COCM). “There was a lot more hesitation and we leased later in some of our markets. But there’s nothing cookie cutter about COCM, so a few of our markets leased very aggressively and were full before we anticipated.”
And the outlook is even brighter for the 2022-2023 academic year, according to Petersen. “For us, leasing is off to a fantastic start and velocity is significantly better than for fall of 2021,” he says. “As you might imagine, last year at this time there was still a great deal of uncertainty about when and if schools were going to re-open. As a result, the leasing curve was significantly later than in years past, and much of the leasing season was condensed into the second semester. For fall 2022, there does not seem to be any uncertainty from a university perspective, and when you couple that with fewer new supply deliveries, students appear to be much more motivated to make their leasing decisions earlier. We think this is a good thing and hope that it continues through the fall and spring.”
Across the sector the outlook is optimistic for the year ahead in student housing. “On a relative basis, student housing performed very well throughout the pandemic, and all signs point to its ability to continue to deliver outsized results compared with other asset classes,” says Petersen. “The capital markets have taken notice as well and we believe that interest will continue to fuel the next phase of growth and maturation in the sector.”
“I think there is going to be a lot of transaction volume in this upcoming year,” agrees O’Brien. “The buying window is open for groups in student housing and I also expect to see continued consolidation in the industry. Overall we expect a strong performance year. Many developments were put on hold for COVID, so we should see an even stronger year than this year in 2022.”
O’Brien doesn’t, however, think the industry is out of the woods yet with supply chain issues. “We are working to really get ahead of turn this year,” he says. “Generally we’ll do a certain degree of unit inspection and order needed items in advance, but we’re pushing that timeline up even more. Our 2022 turn is starting right now. We have to be way more proactive and plan to make sure we’re accounting for these delays that will impact us again next year.”
This article was originally published in the September/October 2021 issue of Student Housing Business magazine. To subscribe, please click here.