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Residence in Flux – The State of Indiana’s Student Housing Market

Posted 3:40 PM by

Real Estate Insights, ULI Event

University enrollment continues to steadily increase across the United States, leading to a growing need for safe, accessible student housing. Concurrently, academic institutions are cautiously evaluating the merits of on-campus housing and internal funding. The ongoing battle creates great opportunities for private student housing development and financing.

Converging trends – including enrollment shifts, affordability, and the expectations of millennials – are affecting student housing in Indiana in several ways. A panel of leading experts recently spoke to this trend at an Urban Land Institute (ULI) Indiana event. The panel, moderated by Zach Roden of HFF, included:

  • Loren King, CEO, Trinitas Ventures
  • Kyle Bach, President & CEO, Annex Student Living
  • Larry Gough, Owner, Investment Property Advisors

Enrollment Numbers Remain Key Factor

While developers must continue to address barriers to market entry, existing pipeline development, and the efforts of the competition, the most crucial factor is still university enrollment. “We must consider what the market will look like in the future,” said King. “There’s always a threat the status of a property will change despite our due diligence.”

Focusing on enrollment numbers at universities throughout Indiana helps to forecast where properties may be most successful. Establishing synergies with universities also creates benefits. New housing developments are often valuable in recruiting students, especially when campus housing departments have low vacancy rates. By avoiding adversarial relationships and seeking opportunities for cooperation, new developments can fulfill demand.

“Purdue’s enrollment, for example, has been capped for a few years,” said King. “But demand existed for newer, highly attractive housing models at a higher price point.”

“Pulling students into higher quality products is a challenge,” added Gough. “It might take a few years to capture a market.” As long as enrollment remains steady, opportunities will become available, as evidenced by the growing international student body.

“At Purdue, we’ve seen that international students are sometimes the most affluent and have little to no price sensitivity,” said King. “Our project costs matched their rent expectations.”

Building the Ideal Housing Development

Developers are continuously trying to identify what constitutes ideal student housing. Different developments target various markets. What graduate students expect from housing doesn’t necessarily align with the desires of undergrads. “All students want close proximity to campus,” said Bach. “But some students are willing to sacrifice on proximity for an increase in space.” When space is more of a premium – as is the case in downtown Indianapolis – proximity gains greater weight.

The expectations of millennials and today’s incoming students have shifted the focus more toward lifestyle. “Wi-Fi is the most important factor,” said King. “They expect to be able to get online from everywhere on the property.”

Today’s purpose-built student housing aligns with what many students demand from their university housing experience. “Everything is top-end,” said King. “The units have nice interior design, including hardwood floors, ceramic tiles, and even resort-style pools. We offer shuttle service from some developments. Utilities are often bundled into one bill, so students have to make only one payment. It’s as nice as you can imagine.”

Despite the push by many for luxury accommodations, price point is still a top factor for many students. “At some of the smaller, commuter-based schools, the competition for housing is often mom and dad,” said Bach. “We appeal to those students by stressing the value of the life skills you develop living away from home.”

One growing concept not on the table in Indiana, yet, is micro-housing. Areas like San Francisco, New York, and Seattle have seen the concept grow due to market demand and limited space.

Incentivized Partnerships

The Indiana student housing market has also seen strides based on incentivized partnerships. One deal struck at Ball State allowed for construction of a housing development in tandem with the creation of new parking areas. At IUPUI in Indianapolis, developments that brought successful commercial use to the Canal at White River led to tax abatements on the property from the city.

“New developments can provide solutions not just for a university, but also the community,” said Gough. “If there are opportunities to partner with a city, it’s worth exploring potential incentives.”

“New housing can serve as a catalyst for community growth,” said Bach.

With Indiana’s student enrollment numbers remaining strong, coupled with the shifting lifestyle expectations of students, the demand for new housing shows no signs of slowing.

About the Author
Josh Malarsky is a partner in Katz, Sapper & Miller’s Real Estate Services Group. Josh advises clients on complex real estate transactions ranging from buy-sell agreements to tax credit projects, REIT structure and compliance, and more. Connect with him on LinkedIn.

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