Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/870737
COMMERCIAL INVESTMENT REAL ESTATE 32 September | October 2017 Tansey brokers transactions and develops retail opportu- nities for the University of Iowa campus in Iowa City, Iowa. Previously, he was an owner of student housing properties. "We work to educate small investors about student hous- ing, which is not a quick- profit investment," he says. "Cap rates are below market, and undergraduate students are not good caretakers of properties." Likening student hous- ing to a n a r ms race, he says as an owner it's tough to keep up with needed renovations and desirable new amenities. As an alternative, Tansey finds the student-specif ic retail market is a good niche for investment. While Iowa City is a tertiar y market, Tansey is working with more big players because " lots of opportunities in the primary and secondary markets are picked over." On the upside for invest- ment, "student housing does well when the econ- omy is strong and is stable in down cycles," Tansey says. Building Reputation Establishing and maintaining a good reputation at universities is a top priority. Those colleges attract high-quality students, drawing from greater num- bers of applicants. "Due to the substantial capital investment required to develop and establish real estate invest- ments, it is risky for an investor to be the first to move into areas where a particular university has not established its gravitational pull for attracting other viable commercial endeavors," says Mario Guevara, CCIM, real estate project manager at Silver City Partners Ltd. in Winter Park, Fla. The management of student housing investments requires providing capital management, overseeing the property, and keeping up with the local eco- nomic pulse. "Due to constantly evolving tastes, student housing assets have to comply and conform to market trends, which usually means large capital infusions," he says. In Guevara's market, the University of Central Florida hit its stride in the 1990s and has been strengthening its undergraduate and graduate pro- grams ever since. Through its 54 years of operations, increasing numbers of its graduates have found good jobs locally. For instance, UCF provides many engineers to nearby Cape Canaveral. Specialized positions in the military, Walt Disney World, and other entertain- ment businesses are other good employers for UCF graduates. Describing the Orlando metro area as "bursting at the seams," Guevara sees UCF spurring multiple offshoots, which create opportunities for other busi- nesses to flourish. In turn, this propels demand for more commercial property development. Midwest Hub College towns like Columbus, Ohio, often have more than one major university to support the expansion of student housing, as well as other com- mercial property development. Yet even with 20 universities and colleges in the Columbus metro area, The Ohio State University stands out for its consistently robust enrollment growth — between 5 and 10 percent annually. During the past five years, higher numbers of students have fueled nearly $2 billion in construction. Of that budget, 25 percent was invested in reno- vations and newly built on-campus dorms to support Ohio State's mandate in 2016 for sophomores to live in on-campus university housing. Previously, only freshmen had to live on-campus. Despite the loss of sophomores to on-campus hous- ing, Steve Reynolds, CCIM, predicts 10,000 more residential units will be added to the core urban cen- ter of Columbus. "I don't see any reason for student housing to slow down here," says Reynolds, owner of Pinnacle Associates in Grandview Heights, Ohio. "If the economy tanks, Ohio State enrollment will not decrease from 66,000 students to 33,000." As an investor in student housing, he advises buyers "to buy right, sell right, and know what you're buying into, such as student housing built close to campus." Retail Gems In the past decade, some large universities show sig- nificant shifts in students living on campus versus 232 2015 | 169 41,509 2015 | 29,870 107,175 2015 | 72,693 $4.685M 2015 | $3.2M $200,915 2015 | $199,298 $67,769 2015 | $73,439 37.3% Total Transactions 39.0% Total Units Sold 47.4% Total Beds Sold 46.4% Total Sales Volume 0.81% Average Price per Unit -7.72% Average Price per Bed Tier One 2016 Year-End Report 20K+ Enrollment Source: Real Capital Analytics published by Colliers International Student Housing Group