Kevin May is a Director at GRS | Corteq
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When many of a certain age think of student housing, communist-bloc-style cement buildings with gross cafeteria food, or dilapidated slumlord-owned houses often come to mind. Well, it’s certainly not that way any more, at least for some students attending college today. Many new student-housing developments are filled with contemporary amenities, such as swimming pools and lounges that resemble nice coffee shops. It’s as if student-housing-management firms started watching a lot of HGTV and took notes. Meanwhile, transaction activity for this sector in commercial real estate is extremely active, and development is also taking place. These were some of the takeaways from the recent RealShare Student Housing conference in Las Vegas, which was attended by Kevin May, a business development manager at GRS Group. Following are his views from the show.
What was one of your biggest takeaways from RealShare Student Housing?
It’s a growing commercial real estate sector and one of the areas we are seeing development take place right now. Most of the panelists agree that enrollment is expected to increase at many universities and near-campus housing is hot. The closer an owner can be to campus, the better their asset is likely to perform.
Some of these developments are a bit nicer than the dorms you or I might have stayed in years back?
Definitely. Landlords are putting into place all sort of amenities to attract tenants that can make some of these properties seem more like a nice hotel. Speakers at the conference mentioned properties with single-occupant rooms, private baths and even pool and spa areas. Storage areas are also key for some of these student, and, probably needless to say in this day and age, great Internet access.
So what is the acquisition market like right now in the student housing sector?
There are more buyers entering the arena, and cap rates are compressing. With all of the capital flooding the overall commercial real estate industry, this sector is getting especially competitive, pushing many buyers out of the space. Many of them see development as a more cost-effective approach. Additionally, a lot of buyers are looking at tertiary markets for acquisitions because the core areas have just gotten too hot.
Do you see any hurdles facing the sector other than pricing?
There is always the fear of over development and rising construction costs. As I mentioned earlier, being close to campus is key. Developers are even looking at infill sites in more urban settings, which is a trend we didn’t see much of years back. My guess is that student housing could feel the most pain in off-off-campus product, such as the assets that are miles away from the education facilities. Everyone in the industry is a little concerned about rising interest rates right now, but the thing that student housing has going for it is that pricing can change rapidly, as there is a rapid tenant turnover.
What capabilities and services does GRS Group have that can help people do business in the student-housing sector?
In addition to monitoring construction projects we can also help with Property Condition Reports, Environmental and Seismic Assessments. We also offer one-stop shopping for Title services, Appraisals, ALTA Surveys and Zoning Compliance.