December 1, 2020 |
Updated December 1, 2020
Four industry leaders weigh the effects of COVID on rental housing on or near college campuses.
By Scott Sowers
The ongoing effects of the pandemic on higher education has led to quarantine dorms, virus tracking apps and sequestering ill students in hotel rooms. College sporting events are still riding a roller coaster of cancelations and postponements. When the illness first struck in March, nobody was prepared as college campuses shuttered and students were sent home.
“When the pandemic spread in the spring, 39 percent of our residents returned home as a result of university messaging following the conversion of all universities to 100 percent online instruction and the closing of most on-campus residence halls,” says Frederick W. Pierce, President and CEO of San Diego-based Pierce Educational Properties. But the early dismissals soon gave way to a gradual and cautious reopening. “By May, only 30 percent were still at home,” says Pierce. “Between April and July, more than 97 percent still paid their rent.”
Open for Business
All of Pierce’s student apartment communities are located off-campus and all of them are currently open. Most of the firm’s inventory is housed in garden-style buildings that offer greater separation as compared to high rises or traditional dorms, which may lack private bathrooms or bedrooms. More than 99% of the students who signed leases with Pierce for the 2020-21 academic year moved in as scheduled this fall and 99% have paid their rent.
It’s a similar story at Atlanta-based PeakMade Real Estate. “Our portfolio is fully open for business,” says Casey Petersen, COO. “The vast majority of our portfolio is private, off-campus apartments. Regardless of what any academic institution decides to do in terms of their method of instruction, demand remains strong.”
Most of the schools in Peterson’s market are currently using a “hybrid” model of instruction that blends classroom attendance with online sessions.
Adapting to Change
Benjamin Modleski, President, Property Management, at Chicago-based Core Spaces, is predicting a gradual return to how things used to be in the near future as new protocols and precautions are baked in. “I’d hate to think that this ‘new normal’ is here to stay,” he says. “If the current status continues for a while longer, we are much better prepared today. Our teams and our residents have learned to adapt with physical distancing, enhanced cleaning, virtual resident events and no-contact services have been refined.” Core is also making use of rapid testing centers within their buildings in Tucson, Ariz., and Columbia, S.C.
Being adaptable and employing science-guided commonsense has helped reduce the virus’s impact on community amenities. “We still have some amenities with limited access based on CDC recommendations, such as reservation-based facilities like our fitness centers,” says Dan Oltersdorf, Chief Learning Officer, Senior Vice President, Campus Advantage, based in Austin, Texas.
Like many other sectors of the rental housing industry, Oltersdorf is witnessing the virus accelerating changes that were already underway. “We have been forced to innovate,” he says. “From more virtual events and online community-building to our low-touch and drive-through move-ins. I think there are a lot of changes that are here to stay, not because of COVID but because of convenience.” Campus Advantage also ramped up internet speeds and broadened coverage in their properties to facilitate more online learning.
Pierce believes building occupancy and basic design schemes will evolve to promote more safety and less risk of exposure by spreading things out. “The functional supply of on-campus housing has been reduced through de-densification, including the closing of residence halls that are not social-distance friendly, gang bathrooms and by reducing occupancy in individual rooms,” he says.
He’s also looking for the eventual demolition of dormitories that have already been closed. “The off-campus student housing market will benefit with more demand being pushed off-campus in the short- and intermediate terms until campuses return to pre-COVID bed capacities,” he says.
The importance of improved interior air quality has already started having an effect or remodels and new construction in the form of expanded use of HEPA filtration systems.
Petersen agrees that the pandemic is also changing thought patterns about how and where to locate housing near campus. “We think schools are learning quickly that their aging on-campus student housing stocks are reaching obsolescence,” he says. “We believe that high-density, small, shared bedroom, cinder block construction is no longer what today’s student is looking for in their college experience. This will present a unique opportunity for private on- and off-campus housing providers to help schools meet those new demands.”
To deal with the rapidly changing present, Core Spaces also is trying to blend in soft skill tools to help its residents cope. “We’ve learned that students are feeling the stress of the pandemic,” says Modleski. “We’ve responded by connecting our residents with the resources that can directly help them navigate these trying times, such as tools for emotional growth and well-being, including meditation workshops and self-management events designed to help students stay grounded.”
Despite the challenges, there is strong sentiment that the business of developing, building and investing in student housing is still a good bet. “Student housing has once again proven to be a wise hedge against an economic downturn,” Modleski says. “We expect that the long-term trend in the sector to remain strong post-COVID-19. Occupancies for 20-21 are relatively in line with those the year prior and collections also remain very strong despite the volatility in the economy. The demand for student housing will continue to grow and international students who may have had difficulties obtaining a visa or traveling to the United States will vigorously return.”
Oltersdorf does have some concerns about the future of financing. “Off campus, we have already seen the agencies start to steer away from student housing,” he says. “If they do not step back in and no other private market steps up within the next 12 months, we could see valuations decline in student housing.”
Oltersdorf is also envisioning a move away from publicly funded builds. “We believe the pandemic will accelerate the dedensification and privatization of on-campus housing moving forward which should be a net benefit to the off-campus student housing market as well as provide development opportunities on-campus.”
Oltersdorf cites signs of contraction in the market as evidenced by Johnston and Wales selling off an entire campus in Miami and the state systems of Pennsylvania and Wisconsin announcing strategic plans to eliminate the number of branch campuses. But the prospect of the pandemic causing a pivot to total online learning seems dim.
“I believe there will continue to be adjustments in what is perceived as a traditional higher education experience,” says Oltersdorf. “I believe you will continue to see hybrid, in-person and fully online experiences, but I don’t see the face-to-face experience going away. America’s rich tradition of higher education has a foundation that I believe will continue to evolve. We are hearing and seeing that students want the full college experience of living on their own, meeting new people and exploring who they are within a new environment away from mom and dad.”
Pierce agrees. “If anything, the pandemic has reinforced the value of and desire for a residential education,” he says. “A college education is about way more than classroom learning. It is about growing up as a young adult, making life-long friendships, living on one’s own, attending college sporting events and, yes, having fun. Those students who went home in the spring couldn’t wait to get back to school and did in huge volumes this fall even if 100% of their fall courses were online. Surveys have also indicated that two-thirds of college students find online courses inferior to classroom instruction.”
“As an industry, we’ve been answering this question for a few years, and we believe that the pandemic has proven that online education is not a threat to the traditional higher education and by extension, off-campus student housing model,” says Petersen. “Throughout our portfolio, we have found that students come to school to learn, but that they also come for the college experience. This is evidenced by the fact that several of our markets are providing instruction almost completely online, and yet our properties in those markets remain near full occupancy.”
Modleski espouses the same viewpoint. “While I believe that everyone appreciates the convenience of more things becoming virtual and accessible from their home, we’ve found that students want to get back to in-person classes,” he says. “We polled our residents across the country and had over 1,500 responses. Over 65 percent said their experience of online learning is less than positive with 92.36 percent of the respondents said they want to come back to campus. And even if school was all virtual, 87.4 percent want to live in a university town. This data is telling us that there is no replacement for the college experience They want social interaction with friends and community involvement and we’re thankful to provide a place for them to do so.”
Scott Sowers is a freelance writer.