Student Housing Business

MAY-JUN 2018

Student Housing Business is the voice of the student housing industry.

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Page 86 of 88

WHAT'S ON MY MIND May/June 2018 86 O Ongoing construction and 'healthy' develop- ment pipelines for on- and off-campus student housing continue to alter the landscape of col- lege campuses and disrupt basic supply and demand fundamentals. As a result, we've wit- nessed many markets become overdeveloped and saturated with housing supply, present- ing a unique set of challenges that influence the way we both evaluate new investments and operate existing assets. From an operational perspective, the aggres- sive pace of new development has created its own set of obstacles. As overdevelopment disrupts the balance of supply and demand in a market, we see a direct impact on future rent growth and vacancy rates. However, these challenges are not unlike those we have faced in the past in markets that have experienced declining enrollment or adverse university housing policies. The lessons learned from these setbacks can be applied to effective- ly overcome the challenges of a saturated market. The first and most critical step, you must admit to a shift in the balance of supply and demand, acknowledge that the imbalance may persist for several years, and that your asset is not immune to the market impact. The imbalance doesn't happen overnight and, as a result, it can't be remedied overnight. Patience and a long-term business plan are paramount to success. It is critical to anticipate the chal- lenges ahead to implement proactive strate- gies and mitigate setbacks before they arise. At Coastal Ridge, we've taken many of our lessons learned, and attempted to summarize those into a brief action plan for operators in these challenging situations: 1. Honest Assessment: Objectively assess the strengths of your asset as it relates to the current market and development pipeline. Understand precisely what your asset is and, just as importantly, what it is not in the eyes of potential residents. That knowledge paired with a constant awareness on pricing and con- cession trends can help you become a more effective target marketer. 2. Study the Data: In a market where supply and demand has shifted, you must make data driven decisions focused on pre- serving occupancy versus chasing unrealistic rent growth. It is important to recognize and accept that every asset will be finan- cially impacted in a saturated market. Numbers don't lie, so make objective decisions based on the numbers not emotion. 3. Build the Right Team: Focus on build- ing and retaining best-in-class site level teams led by excellent business managers who understand their impact on the value of an asset. Owners must have excellent site level managers, who are self-motivated and thrive in competition. Pricing and concessions are irrelevant if you don't have the right people in place to capitalize on each sales opportunity. 4. Develop and Maintain a Flexible Strategy: Be nimble and consistently com- pare your performance versus expectations. Do not hesitate to pivot if necessary, but do so quickly. For instance, if bed supply increased 10 percent, while enrollment remained static and you begin falling behind your pre-lease expectation curve, you must adapt your strat- egy. Leverage those with different skill sets to help observe your asset's performance with a keen sense for remaining ahead of the curve. 5. Lease (and Renew) Early: If you are in a saturated market or there are projects delivering in the development pipeline, it is important to make an aggressive leasing push before the competition. Do your research on the front end to ensure you set rents appro- priately for your market. And remember, it is critical to secure lease renewals as soon as possible, ideally during the first month of tenancy. This will dramatically assist in managing marketing strategies, budgets and vacancy. 6. Active Reputation Management: The reputation of a brand can mean the difference between having the funds to make improve- ments or watching the property deteriorate. The same can be said for student housing where you must manage your reputation in the market. This means surveying your residents, monitoring web- sites where tenants can rate your com- munity and talking with the admis- sions department at nearby schools. The community, as well as past and present residents, can be stewards for your property, but a prop- erty manager must listen to the feedback in order to adapt to their needs. 7. Always Be Prospecting: Prospecting for new tenants is key to the leasing success of a student housing community. It is important for the property manager to have a protocol for handling potential tenants. This includes everything from answering the phone and conducting property tours, to events and lead generating marketing campaigns. A property manager and their team must always be look- ing for new ways to reach potential tenants in a competitive market. Then cater to prospects by being available to answer questions and tour the property to get them to the leasing table. In summary, owners and property man- agers of student housing communities will continually face market challenges, however, an analytical, proactive, and adaptable man- agement approach can help overcome these obstacles and lead to the success of your prop- erty in spite of any market headwinds. Patrick McBride and Jay Harkrider are managing partners of Coastal Ridge Real Estate. PATRICK MCBRIDE Managing Partner, Coastal Ridge Real Estate Crowded Conditions Position your student housing community to weather overdevelopment. Patrick McBride and Jay Harkrider JAY HARKRIDER Managing Partner, Coastal Ridge Real Estate

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