by When the Standard, an off-campus student housing complex, opened its doors in the fall in Bloomington, Indiana, welcoming its first group of residents, it had a decidedly resort feel. In addition to the requisite pool and gyms, it attracted students with two pickleball courts, a dog park and a motion sports simulator. The complex even used an app to find roommates.
The arms race over student accommodation amenities is nothing new, but what’s striking about the Standard is its size: 1,000 beds, about twice the size of a typical dormitory. In fact, Standard could house 3 percent of Indiana University’s more than 34,000 undergraduates.
Off-campus student housing complexes across the country are getting larger, some housing more than 1,500 students, and are being built on prime parcels as close to campus as possible, as developers look to better manage their results.
“Having larger projects allows us to have more amenities because we can spread the costs over a larger number of beds,” said J. Wesley Rogers, chief executive of Landmark Properties, the developer of Standard complexes in 23 states, including Indiana.
But developers face challenges, including higher land costs near campus and the possibility of declining college enrollment.
The move toward larger complexes comes at a time when the industry is shedding its image as a niche business run by local owners and instead attracting more institutional and global investors, said Dave Borsos, vice president of markets for capital of National Multifamily. Washington Housing Council. The two largest international investors in the market are currently the Abu Dhabi Investment Authority and Global Student Accommodation, a property management company in London.
Larger investors carry greater scrutiny. “The industry demands a different level of expectations for efficiency and management,” Borsos said.
One strategy is to place more students in less space. Some of the Standard’s units have five bedrooms, a trend Borsos has seen become more popular as developers try to include more beds.
Despite smaller spaces, more beds mean lower rent for each roommate. And larger developments also allow for more luxury perks, like yoga studios, climbing walls, and fire pits.
Landmark’s largest student housing development is the Standard in Seattle, which opened on September 22 next to the University of Washington. It has two high-rise towers and a mid-rise building, which together will house 1,545 students. The university, which has more than 34,000 undergraduates, does not require freshmen to live on campus as many universities do, so the pool of available residents is larger than elsewhere.
The shift toward “bigger is better” has accelerated, Borsos said. Even a few years ago you would have been hard-pressed to imagine a complex with 1,500 beds. For a time in the early 2000s, developers bet that college students would trade a longer commute for better amenities and more spacious accommodations. Groups of students lived in areas of cities that were not always part of the university community and used shuttle buses to travel to campus.
But now, developers can command higher rents with housing closer to campus, offering a greater return on their initial investment, which can be high. The cost per bed in a housing complex a half-mile or less from campus is $131,244, which is about 77 percent more than that of student housing more than two miles from campus.
The higher rate of return has attracted other developers, who are rushing toward campuses with big developments. Cranes are part of the skyline around the University of Texas at Austin, and construction is moving rapidly along the periphery of Purdue University in West Lafayette, Indiana.
Core Spaces, which builds off-campus student housing, is getting closer. Dan Goldberg, president of Core Spaces, said there had been “a proliferation of purpose-built housing further and further away from campus” but that the trend had peaked. Since then, the company has changed course. “We typically do 15- to 20-story buildings as close to campus as possible,” he said.
But getting land near campus is often expensive and subject to local zoning. Projects can take years to get off the ground. Despite the challenges, Goldberg believes “closer to campus” will outlast the other trends.
“We saw competitors build extravagant facilities,” such as arcades and movie theaters, he said. “What we’ve found over the last five years is that what students want is more wellness, more fitness, more study space and great Wi-Fi.”
But the most desirable convenience is proximity. “College students want to be able to get out of bed and go to class,” she said.
Core Spaces has developed edge-of-campus housing in dozens of cities across the United States. The company’s Hub on Campus brand, for example, extends from the University of California to the University of Florida. The largest, with more than 1,500 beds, is near the Virginia Tech campus in Blacksburg, Virginia.
The developer’s center in Champaign, Illinois, opened a block from the University of Illinois Urbana-Champaign in 2021 and caters to students by offering a rooftop terrace and pool, a barbecue area, and a fitness center with a sauna. Upgrades include smart TVs, memory foam mattresses, and sound systems.
The company has larger projects in the pipeline, including several with more than 2,000 beds in Knoxville, Tennessee; Raleigh, North Carolina; and Berkeley, California. Its largest project will be adjacent to Clemson University in Clemson, South Carolina, with more than 2,300 beds. And Goldberg said he wouldn’t rule out the development of even larger complexes.
“We are not putting a limit on the size of buildings,” he said, adding that developments are carefully vetted because they are subject to market demands.
Still, the move toward larger developments may have its limits, said Jaclyn G. Fitts, executive vice president and co-head of the national student housing team at CBRE, a real estate services firm.
To fill larger facilities, developers face a daunting “capture rate,” or the percentage their developments seek to fill of the number of college students available for off-campus housing, he said. Traditionally, promoters aim for a capture rate of 2 to 3 percent, which is high enough to turn a profit but low enough to limit exposure if the economy deteriorates and demand declines.
Ms. Fitts believes the “sweet spot” for off-campus development is in the 400- to 600-bed range because it is more realistic to fill them. “You have to know that you have demand to fill your home,” she said. “The economy has to work.”
But Landmark’s Rogers said a capture rate of 6 to 7 percent made economic sense “depending on market dynamics.”
The appetite for big growth could come back to haunt developers, said Anne P. Villamil, an economics professor at the University of Iowa. They may be counting on an endless supply of students, but Villamil pointed to studies showing that changes demographics would result in a substantial drop in the college population starting in 2025, a trend some refer to as the “enrollment cliff.”
She predicts that fewer students will mean survival of the fittest among apartment complexes that may sit empty if they can’t compete.
“We have been in a period of uncertainty with all the shocks that will affect the economy, but this is another shock that is clearly coming,” Ms Villamil said.
Borsos, however, said he had seen the same studies and predicted a more modest decline. “Larger public universities will continue to receive large applications, many more than they can accept,” he said.
So will the 2,500-bed complex become common? “If a developer has access to land at a university and believes there is enough capacity to occupy something larger, he can do it,” she said.
