HFF Hires to Tap Into Student Housing Market

He joined the firm Wednesday after a few years building relationships with national student housing developers and owners as a senior housing investment specialist with Marcus & Millichap. The company could not be reached for comment about his departure. "The affiliation with the debt markets will really help my investors," Kelly says.

Wall Street, which has taken a beating the last few days, has been very comfortable with student housing, he says. "It's really been the hot niche of multifamily, in the past 10 years it's been sought after more and more every year," Kelly tells GlobeSt.com. "Right now it's perceived as insulated from the economic swings, some have even called it recession proof."

He says he has his ideas why student housing has become so popular, and college applications have increased. "As the economy goes south, that's just basic, more people tend to try to get their degrees. Then you have the '"Echo Boomers,' the children of the Baby Boomers, where you're seeing that bell-curve of population all over again. The number of college-age students is going to go up dramatically in the next five years."

However, he says colleges have also been working harder to attract students, and one of the methods has been raising the bar on amenities in student housing. "You just can't compare it to a decade or more ago, what they have today," Kelly says. "I had a listing a little while back in the Midwest that had a resort-style pool, full indoor basketball court, fitness facility, computer lab, study rooms, game rooms, a tanning facility and hot tub, even a movie theater. And that's getting pretty common."

The crowd of owners seeking student housing, or to develop new or infill locations, just keeps getting bigger every year, he says. American Campus Communities and Education Realty Trust are the two main REITs that focus on the product type, but there are many developers, especially multifamily companies, that have been trying to break into the market, he says. "I had a deal close just recently (while he was still at Marcus & Millichap), the Bard Townhouses serving the small Shippensburg, PA local college, that had eight offers from across the nation. The 173-unit property closed at just less than $20 million…it wasn't a notable property, but the amount of interest was phenomenal."

New blood is also finding new ways to attack the market, he says. For example, owners are now starting to lease per bed, instead of per unit. "It's a little more strenuous on management, but it's also a little bit of a premium on a per-bed lease," he says. Also, companies are more aggressively tackling the older class B and C product with renovation and updates, creating a competing product that may be closer to the university than new development, Kelly says. "There are certain groups that target these properties, and they've been doing very well," he says.