The student housing sector is not the industry’s Sleeping Beauty anymore. The number of students attending universities is growing and this is due mostly to the ease of obtaining loans. As a consequence, the demand for this type of accommodation is surging, which makes the segment appealing to investors. Sales volume almost quadrupled in the last six years, according to Rick Graf, president & CEO of Pinnacle.
According to Yardi Matrix data, Pinnacle Living owns and manages more than 150,000 units of which roughly 18,000 beds at 34 universities across the country, from San Diego to Syracuse, N.Y. In an interview with Multi-Housing News, Graf shares his view on the student housing industry, but also touches on what it takes for a property management company to stay ahead of the game in 2019.
Tell us about your view of the multifamily market in general and the student housing sector in particular. What are the main trends?
Graf: In general, the multifamily market remains robust. Demand has not lessened due to very strong job growth in nearly every market. With respect to the student housing sector, we continue to see institutional acceptance and desire to expand holdings into this niche subset of multifamily real estate. Transaction volume in student housing topped $11 billion in 2018, up from $3 billion just six years ago. It is important to note that student housing is significantly more management intensive and multifamily investors should be cautious to partner with operators with specific expertise in the nuances needed for success.
Could you single out one trend that is gaining popularity in the student housing property management sector?
Graf: A sea change has come to student development. While student housing properties rival high-end multifamily properties, the arms race of amenities has turned from wave pools and golf simulators to more passive study and meeting spaces, and state-of-the-art digital entry systems to enhance the college experience.
What strategies do you use to keep student housing communities attractive to residents and competitive in their markets?
Graf: High-speed reliable broadband services are essential. Pinnacle uses digital resident portals that provide instant notifications and allow 24-hour access to expedite activities like lease applications, move-out posts and package room deliveries so they can be managed on an electronic system during the residents’ schedule rather than the property’s normal staffing hours.
Which student housing markets are now growing and why?
Graf: The markets are filled with unexpected twists and turns as employment sectors continue to change.
What are the main challenges in the student housing sector?
Graf: Current and future development must be in step with university growth, rather than occur under the “build it and they will come” philosophy. This mindset can send some markets into a disequilibrium that negatively affects all assets in a market. The challenge is to find the equilibrium market to market.
What does it take for a property management company to stay ahead of the game in 2019?
Graf: The ability to thrive and prosper in the property management business is based largely on the company’s success with attracting and retaining the best and brightest in the multifamily space. Jobs are hard to fill in the current economy and sometimes we have to get creative by introducing people into the business from other sectors, such as retail, hospitality etc. Pinnacle also stays ahead of the game by collaborating with our clients. While we are not financial partners with them, we take a partner’s approach to making their investment very successful.
What green initiatives have you recently implemented in the properties you manage and how do you plan to expand such practices in the future?
Graf: Pinnacle is constantly working to enhance our sustainability approach. We use green products in our renovations and drive our overall efforts by partnering with owners and suppliers to provide energy and water-saving appliances, fixtures and methods to the properties that we manage. Pinnacle is also rolling out a sustainability guide for all of our properties in the early part of 2019 that will list purchasing considerations and best practices for many of our products.
How does Pinnacle use technology to improve its services?
Graf: Pinnacle is a great believer in leveraging technology to enhance the resident’s experience by keeping it very positive throughout their life cycle at our communities. We also use technology to make our operations more efficient. Pinnacle is constantly vetting new products to make sure we are on the cutting edge of technology and we actively review our offerings to make sure we meet the needs of the market.
What are Pinnacle’s goals for 2019?
Graf: Our goal is to enhance property level performance for our clients and to improve the operating margins for our shareholders.