How Long Will Student Housing Be Big Business?
Even with high turnover and messy tenants, returns are stable for now. But demographic shifts could hurt demand.
The London, a student housing complex in College Station, Texas.
Source: CLS Living
Isaac Sitt and Elliot Tamir had been investing in real estate for years when they stumbled onto the idea. They’d bought a few apartment buildings in Brooklyn in 2008 and, after the financial crisis, were struggling to rent units. So they decided to put up ads at the nearby Wyckoff Heights Medical Center, expecting to lease to doctors. Instead, they got medical students. With jobs scarce, tons of people were going to school, they realized. Sitt remembers thinking, “Hey, this is a good business,” even in a downturn. “Not only does it make sense, but I think we can raise equity for it.”
Today, Sitt and Tamir run Vesper Holdings LLC, one of the largest owners of student housing complexes in the U.S. If you’ve visited a college town such as Athens, Ga., or Lawrence, Kan., in recent years, you may have seen one of their properties. They have names like The Ivy and The Gramercy, meant to evoke a boutique hotel. Many have pools, study areas with free Starbucks coffee, and “gyms that look like Equinox”—the kinds of amenities, Sitt says, that millennials really want. It’s been a lucrative niche. One of the few dangers for the business is bringing back the draft, Sitt jokes. “That would be a problem for the college population,” he says. The other, he adds, “is overbuilding.”