Insight Blog

Two Top CRE Asset Classes Unite

Two Top CRE Asset Classes Unite According to a June 2021 article on Commercial, student housing appears to be a solid option for commercial real estate investors. Its profitability growth projections exceed those of office space, shopping malls, and hotels.

Pre-pandemic in 2018, the U.S. student housing sector saw a collective investment of $10.9B with private capital buyers responsible for two thirds of the transaction volume.

Even with a 3.5% drop in post-secondary student enrollment between spring 2020 and 2021, COVID safety protocols renewed a demand for more spacious, private living quarters, thereby resulting in construction starts against statistical odds.

Two other commercial real estate asset classes poised for growth are self-storage facilities and senior housing. In recent years, some colleges and universities have become involved in the development of senior housing. It has even earned an acronym: UBRC (university-based retirement communities). As more institutions commit to building and managing these communities, it seems the demand will match the supply. Based on U.S. Census data, there are 94.5 million Americans aged 55 and over, and they constitute 30 percent of all renter households.

How are these senior communities affiliated with higher education institutions?

In select cases, the communities lease land from the institution’s real estate portfolio, providing another source of revenue. In other cases, the retirement communities are situated close enough to campus that residents can share amenities (pool, fitness center, library) with students and attend school-sponsored events.

Most events are easily accessible within these walkable communities or via campus transportation—eliminating the need for a vehicle. That can eliminate cause for concern for some older seniors and ease transportation and parking issues for the university.
Then, there is the convenient access to top healthcare systems, which often include academic medical centers supported by university research. For example, Oak Hammock at the University of Florida has access to UF Health Senior Care run by the University of Florida College of Medicine physicians and nurse practitioners.

At the same community, residents can take part in the Institute for Learning in Retirement (ILR). ILR offers continuing education classes taught by University of Florida professors and experts in particular fields of study. Subjects range from literature, art, and music appreciation to sciences and also include history, philosophy, creative writing, and current events. While these classes are held onsite at the community center, some schools encourage seniors to enroll or audit classes on their campuses, providing an opportunity to interact with more students. An example is University Commons, bordering the north campus of the University of Michigan. The condominium community describes their environment as “university oriented, academically inclined and intellectually curious.”

Other chances to interact with a younger generation can be the emotional draw to this unique union. Through tutoring and mentoring opportunities, older residents can feel needed and fulfilled, and the benefits are not one sided. Students away from home or those missing their family members can befriend older residents, learn from their life experiences, and feel more connected to the outside world. Students may also earn credit for volunteer work that involves assisting the aging population with errands or home chores.

The takeaway?

UBRCs seem ideal for an active, vibrant population who wants to utilize amenities and does not require assisted living nor a high level of medical care. The housing can provide alternate income to colleges and universities in a time when undergraduate enrollment is steadily decreasing.

The downside?

UBRCs are not affordable for all Americans often requiring a sizeable entry fee; however, because the fee is intended to offset health care costs, in some cases, it can be refunded to residents, their heirs, or their estate if the care is not needed.

In conclusion...

Campus housing does not always allow students to keep their belongings at school during the summer months; students have to find a safe location near campus to store things or move them to a relative’s house. Renting a seasonal storage unit near campus would be a convenient and cost-effective solution. If college and university campuses begin investing in self-storage facilities, we could experience a confluence of the three CRE asset classes with the greatest projected growth over the next four years!

To discuss real estate trends or facilities planning within higher ed, please contact us to connect with a Helbling search consultant.