By Ian Ritter | Shared post from the Hightower Blog
Student housing facilities have changed a lot over the last several years. Tech-enabled, communal living spaces have replaced the stacked double rooms that once defined the college dorm.
But, the newest trend is that some student-housing developments are now adding retail and other property sectors to their project, effectively creating a mixed-use arena. This marriage makes sense because student housing has become more of a mainstream commercial real estate product type.
The reason for this change is a spike in undergraduate enrollment, which is attracting both developers and various retail / restaurant tenants. According to the National Center for Education Statistics, between 2000 and 2010, undergraduate enrollment rates increased by 44 percent. And even more growth is projected. The organization sees a 14 percent increase from now until 2025 for full-time students, while part-time students are reportedly rising 15 percent.
The commercial real estate industry is taking notice.
How to go mixed-use
One recently announced example is in downtown Orlando, where the University of Central Florida’s new student housing complex is going up. The $90-million development, which will have between 14 and 15 stories with 600 to 700 units, will also include 10,000 square feet of retail. Meanwhile, also in downtown Orlando, Valencia College is planning a student housing facility, which will also have 50,000 square feet set aside for a restaurant and staging area for the school’s hospitality program.
This fall, a mixed-use student-housing project is set to open at Johns Hopkins University, in Baltimore. Below will be 30,000 square feet of retail and restaurants anchored by a CVS. Additional tenants include Honeygrow, a regional Northeast fast-casual chain that serves food with local ingredients, and a local ramen shop.
In downtown Greenvillle, N.C., the home of East Carolina University, mixed-use student housing is one of the centerpieces of Greenville 2020, a public-private partnership intended to shape the development future of that city. Part of the $1 billion in total investment, which includes public-transportation improvements, retail, restaurants and breweries includesCampus-Edge. That project will reportedly have 20,000 square feet of retail space underneath five stories of student housing.
These types of developments aren’t limited to housing strictly for students, but are going up where students are major tenants along with other renters. Boston, for example, has several universities scattered throughout its metro area. A development in the Downtown Crossing area looks to target both. A 72-story tower being proposed in Downtown Crossing, will be a mixture of residential and office, and developers Millennium Partners are banking on students taking up much of the apartment space in the building.
Still, not a perfect marriage
A recent Urban Land Institute (ULI) panel on student housing addressed the trend. J. Wesley Rogers, president and CEOLandmark Properties, said that putting retail under the housing units can provide a stronger yield for some assets. In Gainesville, Fla., for example, retail rents in one of the firm’s properties are commanding a strong $50 per square foot.
But Rogers warned that putting the two product types together doesn’t always work. For one thing, some municipalities won’t allow the combination due to zoning issues. Plus, Rogers pointed out, a good student-housing location doesn’t always mean a good retail location.
So, making every student-housing development a mixed-use scenario doesn’t necessarily make sense. But if it is in a dense area near a campus, or in an urban environment, where some universities are located, there isn’t much downside. Student housing in these locations not only has a built-in customer based above the asset, but college towns in many locales are similar to the 24-hour environments in big cities that retailers and restaurants increasingly crave.