The student housing sector was a magnet for both foreign and private investment in 2016 and is expected to draw continued interest this year. To get a better sense of what to expect from the asset type in 2017, NREI reached out to J.J. Smith, president of CA Student Living, the student housing division of Chicago-based development firm CA Ventures.
The company has invested nearly $2 billion into student housing since 2010, including $380 million in 2016. The firm also delivered approximately 4,000 student housing beds to the market in 2016.
NREI: How would you describe the state of the student housing sector in 2016?
J.J. Smith: The student housing sector is in the sixth inning and there is still a lot of opportunity out there. Even as bed deliveries are slightly down over 2014 and 2015 [around 47,000 beds were delivered in 2016, while the sector saw 63,000 new off-campus student housing beds in 2014 and 47,800 new beds in 2015, according to Axiometrics], we see that as a positive for those of us who are still finding great deals to augment already robust pipelines. CA Student Living will deliver between 3,500 and 4,500 new beds each year through 2020, many of which will be located in… high-barrier-to-entry university markets.
NREI: How does the financing situation look for student housing right now? And do you think it will change in 2017?
J.J.Smith: Institutional investors, including sovereign wealth funds and pension funds, remain interested in the student housing sector due to their ability to achieve higher returns than they otherwise would through conventional multifamily housing—provided they’re able to find the right opportunities in the right markets with operators who understand the nuances of the business. A tighter grip on lending and rising interest rates will make it increasingly difficult to finance projects and enter select markets, particularly for firms without a successful track record. In addition, the political climate is being closely monitored in all real estate sectors, and student housing is no exception.
NREI: What regions of the country have been the most active for student housing development?
J.J. Smith: The South and Southeast continue to see a lot of development and, while we are capitalizing on opportunities in those markets, we are also developing in some of the attractive—yet untapped—markets throughout the Midwest and Northwest.
NREI: Please describe any significant or noteworthy trends you’ve seen in student housing in 2016 that will come into play in 2017.
J.J. Smith: In 2016, students continued to favor buildings with smaller unit floor plans offset by expansive amenity offerings. Looking ahead to 2017 and beyond, we expect amenities to come back down to earth in terms of size and grandeur as the availability of land on core locations continues to tighten. The spaces will be designed with increased flexibility in mind and a keen eye on square footage.
NREI: Currently, what are the most in-demand amenities?
J.J. Smith: Every property must program substantial study space for hitting the books, but there’s also a need to balance work and play with recreational spaces where residents can unwind and socialize. Well-appointed game rooms, lounges and outdoor spaces are wildly popular, while sports simulators give residents a chance to hone their skills depending on popular regional pastimes. For example, at our Uncommon Athens community near the University of Georgia, residents have been enjoying an on-site golf simulator, while at the Uncommon Fort Collins community, slated to deliver in 2017 near Colorado State University, we have plans to include a ski and snowboard simulator.
NREI: What do you expect 2017 will bring for the property type? How will CA Ventures’ strategy reflect that?
J.J. Smith: Investor (and renter) demand will remain high for newly constructed, core assets in infill locations, particularly those offering convenient access to top-tier universities, public transportation and business and nightlife districts.