Fred Pierce

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SAN DIEGO—Even with tens of thousands of new student-housing units being delivered to themarketplace, most markets continue to be strong thru 2018,Pierce Education Properties' president and CEOFred Pierce tells GlobeSt.com. Back-to-schoolnumbers have been high three years in a row. public universitiescontinue to enjoy student and family attendance, and studenthousing continues to provide every amenity possible.

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But, are ever-improving student-housing amenities raisingquality-of-life expectations, and are low renewal rates having adampening impact on the sector? We spoke with Pierce about theseand a number of other related issues.

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GlobeSt.com: Are we spoiling our students withever-improving housing amenities?

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Pierce: Almost since its inception,student housing has been purpose-built with student occupancy inmind, and it is heavily tilted to three- and four-bedroom units.Amenities have always been a plus, but now we're seeing amenitieson steroids—there's a bit of an amenities arms race going on, andit's intensified in the last five to 10 years.

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It's interesting in that the super-majority of what's been builtin the last five years has been very urban, pedestrian, mid-riseprojects. Land is very scarce at major universities, so people havebeen working on those assemblages for years. The urban environmentremains the in-vogue location to develop newground-up student housing, but generally speaking, those urbanprojects don't have as nice amenities as the garden-style housingof the 2000s that is a bit away from campus because it offers moreland. With more land, you can have a resort-style swimming pool andsand volleyball courts, but in an urban location, you the amenitiesare nice but more compact.

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What's driving rents in new student housing is the fact thatthey're going into mid-rise, steel and concreteconstruction, which is way more expensive thanwood-frame construction—there's more brick-and-mortar and land perbed than amenities, although those amenities remain super-nice.

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Nevertheless, whether in a super-highly amenitized property amile from campus or in an urban setting that has not as manyamenities, but cool buildings with state-of-the-art finishes,students are living in unprecedented luxury compared to the collegehousing of prior generations. Are they getting spoiled? Well, theycertainly have a quality of living unlike those students beforethem.

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The interesting thing is that students are moving back in withtheir parents after graduating from school, and in many cases,their homes don't have as nice amenities as the student housingthey lived in at school. It certainly is creating a housing-qualityexpectation for students once they graduate. They've lived insomething this nice, and they want to continue that. And, itdovetails nicely with the larger part of population—especially the21-to-35-year-olds, which has a higher percentage of renters thanever before—who are waiting to get married, buy houses and havekids. They're living in nice apartments if theydon't move back home. So, there may be some correlation. There's acombination of demographics and lifestyle choices at work here, butperhaps they're getting a taste of the quality of life they want incollege and it's translating to wanting a greater quality of lifewhen they graduate.

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GlobeSt.com: It's been said that students arefickle, and it takes nothing at all for them to pick up and moveyear after year to a new community. How does this affect themarket?

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Pierce: It is true, but in part it'sless to do with being fickle than it is to do with otherfactors—namely, a changing student lifestyle translating to achanging student preference for housing. As they move from beingfreshmen and mature, their desires evolve. Also, the single mostimportant factor in determining where students live is where theirfriends live. As their friends live elsewhere, they will move intothe same complex or community as their friends. Friends followfriends; these are migration patterns.

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Renewal rates are between 30% and 40%, so every year as an ownerof a student-apartment complex, new residents represent 60% to 70%of those that live with us. The turnover in our rent roll higherthan in other types of housing.

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In our student housing, it's important to us to have a balancebetween students having a good time and students succeeding inschool. I believe both are critically important elements andtakeaways from going to college: you get educated in the classroom,but you're also “educating the whole person”—basically, growing up.Part of this is maturing as a young adult and balancing time tosucceed in school, develop a social life and develop goodinterpersonal skills. Sometimes, seniors move out to live in asomewhat quieter environment. Some students move into Greek housingand move into independent housing after a year or two. If theydidn't evolve, we'd have a housing crisis in higher education—wewouldn't have enough of it.

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GlobeSt.com: The cost of attracting students ishigher every year. Where are these monies spent to attract newstudents?

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Pierce: This effort has beencontinually changing and has dramatically shifted to social media.The average operator spends between $100 a bed and $150 a bed peryear on marketing. That does not include concessions; in strongmarkets there are no concessions, and in softer markets there areconcessions. These are largely giveaways: gift cards, rent credits,giveaway items—things not dealing with placing advertising andpromotions and holding leasing events, etc. The majority of marketsdon't have measurable concessions.

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So, how do you reach students? Word of mouth; owners have oftenpaid referral fees to residents because friends live with friends.Upwards of 40% to 50% of leases can come from friends of residents.Otherwise, it is social media: a combination of SEO to make surethrough the various search engines that we show up on the firstpage. We've found that students start their search for studenthousing on the web, then they go to the website, and then they goto the property. Social media is ultra-critical.

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GlobeSt.com: On a different topic—but one with whichyou are closely involved—what's your view on theSDSU West ballotinitiative?

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Pierce: I see it leading to victoryfor SDSU West. As you know, I'm an active member of theFriends of SDSU Steering Committee that supportsthe initiative. The initial polling that was done the day theinitiative was announced showed that 67% of those polled were infavor of SDSU West and 33% were in favor of SoccerCity. It shows how important higher education and SDSU arein our community. It's not just another development, but aneducation-driven development. SDSU West will insure the futuregrowth of SDSU; conversely, Soccer City will close the option. It'sno controversy that SDSU is one of the main economic engines in SanDiego County, and there's almost no room for the university'sgrowth on the mesa. It will have to grow elsewhere. To be optimaland synergistic, growth has to be proximate to the main campus, andit needs to have transportation linkages. It wouldn't be practicalto be in Chula Vista or Carlsbad. Here, adjunct professors can keeptheir cars parked on the main campus and take the trolley to andfrom their research office.

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We as citizens should never grant land-use entitlements througha ballot initiative. This is different. It's a matter of sellingland to SDSU, and the community gets input on the master plan. Itgoes through a full CEQA analysis. It's the rightway to do it.

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Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.

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