CRE Investors Eye College Towns

Businesses in college towns are not strangers to the benefits their respected colleges bring to their communities, particularly when it comes to a steady stream of income from …

Businesses in college towns are not strangers to the benefits their respected colleges bring to their communities, particularly when it comes to a steady stream of income from students who need food, shelter, jobs and entertainment. The colleges themselves also provide ample annual growth in the form of job creation, tech innovation and the need for services. That’s why commercial real estate investors are now looking more closely at college towns, particularly the ones with the fastest-growing populations. Many data firms track these statistics and those that are landing at the top of the charts are seeing more investment in commercial real estate. For more on this continue reading the following article from National Real Estate Investor.

Colleges and universities are a boon to local economies in more ways than just providing a steady supply of students who fuel demand for beer and pizza joints.

Academic institutions are often the life blood for many “college towns.” In addition to hosting a ready-made pool of consumers, schools often serve as a major employer and a community partner who helps to seed innovation, research and business growth. That stabilizing presence is a quality that commercial real estate investors are valuing more highly these days. “The university is a key part of a larger whole that makes this an attractive area for businesses to locate, and by extension, keeps our commercial real estate market reasonably healthy,” says Jay Taylor, managing director for the Raleigh office of Sperry Van Ness.

A new ranking of “America’s Fastest-Growing College Towns” produced by SpareFoot, an online free marketplace for self-storage rentals, offers added insights on those cities that are out-performing their peers. Just like any Big Ten or Pac-12 conference showdown, making it into the top bracket for these college towns means facing stiff competition. Cities that made it into the top 15 posted a population growth between 2000 and 2010 that exceeded 20 percent—well above the total population growth in the U.S. during that period of 9.7 percent.

Raleigh, N.C., which is home to North Carolina State University, grabbed the top spot as the fastest-growing town on the list, with a population growth of 46 percent from 2000 to 2010. Raleigh bested second place finisher College Station, Texas (Texas A&M University), which had a growth rate of 38 percent. It is tough to peg Raleigh as just a college town. True, NC State has a powerful influence on the economy with more than 25,000 students and it is one of the top employers in the city with 7,700 workers the city. Yet the city also has its own diverse economy.

That being said, the academic influence on the larger “Research Triangle” area of Raleigh, Durham and Chapel Hill, which are also home to major institutions such as Duke University and the University of North Carolina, cannot be denied. In fact, Chapel Hill also made the list in the No. 16 spot with a notable growth rate of 17.5 percent thanks in large part to the University of North Carolina. All three major universities contribute key components to the local economy, notes Taylor.

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Other fast-growing cities that round-out the top five include Las Cruces, N.M. (New Mexico State University) at 31 percent; Gainesville, Fla. (University of Florida) at 30 percent and San Marcos, Texas (Texas State University) at 29 percent, according to SpareFoot.

Colleges fuel growth

Some of the biggest benefactors to that growth are the housing market, retail and restaurants. Self-storage facilities also thrive on both population growth, as well as people in transition. College towns are a magnet for student housing REITs such as American Campus Communities, Education Realty Trust and Campus Crest Communities. Yet college towns also spark demand among the broader apartment market.

San Marcos, for example, has seen an explosion of new apartment projects. San Marcos saw five new apartment complexes completed earlier this summer, adding approximately 3,530 new units to the market. All of them are aimed at attracting students from TSU. Texas State’s enrollment growth is part of the reason fueling that new development. In 2012, Texas State set a new enrollment record for the 15th straight year with 34,225 registered students. The university also changed its campus housing requirements, requiring students with fewer than 30 credit hours—down from 60—to live off campus.


Many of these colleges and universities have been growing because more students are going to school or staying in school longer in post-graduate studies due to the challenging job market. “There have been a lot of new student housing projects built, not just in Gainesville, but in Tampa and Orlando and just about every major college town,” says John Stone, managing director, multifamily services / foreign investments at Colliers International in Clearwater, Fla.

For example, Stone brokered the sale of Martin’s Landing Apartments in nearby Lakeland, Fla. The property had gone back to the lender through foreclosure. The 236-unit property sold through auction in April 2012 for a price of $6.8 million or $29,034 per unit. In this case, the property offered the opportunity for buyer Integitas Residential LLC to acquire a value-add investment property for well below replacement cost. The new owner plans to invest upwards of $20,000 per unit on renovations for the market-rate apartment property.

Barriers to entry

One of the hurdles for new commercial real estate development is finding building sites close to those campuses. College Park, Maryland ranked 10th among fastest-growing college towns with a population growth of 23 percent. Certainly, there are developers who would like to capitalize on that growth by locating projects near the University of Maryland and its nearly 27,000 students. Yet one of the challenges is a lack of land in this urban community that is located within the Washington, D.C. beltway.

The campus sits on 1,250 acres that is bordered by homes and neighborhoods that have been around for 60 to 70 years. “So, it is a unique situation in that it does not have the sprawl of a suburban campus surrounded by hundreds of acres where the college can do whatever it wants to attract industry or developers,” says Kevin Greaney, a vice president in the Columbia, Md. office of Cassidy Turley.

A Baltimore-based developer recently approached the university about developing the university’s golf course into a $100 mixed-use project that would include student housing, office and retail. Although that proposal will undoubtedly be met with opposition due to the loss of green space, the golf course is one of the few development options for the university that remains largely land-locked, notes Greaney.

Maryland developers have found success along the Route 1 corridor by purchasing older properties and redeveloping the area to create higher-end amenities to serve both the student population and the surrounding residential population. “That has been a great plus to that area,” adds Greaney.

This article was republished with permission from National Real Estate Invesetor.


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