The current trend in student housing over the past few years has geared away from dormitories and more towards high-end apartments with swimming pools and party rooms. Another emerging trend seems to favor easy student access to restaurants, shops, and even hotels. Not only do students want to live close to campus, they also want to be able to have the convenience of proximity to food, coffee, and retail. Developers are trying their best to respond to the students’ demands.
Of course, the added amenities and the closeness to school and retail areas will come at a price, not only for the students, but also for the developers. In the past, student-housing developers wanted nothing to do with retail because mixing asset classes would make the projects more difficult to finance. But given the circumstances of these new trends, it is not uncommon to see mixed-use in 20% to 25% of assets being developed. Since most banks only lend on one asset-class type, it is more difficult to convince lenders to sign on. The difficulty becomes worth it in the end because the close retail stores give projects a competitive advantage, and therefore allows the apartments to rent at a premium.
With college students averaging more than $15,000 in annual spending, the desire for retail near student housing is increasing. Although, not all industry experts are keen on integrating retail space near student housing. Kevin White, an acquisitions director at Virtus Real Estate Capital points out that many stores located near student developments can struggle to bring in customers. With experts leaning both ways on this issue, only time will tell which way this trend will sway.