Over the past decade, numerous universities around the country have gone to private student housing companies to fill their needs. Here are three reasons why this trend could gain even more steam:
A lot of the dormitories on college campuses today were built for the last onslaught of students to hit college—the Baby Boomers in the 1960s. Universities worry that aging stock can be a competitive disadvantage with today’s Gen Y-ers. “Colleges and universities, in order to recruit and retain students, need market-based solutions acceptable to today’s customers,” says Bill Bayless, CEO of Austin-based student housing REIT American Campus Communities (ACC).
Preservation of Capital
It’s now old news that state legislatures are tightening the purse strings on their institutions of higher learning. Borrowing is an option, but universities are hyper sensitive about dinging their credit capacity. “Universities want to utilize the limited credit capacity for the core academic mission of institution and rely upon the private sector for housing,” Bayless says.
The core mission of a university isn’t to deliver housing. Yet with total enrollment in postsecondary degree-granting institutions expected to increase 13 percent between fall 2009 and fall 2020, according to the National Center for Education Statistics, housing is something many schools will need to provide more of. “Schools are looking for solutions to fulfill their commitment to students. So they’re looking to the private sector, which can go out to the capital markets and raise funds,” says Tom Trubiana, chief investment officer of Memphis-based student housing REIT EdR.