At Landmark apartments, just steps away from the main campus of the University of Maryland, upperclassman Jordan James and her mother Gia were unloading groceries into the stainless steel refrigerator in her two-bedroom unit.
The rest of the apartment, which came complete with a 50-inch flat-screen television, hardwood floors, en suite bathrooms and an in-unit washer/dryer would rival any luxury condo in any major city in America.
"I just like having my bedroom and then also a living area, which you don't get with dorms. You're all in one area, and you have to live in a tiny kind of box," reasoned Jordan. "And being close to like my chapter house and the shopping areas, and obviously, like, Chipotle."
This type of student living is fast becoming standard at large public universities across the country. Residential developers are pouring money into the sector, upping the ante on amenities and seeing occupancy rise. Approximately 47,700 new beds are expected to come to market in privately owned, student housing properties for the fall 2016 semester, with universities in the Southeast the primary target, according to Axiometrics, an apartment research firm.
"Privately owned student housing is quickly becoming an integral sector in real estate, and performance metrics demonstrate its strength," said Jay Denton, senior vice president of analytics at the firm. "Axiometrics forecasts rent growth to remain strong over the next five years and occupancy to stay above 95 percent, as enrollment continues to rise nationwide."
Enrollment is particularly strong at state universities, which are actively recruiting out-of-state students in order to meet higher costs and offset budget cuts. Those students are filling up off-campus housing at a fast clip, and the schools can't afford or even keep up with construction. That is why companies like Chicago-based CA Ventures, a residential real estate developer with student apartments in several states, are getting a fresh look from investors.
"The interest really started two or three years ago. A lot of the capital — institutional investors — needed to be educated on the space itself and what it meant to be in student housing. We had to do a lot of convincing that it wasn't all 'Animal House' structures, but actually really stable cash flow properties," said J.J. Smith, chief operating officer of CA Student Living. "Now that we have educated the institutional world, we're seeing a lot of capital interested in these properties."
Luxury student housing is really in its infancy, and developers like Smith see a long runway ahead. Markets can shift, year to year, as some campuses meet capacity, but there are always others lying in wait. Developers used to focus on more affordable, garden-style apartments farther from campus.
"More recently what we've seen is pedestrian-oriented infill walkable high-rise construction at major universities and those are becoming much more in favor from an institutional capital perspective. They're seen as more stable because they have the location more than anything else," said Smith.
And apparently parents are willing to pay the premium, which can be between 10 and 40 percent more than a university dormitory, depending on the meal plan.
"I think after living at home and having that certain lifestyle that they've become accustomed to, I think it would be difficult for her to move into a room with another person and just share a space," said Gia Jordan.