Is There Danger of Student Housing Overbuild?

MIAMI—If you want to know what the latest trends in student housing are, ask Campus Evolution Villages. The Campus management team has over 25 years of experience and manages over 50,000 beds across the country.

GlobeSt.com caught up with Andrew Stark, CEO of Campus, to get his take on the latest trends in student housing development, the overbuilding question, and more in part one of this exclusive series. Be sure to come back this afternoon for part two, in which Stark will discuss the opportunities, challenges and outlook for the student housing sector.

GlobeSt.com: What are the latest trends in student housing development?

Stark: The student housing sector is still relatively young. It's still in its infancy, so we have seen quite a bit of change and innovation since its inception in the early 90s, from bed-bath parity to resort-style amenities to cottage style detached housing. 

What we see at Campus Evolution Villages is the growing sophistication of the student resident consumer wanting more than a place to put their head at night. Our unique philosophy is focused on the experiential side of student housing that has meaning to, and resonates with, the student population. As the sector grows so will the need to deliver more than merely shelter.

GlobeSt.com: What would you say to those who are concerned there is too much inventory flooding the market?

Stark: I would say they are right, sort of… There is a handful to a dozen markets in the country that certainly have experienced an oversupply over the past 3-plus years. 

Some institutional capital rushed to bigger markets and we have experienced excessive supply in those markets. Over time it will be absorbed as development slows, but it will impact pricing elasticity for a period of time. 

Outside those few markets, we are still in a sector where the majority of universities can only house 25%-plus of their student population which leaves a majority of students looking off-campus for their living needs. That is where the privatized off-campus providers can work in unison with universities.

Most recognize that the private sector plays a key role and is more efficient and thereby frees university capital up for more important academia uses. In looking at new development, enrollment growth and in place housing must be carefully balanced. We see strong growth in the sector for years to come, if strategic and thoughtful, in the pursuit of opportunities.

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

Stark: Of course, as in any real estate investment sector, different investors are focused on different investment terms from length of investment horizon, to risk, to overall returns. Student housing is no different as it offers a spectrum a risk-return profiles which include university enrollment size, distance to campus, low- to high-cost provider, core verse value-add verse new development. 

We have, and continue, to see a mix of different assets as our approach, with Campus Evolution Villages seeking out assets that have value-add opportunities whether newer assets or several years old. Anyone can look to execute upon a physical improvement program but the rubber really meets the road through seizing upon turning around under-managed properties. It is hand-to-hand, day-in-day out, and through that we can yield for us and our investors, strong returns in a relatively risk-adverse investment sector.