Dissecting the Student Housing Boom

It’s impossible to ignore Columbia’s student housing boom.

Waves of student housing complexes dotted U.S. Highway 63 and Rock Quarry Road when the University of Missouri’s enrollment first began to swell in the mid-2000s. In recent years, developers have moved closer downtown and erected major projects along College Avenue, Locust Street and Ninth Street.

In fall 2015, two new housing developments will add hundreds of beds even closer to downtown. District Flats, The Opus Group’s hotly debated downtown housing project, will spread 259 beds in six stories on Eighth and Locust streets. Not far away, Todd Apartments will add about 350 beds in 103 units on Fifth Street and Conley Avenue. An even bigger complex with 718 beds at Turner Avenue and Providence Road is slated for an August 2017 opening.

The steady clip of Columbia’s student housing development comes at a time when the future of MU’s enrollment remains uncertain. Although the university admitted a record of 35,441 students in fall 2014, a projected slump in high school graduates nationwide and fierce competition for talent from other state schools means it’s likely MU’s enrollment won’t grow much in the immediate years ahead.

UM System projections suggest MU’s undergraduate enrollment will grow by about 1 percent annually between 2015 and 2019, a slower pace than the 2 to 6.5 percent growth MU had between 2007 at 2012. But even as enrollment growth slows, housing developments keep popping up.

Some, including prominent developers Jon and Nathan Odle, who developed the Brookside Apartments and Townhomes that span three locations around Columbia, have predicted a student housing bubble that’s about to burst. But vacancy rates at many complexes remain low, and some community planners say even higher rates would still signify a healthy local real estate economy.

‘Do we really need all these buildings?’

In the past decade, Columbia has gained more than 23,500 new residents and about 6,200 new apartment units. Much of Columbia’s growth came from a surge in MU’s student population. Fall 2014 enrollment at the university was 35,441 students, up from about 27,000 a decade ago. MU’s Department of Residential Life, however, has not grown at a pace that matches enrollment. In fall 2003, MU had 5,683 beds available for students and 374 apartment units, most of which were restricted to graduate students or students with families.

A decade later, MU had added about 8,000 students but only 627 residential beds and 70 apartments. Developers took notice, opening dozens of housing complexes designed for students.

“People say, ‘Hey, do we really need all these buildings?’” says Anthony Holmes, secretary and treasurer of the Columbia Apartment Association, an industry group that represents about 80 property managers, owners and developers who control about 3,000 student and family units in the city. “But it comes directly from the university. We’ve added in almost 10,000 students. MU has less apartment units than they had five or 10 years ago. That’s 10,000 people that needed to be accommodated.”

So far, luxury student housing complexes have boasted low vacancy rates. According to a study conducted in late 2014 by local real estate appraisal company Moore and Shryock LLC, student housing complexes were 4.72 percent vacant in fall 2013. At least 10 complexes were 95 to 100 percent occupied at the start of the 2013-2014 school year, according to Planning and Zoning Commission documents.

According to data from the U.S. Census Bureau’s American Community Survey, the 4.72 percent student housing vacancy rate was higher than Columbia’s overall rental vacancy rate, which sat at 2.92 percent in 2013.

The Moore and Shryock report suggested nonstudent rentals were 3.17 vacant, for an average vacancy rate of 3.61 percent citywide.

Although the overall vacancy rates were up from the 2 percent rate Moore and Shryock found in a 2011 study, student and residential rentals in Columbia are far more occupied than state and national averages. Statewide, rental vacancy rates were between 9.2 and 13.5 percent in 2013. In 2014, rates ranged from 9.4 to 10.3 percent.

Early estimates show the 2014-2015 school year has so far had similarly high student housing occupancy rates, even with the addition of The Den, a 552-bed property on Grindstone Parkway. Its occupancy rate for the current year is 97 percent, according to a commercial real estate financer that provided its developers with a loan of more than $23 million.

Even if occupancy rates were to dip, Holmes says more vacancies don’t automatically spell trouble for property owners. He says developers don’t always go after 100 percent occupancy rates. Some consider full occupancy to be a sign that they’re undercharging for their apartments.

“It depends on the philosophy of each individual business,” Holmes says. “There’s a lot of mix there. Some think zero [vacancies are] best, but obviously that’s not always realistic. People need room to move.”

‘We need to wait and see’

Developers, including Paul Levine, a principal at the New York-based Park 7 group best known for since-scrapped plans to build a 24-story high-rise student housing complex downtown, don’t see the student housing market drying up any time soon. Levine says the company considers student population and enrollment growth when considering future developments.

“Looking around the country, [Columbia] is definitely one of the strongest markets we’re looking at right now,” Levine said during a Planning and Zoning meeting.

Local developers Jon and Nathan Odle reached a different conclusion. To them, the 4.72 percent vacancy rate recorded in 2013 represented an oversupply of more than 902 beds. By their estimates, MU enrollment could swell to 38,000 students — a figure the UM System suggests MU will be just shy of by 2019 —without creating more demand for student housing.

“Every university market we have visited in the past two years states they will increase enrollment by recruiting out of state,” they wrote in the report. “Obviously, not all universities are going to be successful due to the decreasing pool of graduating high school seniors nationwide.”

Levine disagrees with the Odles’ assessment. In one Planning and Zoning meeting, he said he suspects MU’s enrollment will hit 38,000 in the next five years, especially as MU continues to attract international and out-of-state students.

“It is a very compelling school to come to, and that is why we are seeing [enrollment rise],” Levine said.

He dismissed the Odles’ report, saying there were “several things wrong with that” and noting that high school graduation numbers fluctuate, though the share of high school graduates who go to college has increased. Park 7 group was waiting in April on City Council approval to build an 849-bed student housing complex on Cinnamon Hill Lane.

The Odles decided to cancel a 1,200-bed complex in south Columbia and instead focus on smaller projects closer to campus. They say it would be at least four years before they consider building any large projects.

In the city, Moore and Shryock found that south Columbia, which has seen the highest concentration of new construction in the past two years, also has the highest vacancy rate despite historically being one of the least-vacant sections of town. The Odles cite these rates as among the reasons they called of the south Columbia development.

“Mizzou has a great track record and is definitely attractive, but as it pertains to undergraduate growth, we need to wait and see what happens,” they say.