Revolutionizing Student Housing: Advancements in Development and Design

By: Taro Chellaram /Real Estate Articles/Jan 17, 2024

Revolutionizing Student Housing: Advancements in Development and Design

The challenges in the current state of capital markets and the hurdles in securing financing for new development projects. Despite these challenges, there is a focus on innovative architecture and design, particularly in Power Five university markets [The five major college sports conferences], to cater to the demand for new communities. Developers are adapting to changing trends, prioritizing functional and efficient designs over flashy amenities. The capital markets are becoming more selective, preferring developments in A-plus locations with strong demand. Despite financing difficulties, there is optimism for a recovery in 2024, with an expectation of increased equity flowing into the student housing market.

Developers face challenges securing financing for new projects, despite demand in university markets. Innovative design focuses on functionality and efficiency, prioritizing student well-being. Capital investors prefer A-plus locations, impacting project viability. While financing is currently tough, optimism for a recovery in 2024 persists. Varied project types, including cottages and high-rises, show market diversity. Design trends favor flexible study spaces over flashy amenities. Walkability becomes a key amenity, emphasizing proximity to campus essentials. Developers aim for efficiency amid rising construction costs, exploring modular components. Anticipation of a modernized off-campus housing market, catering to student preferences. Despite hurdles, demand persists, with potential for increased equity investment in the student housing sector by the second half of 2024.

Capital Market Challenges:

  • Securing financing for new development projects is a significant hurdle in the current state of capital markets.
  • Despite demand for new communities, getting projects financially viable remains challenging.

Innovative Architecture and Design:

  • Successful developments focus on innovative architecture and design for maximum functionality and efficiency.
  • Shift from flashy amenities to designs prioritizing student well-being and health.

Developer Perspective:

  • Power Five university markets experience high rental rate increases, but equity requirements and high hard costs pose challenges.
  • Capital investors are selective, favoring A-plus locations with strong demand for student housing.

Market Trends:

  • Higher density, campus-adjacent projects gain focus to counter rising development costs.
  • Optimism for a recovery in 2024, historically seen as a rebound year for the student housing market.

Product Type Diversity:

  • Demand for both cottage and high-rise projects varies market-to-market.
  • Capital markets adopt a holistic approach, considering the owner and property management company's track record.

Differentiating Through Design:

  • Shift from traditional amenities to flexible study rooms, delivery concierge areas, and innovative outdoor spaces.
  • Emphasis on walkability as a crucial amenity, focusing on student health, wellness, and academic success.

Efficiency and Design Innovation:

  • Anticipation of a greater focus on efficiency and design innovation in response to ongoing high construction costs.
  • Use of prefabricated and modular components for better quality control and schedule efficiencies.

Modernization of Housing Stock:

  • Expectation for further modernization of off-campus housing, aligning with on-campus trends.
  • Transformation of outdated buildings into new student housing or repurposing for conventional multifamily.

Continuous Evolution:

  • Ongoing evolution in development and design to meet the changing needs of the new generation of student residents.
  • Anticipation of increased equity entering the student housing space, contingent on an easing interest rate environment.

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