BOTTOM LINE: MARKET OPPPORTUNITIES

APARTMENT FINANCE TODAY • NOVEMBER/DECEMBER 2007

What Students Want

To be successful in the student housing business, take cues from the hospitality industry. Great customer service is the ultimate goal.

By Dana Enfinger

Off-campus student housing is a growing niche market. Students want to be around other students, yet still feel they have a respite from campus. They are looking for an adult off-campus atmosphere. Sounds simple enough. Not exactly.

“This has been a trend in the last five or six years, this idea of purpose- built housing for students,” said Kirk Preiss, chief financial officer of The Preiss Co., based in Raleigh, N.C. “Approaching student housing like the conventional apartment building won’t work,” he added. “An operator has to be eaten up with the business.” Preiss’ firm operates 17 student housing properties in Alabama, North Carolina, South Carolina, and Texas. The developer has three projects in the development stages in Clemson, S.C., and Raleigh, N.C.

The key to serving this market is understanding what students want, experts said. And that’s always changing. Freshman and upperclassmen want different things, according to a recent study conducted by the National Multi Housing Council (NMHC) and J. Bruce Innis, a consultant with InnesWorks Consulting. The study included input from 140 students at nine universities. Most freshmen care about social opportunities and the ability to have pets, the study found. (At several Preiss properties, students may bring their pets.) Upperclassmen want to know about the lease terms and conditions as well as specific amenities: study areas, fitness centers, barbecue grills.

“Freshmen really want to be able to meet people and feel connected,” Preiss said. “This is their first time they’re on their own. They may be cool with sharing a bathroom for a while. They’re like, ‘Sure. Whatever.’ But when they’re sophomores and juniors, they’re like, ‘I don’t want to share. I want my own space.’”

Developers should find out what a school’s policy is toward freshmen before trying to market to them, said Gary M. Tenzer, principal and senior director of George Smith Partners, a Los Angeles-based real estate investment banking firm that has financed a number of student housing deals.

“You are wasting a lot of time if the university requires freshmen to live on campus,” said Tenzer.

The design of these student communities is important. Students typically want their own bedrooms and bathrooms. Common areas where students can mingle are important to freshmen. Upperclassmen want to hear about what sports-related amenities are available on site.

“I would say to someone just starting out in this business to talk to an architect who has designed these projects before,” said Tenzer. “If you don’t, you’ll probably fail, and fail miserably.”

Security is also important to students and their parents. At the Preiss properties, an off-duty police officer lives in one of the units rentfree.

Students are also impressed by a gated entry (it’s a “wow” factor if students can open the gate using their cell phones, according to the NMHC/InnesWorks study), cameras, patrols, and good exterior lighting. Parents are particularly impressed if a night-lit photo of the parking lot is featured in marketing materials.

The most important aspect of a property for students is the customer service.

“We are talking about customer service of a much greater magnitude than service at conventional apartment properties,” said Preiss. “We want to be the buzz all around campus.”

To be “the buzz,” Preiss properties host parties on a regular basis. “They are destination parties, not like when a regular apartment holds a party where tenants go just to get their free buffalo wings,” said Preiss. The firm hosts trivia contests, prize giveaways, and events connected with activities on campus. The firm will hold tailgating parties before games and then transport students to and from games.

“The attitude you have to have is you’re a cruise director or a camp counselor,” said Preiss. “The students are your guests. They are always a part of your environment. We have taken soup to kids when they’re sick.”

If you don’t make a connection with students, they will go elsewhere the following school year.

“If you can keep more than 30 percent [of student residents] every year, you’re doing pretty good,” said Preiss.