Student Housing Has a New Mantra: Bigger Is Better

When the Standard, an off-campus student housing complex, opened in the fall in Bloomington, Ind., welcoming its first batch of residents, it had a decidedly resort vibe. Along with the requisite pool and fitness centers, it enticed students with two pickleball courts, a dog park and a motion sports simulator. The complex even used a roommate-matching app.

The arms race over amenities in student housing is nothing new, but what is striking about the Standard is its size: 1,000 beds, about twice the size of a typical dorm. In fact, the Standard could house 3 percent of Indiana University’s 34,000-plus undergraduates.

Off-campus student housing complexes across the country are getting larger, some home to more than 1,500 students, and they are being built on prime parcels as close to campus as possible, as developers seek to better manage their bottom line.

“Having larger projects enables us to have more amenities as we can spread the costs out over a larger number of beds,” said J. Wesley Rogers, chief executive of Landmark Properties, the developer of Standard complexes in 23 states, including the one in Indiana.

But developers face challenges, including higher costs of land near campus and the possibility that college enrollment could decline.

The move toward larger complexes comes as the industry is shedding its image as a niche business run by local landlords and instead drawing more institutional and global investors, said Dave Borsos, vice president of capital markets for the National Multifamily Housing Council in Washington. The two largest international investors in the market now are the Abu Dhabi Investment Authority and Global Student Accommodation, a real estate management firm in London.

Larger investors bring greater scrutiny. “The industry is demanding a different level of expectations in efficiency and management,” Mr. Borsos said.

One strategy is to put more students in less space. Some of the units at the Standard have five bedrooms, a trend that Mr. Borsos has seen become more popular as developers try to squeeze in more beds.

Despite the tighter quarters, more beds mean lower rent for each roommate. And larger developments also allow for more luxury perks, like yoga studios, rock-climbing walls and fire pits.

Landmark’s largest student housing development is the Standard in Seattle, which opened on Sept. 22 adjacent to the University of Washington. It features 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 first-year students to live on campus as many universities do, so the pool of available residents is larger than elsewhere.

The shift to “bigger is better” has accelerated, Mr. Borsos said. Even a few years ago, he 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 roomier digs. Clusters of students lived in areas of cities that were not always part of the college community and would use shuttle buses to commute to campus.

But now, developers can fetch higher rents with housing that is closer to campus, offering a bigger 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 farther than two miles from campus.

The higher rate of return has attracted other developers, who are rushing toward campuses with huge developments. Cranes are part of the skyline around the University of Texas in Austin, and construction is brisk along the periphery of Purdue University in West Lafayette, Ind.

Core Spaces, which builds off-campus student housing, is embracing bigger and closer. Dan Goldberg, the president of Core Spaces, said that there had been “a proliferation of purpose-built housing farther and farther away from campus,” but that the trend had peaked. The company has since switched gears. “We usually do 15- to 20-story high-rises as close to campus as possible,” he said.

But securing land near campus is often expensive and subject to local zoning. Projects can take years to get off the ground. Despite the challenges, Mr. Goldberg believes “closer to campus” will outlast the other trends.

“We saw competitors building outlandish facilities,” like arcades and movie theaters, he said. “What we have found the past five years, what students want is more wellness, more fitness, more study space and great Wi-Fi.”

But the most desirable amenity is proximity. “The college students want to be able to roll out of bed and go to class,” he 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, stretches from the University of California to the University of Florida. Its biggest, with more than 1,500 beds, is the one near Virginia Tech’s campus in Blacksburg, Va.

The developer’s Hub in Champaign, Ill., opened a block from the University of Illinois Urbana-Champaign in 2021, catering to students by offering a rooftop sun deck 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 more significant developments in the pipeline, including several with more than 2,000 beds in Knoxville, Tenn.; Raleigh, N.C.; and Berkeley, Calif. Its largest project will be adjacent to Clemson University in Clemson, S.C., with more than 2,300 beds. And Mr. Goldberg said he would not rule out developing even larger complexes.

“We’re not putting a cap on the building size,” he said, adding that developments are carefully vetted because they are subject to market demands.

Still, the move toward bigger developments may have its limits, said Jaclyn G. Fitts, an executive vice president and co-leader 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 that their developments look to fill out of the number of undergrad students available for off-campus housing, she said. Traditionally, developers aim for a capture rate of 2 to 3 percent, which is high enough to make a profit, but low enough to limit exposure if the economy sours and demand declines.

Ms. Fitts sees the “sweet spot” for off-campus development settling into the 400-to-600-bed range because those are more realistic to fill. “You have to know you have the demand to fill your housing,” she said. “The economics have to work.”

But Mr. Rogers of Landmark said a capture rate of 6 to 7 percent made economic sense “depending on the market dynamics.”

The appetite to go big could come back to haunt developers, said Anne P. Villamil, an economics professor at the University of Iowa. They may be banking on an endless supply of students, but Ms. Villamil pointed to studies that showed that demographic shifts would result in a substantial drop in the undergraduate population beginning in 2025, a trend that some refer to as the “enrollment cliff.”

She predicts that fewer students will mean the survival of the fittest among apartment complexes that may find themselves empty if they cannot compete.

“We have been in such a period of uncertainty with all the shocks to hit the economy, but this is another shock that is clear that it is coming,” Ms. Villamil said.

Mr. Borsos, though, said he had seen the same studies and predicted a more modest decline. “Larger public universities will continue to see significant applications way more than they can take in,” he said.

So, will the 2,500-bed complex become common? “If a developer has access to land at a university and thinks there is sufficient capacity to fill something larger, they may,” he said.