Goodwin Insights August 12, 2020

Envisioning the New Normal: Real Estate + Technology: Part 5: Student Housing

This article is the fifth in a multi-part series examining the impact of the COVID-19 pandemic on select real estate sectors and the considerations around how technologies will shape future operations and accelerate means to re-entry of physical space.

While industry experts continue to believe that the student housing sector will remain a long-term source of reliable income streams, few other real estate asset classes have as many questions surrounding their short-term prospects. The onslaught of COVID-19 has sparked a shift toward the dedensification of student housing, a trend that many experts believe will endure beyond the ongoing pandemic and lead to a strong long-term market for increased on- and off-campus student housing capacity. But in the short term, some owners and operators of student housing assets have struggled to face the challenges posed by everchanging reopening protocols implemented by states, municipalities and colleges across the U.S. that simply cannot predict what life will look like even one or two months down the road.

This challenge has been felt in markets around the world. In the UK, which has a high dependence on overseas students, experts forecast up to a 75% reduction in enrollment by foreigners in universities in September due to the pandemic, despite borders remaining open. The UK Government has also made it clear that students behind on rent are protected from eviction by tenant-friendly rules1 announced by the Ministry of Housing, Communities and Local Government.  As UK student housing operators brace for a substantial fall in general occupancy levels, as a short-term response, and to take advantage of the fact that many student facilities are located in town centers and close to teaching hospitals, some have entered into short-term revenue agreements with the National Health Service and local councils to allow the housing of essential medical workers, as well as vulnerable individuals including the homeless.

Every owner of real estate confronts different challenges in the various markets in which it operates, and student housing is no exception. No two academic institutions are the same – each is in a different community, with a unique student body and varied facilities capable (or not capable) of being utilized to overcome the hurdles presented by bringing students back to school during the pandemic. As each institution formulates and presents its own specific reopening procedures, student housing providers have been forced to become increasingly agile, adjusting their operations to accommodate the different circumstances faced in each university market in which they operate. However, despite the fluctuations facing student housing operators working to implement their own reopening protocols, many have come to understand a consistent theme – technology will be an integral element of reopening during the COVID-19 pandemic and in the efficient and successful ownership and operation of student housing going forward.

Portfolio Analytics

As the COVID-19 pandemic has thrown many owners of student housing assets into a reactionary tailspin, innovative operators have used technology to become more agile and responsive than ever. “Despite how resilient our sector has been throughout the pandemic,” said Eric Bronstein, Executive Vice President of The Scion Group, “there hasn’t been a time that we’ve been more appreciative of our investment in (or focus on) technology.” A forward-thinking operator of student housing across 38 U.S. states, Scion has been at the forefront of the proptech movement. The management team has had dedicated software engineers on staff for several years, and has made a sizeable investment in developing a digital platform to facilitate contactless leasing activities, monitor occupancy and collection rates in real time, and quickly capture and analyze market data focused on their revenue profile. “It’s become clear that our ability to collect real time information on what we’re seeing across our portfolio is a distinct competitive advantage, which has been especially impactful throughout the pandemic,” said Avi Lewittes, Scion’s Chief Investment Officer. The Scion Group has offered the information it has gathered through its advanced digital platform to the student housing community in a uniquely collaborative way. By providing access to this information to other owners of student housing, Scion has helped potentially wayward operators avoid making decisions that would not be in interest of the sector at large out of panic or lack of information. When the COVID-19 crisis wanes, student housing owners with antiquated asset management programs and significant portfolios will need to quickly implement the type of digital platform successfully utilized by Scion if they intend to keep up with their competitors in the future.

Integration of Technology

In certain ways, developers of student housing have been at the forefront of the integration of technology into real estate operations. Marketing and customer acquisition, for example, have long been conducted virtually by managers of student housing, as the demographics of the consumer base – young and tech-focused – forced operators to become early adopters of digital engagement. The COVID-19 pandemic has accelerated this process even more, and many operators expect contactless communication with residents to be key to ensuring an efficient and safe reopening. As Lewittes pointed out, “what has been trending towards digital engagement with residents is slowly shifting to all-digital engagement with residents. We may soon be able to communicate with our residents exclusively on a digital basis.”

As institutions, students and parents have expressed concerns about returning to campus in September, operators have responded in a myriad of ways. In the UK, large operators like Unite Students (a London-listed REIT providing accommodations to approximately 50,000 students in approximately 140 buildings) is promoting technology to aid social distancing. For example, using a branded app, students can check into accommodations, book a cleaning or maintenance request rather than visiting reception, avoid queues for laundry by monitoring in real time when machines are available, and communicate with fellow students via virtual chat groups.

From a physical perspective, housing will be somewhat transformed when students return – common areas and traditional amenity spaces may be closed or redesigned to ensure that students socially distance from each other. Smart sanitizers are being installed in strategic areas to allow students to disinfect their hands as often as possible before touching door handles and other surfaces. Social events and programming, long a staple of student life, will be limited or prohibited entirely, except in those communities run by tech-forward operators offering creative virtual programming. From an operations perspective, innovative managers of student housing will utilize new technologies to provide an increased level of safety to residents, in addition to traditional services. Basic maintenance requests can be addressed with “how to” instruction videos so that maintenance personnel can avoid entering units absent an emergency. Some operators of student housing are working to incorporate high tech filtration systems into their infrastructure wherever possible. Contactless temperature checks using infrared body temperature sensors are being considered by operators of premium facilities – these can be installed at entrances to allow staff or security to be instantly alerted if a student or visitor has an elevated temperature, assisting in government track and tracing programs. GMH University Housing has purchased electrostatic sprayers for all of its assets, a revolutionary tool that sprays an electrostatically-charged mist which allows sanitizer and disinfectant to remain on the target, whether it be a door handle or a laundry machine, for a longer period of time. “We want our tenants to both feel safe and to actually be safe from the coronavirus,” said Rand Ginsburg, Senior Vice President of GMH Capital Partners, the owner of GMH University Housing.

Long-Term Evolution

Many industry experts believe the changes being made at the asset level to student housing facilities will make them safe enough to welcome back responsible students, but some of those modifications are likely to be short lived. Ultimately, communal living is a desired part of the student experience. Students generally prefer to live and learn amongst their peers, and so the hope is that, once the COVID-19 pandemic is under control and a vaccine is readily available, owners of student housing will be able to offer the type of socially-engaged living experience students have come to expect.

However, the student housing sector is undoubtedly undergoing an evolution that will resonate in the future. Just as residents are sure to desire contactless all-digital engagement with managers, owners of student housing portfolios will unquestionably covet the type of real-time data analytics offered by innovative digital platforms. Despite the uncertainty surrounding the upcoming school year, investors in student housing remain excited about the long-term prospects of the sector. “In my opinion,” said Jim Kirby, Executive Vice President of GMH Capital Partners, “a huge opportunity is coming. Schools will be looking to create new housing in three ways – razing and rebuilding existing properties, creating public/private partnerships to develop new assets, or simply looking to the private sector to provide more residential space.” Not only is the dedensification trend likely to yield increased demand for new, spacious product, but many colleges and universities have also realized during the pandemic that their obsolete student housing stock should likely be renovated and managed by third-party professionals who operate residential assets as their core business. “I think universities are realizing that this is an issue that transcends the academic and private sector,” said Ginsburg. “Collaboration on the needs and safety not only of the student community, but the extended community of our host locations, are driving us all to work together to solve this.” While the COVID-19 pandemic has plagued the commercial real estate industry with uncertainty and initiated a constant loop of optimism and bullishness followed by doom and gloom, there are reasons to be optimistic: participation in higher education continues to grow, universities have expressed a desire to have students back on campus (acknowledging that virtual classes are not a long-term substitute for face-to-face experiences), and overseas students continue to value tertiary education in top-tier jurisdictions like the U.S. and UK. As schools and student housing providers get ready to return to a new normal, one thing is certain: those who include technology as a component of their response to this crisis will be best positioned to thrive.

PART 6 PREVIEW: MULTIFAMILY

The next article in our Envisioning the New Normal: Real Estate + Technology series will focus on the multifamily sector.  COVID-19 has accelerated the implementation of many existing technologies at multifamily properties, such as virtual tours, smart locks and tenant smartphone applications and/or web portals.  The new work-from-home model also has required landlords and managers to consider technological changes such as increased internet connectivity and security, as well as fundamental changes to design including larger public workspaces, and the re-imagination of unit layouts in new developments.  Multifamily operators should recognize that virus-driven technological innovations and tenant demands are here to stay, and can increase profitability in the new normal.


1 https://www.gov.uk/government/publications/covid-19-and-renting-guidance-for-landlords-tenants-and-local-authorities