New student housing in South Florida is going upscale as more private developers enter the academic niche of the multifamily real estate market.
Consider the resort-style amenities at newly opened University Park in Boca Raton, a purpose-built student housing community near Florida Atlantic University: a two-story clubhouse and student lounge, a 24-hour physical fitness center with a yoga studio, a video gaming room and outdoors, a sprawling swimming pool, barbecue grills and hammocks.
The developer of University Park, a joint venture of Rosemurgy Properties, Giles Capital Group and Lewis Rental Properties, opened the rental complex in April. It is a cluster of eight four-story buildings with 598 bedrooms in 159 suite-style units.
Each unit has as many as four bedrooms, and each bedroom has a private bathroom. Tenants of the fully furnished units share a flat screen TV, in-unit washer and dryer, kitchen and living area.
Comparable amenities are available to students of Florida Polytechnic University in Lakeland, where a private real estate company, Vestcor Communities, owns and manages the university’s only residence hall and is building a second, according to a report in the Tampa Tribune.
Students living in the Florida Polytechnic residence hall have an in-unit washer and dryer, private bathrooms and modern kitchens, plus access to game rooms, for $2,835 to $3,870 per semester, the Tribune reported.
Byron Moger, executive director in Tampa for commercial brokerage firm Cushman & Wakefield, told The Real Deal that student housing is a small but solid niche in multifamily real estate investment.
“There are more apartment deals sold in Florida than student housing deals sold nationally each year,” said Moger, who researches student housing nationwide for Cushman & Wakefield. U.S. sales of purpose-built student housing developments total “about $1 billion in transactions every year, give or take.”
A single buyer recently paid $22.3 million for two purpose-built student housing projects with resort-style pools near the University of South Florida in Tampa, according to a website called Student Housing Business.com.
The website reported August 29 that the unidentified buyer paid $10.5 million for Campus Club, a 10-year-old property with 256 bedrooms and 64 units, and $11.8 million for College Court, an 11-year-old property with 356 bedrooms and 92 units.
For investors, “the demographics are pretty compelling … The propensity to go to a university is increasing as a function of the job market,” Moger told TRD. “You typically buy into these with a higher cap rate, which means you’re getting a little bit of a premium on your yield.”
On the development side of student housing, private companies are finding opportunities at academic institutions anxious to outsource residential construction and management.
“Universities don’t like to invest in housing because that’s kind of a low-return use of their scarce capital resources,” Moger told TRD. “They’d much rather invest in classrooms and laboratories and fellowship chairs and things like that.”
He said partnerships between developers and universities are upgrading the stock of on-campus housing. “The joint ventures on-campus can take all kinds of forms,” he said. “The simplest concept is the university will provide the land to the operator, and the operator will build the facility and manage it.”
Though privately developed off-campus student housing is a sliver of the real estate industry, “it has been a pretty successful niche,” he said. But “you really have to be close to campus.” Even with resort-style amenities, off-campus housing communities too far from campus “have invariably struggled.”