David Nelson

MIAMI—Where are the opportunities and challenges in the student housing sector? What are student housing investors really after?

GlobeSt.com caught up with David Nelson, a senior vice president for Carter‘s development team, to get his take on these student housing topics. If you missed part one of this interview, you can still read it: Carter Outlines Four Key Student Housing Trends.

GlobeSt.com: What are the opportunities in the student housing sector?

Nelson: We see the opportunities split in a couple of different ways. One, we see tier one universities that have some or little growth, but are providing higher-end, walkable to campus products that haven’t existed. We see an opportunity with second and third-tier schools that are growing substantially as well as the cities around them.

For example, consider the University of Texas at San Antonio and our current project Tetro Student Housing Village. Over a 10-year period, the school grew about 40% and added close to 9,000 students. In years prior, the school was commuter-driven, but during this growth you saw the university reinvest in itself by providing on campus housing, new academic facilities and a new fitness center.

In addition, you saw a city growing around it. Student recruitment into jobs within the major metro area is also picking up, helping make the university an attractive location for students.

GlobeSt.com: What do you see are the biggest challenges in the student housing sector right now and how do you get around those challenges?

Nelson: One of the challenges that still remains is that many people are scared of the student housing market because it is a niche market that requires a high level of management of the tenants. The investment requires oversight, because you are dealing with 18- to 23-year-olds. For years, many people stayed away from student housing projects until they saw how resilient they were during the economic downturn.

Challenges from a management and operations standpoint are having anywhere from 300 to a 1,000 students living in the complex. Ultimately, you need an efficient operator that is able to provide a safe, well-maintained and engaging environment.  

In addition, every year there is a high level of turnover and you may only be renewing 30% of your project because people are coming and leaving the property in August. Everything happens in a short time frame.

How you get around that challenge is by partnering with high quality, third-party operators with the right focus and high level of attention to detail. From a development perspective, one of the major challenges we face is that the project is a seasonal delivery. You have to be focused and have the right team to make sure you are not missing days.

GlobeSt.com: What are student housing investors really after?

Nelson: Student housing investors saw that student housing performed well during the downturn. They realized that they can drive returns or yields and be a little more resilient to changes in the market.