Real estate may be an industry that’s slow to evolve, but student housing construction has evolved in recent years as developers look to squeeze projects onto sites closer to campus.
Proximity to campus is a major differentiator in student housing, as properties closer to campus historically have greater pre-leasing velocity and higher rents. Simply put, these properties tend to outperform peers further from campus.
The student housing marketplace has seen new construction continue to locate closer and closer to campuses across the nation as the cycle has progressed. And with diminishing site availability near campuses, developers have tailored their projects accordingly, building taller buildings and shrinking unit sizes.
Total annual deliveries have averaged around 47,000 beds this cycle. Although the total number of new beds remains consistent, the composition has evolved.
The share of high-rise projects delivering has trended upwards throughout this cycle. High-rise projects — those with seven or more stories — now make up a significantly larger portion of overall deliveries than they did at the start of the cycle. In 2011, just 8% of new beds were in high-rises. In 2018, that figure grew to more than a quarter.
That higher composition of high-rise properties points to an increasing desire to build closer to campus. And the broader data set supports that claim, as high-rises are located much closer to campus than non-high-rise projects. In fact, the average new high-rise was built two-tenths of a mile from campus. That proximity translates to a location essentially across the street from campus boundaries.
Meanwhile, non-high-rise projects built since 2011 tend to be between a third and a half-mile out. Projects built later in the cycle tend to be on the closer end of that range, as projects have evolved to take advantage of better performance trends closer to campus. From 2011 through 2014, the typical, non-high-rise project was built roughly a half-mile from campus. But beginning in 2015, those new deliveries have been closer to one-third of a mile from campus.
This does beg the question, how have developers of non-high-rise properties been able to squeeze new projects closer to campus without adding height? After all, adequate space close to campus can be difficult to come by.
One way in which we see developers increasing proximity is by shrinking the size of each bedroom. The average size of a non-high-rise bedroom built in 2011 totaled 402 square feet. That average shrunk 8.5%, to 368 square feet, by 2018. Bedrooms on tap for delivery in 2019 are even smaller, averaging 344 square feet – about 14% smaller than in 2011.
This trend hasn’t been true for high-rise properties, however, as the average bedroom size has generally hovered around the 380- to 390-square-foot range since 2014. The result of high-rise bedroom sizes staying constant while non-high-rise bedrooms downsize is a diminishing square footage premium among non-high-rise assets versus the high-rise competitors.
Outside of a blip in 2016, the difference in bedroom sizes between high-rise and other properties has continually lessened. At its peak in 2012, newly delivered non-high-rise bedrooms were 80 square feet larger than their high-rise counterparts. By 2018, that difference had minimized to a mere 7 square feet on average.
The data points to a general trend of new construction locating closer to campus – no doubt in effort to capitalize on the performance premium that more proximal properties exercise over more distant peers.