As the federal Department of Education predicts a 25 percent increase in college students nationally between 2000 and 2013 — for a total 18.2 million students — higher-education administrators in New York City know they need to think of new and viable ways of developing student housing. Already, some 370,000 students are enrolled in the city’s colleges and universities.
Student housing in Manhattan is already feeling the pressure of waning land availability, while construction costs continue to grow steadily with each month. “Land is incredibly expensive,” said Woody Heller, executive managing director and group head of the capital transactions group at brokerage Studley. “Almost no rental housing is being built in New York City for the same reason.”
This means even as colleges and universities continue to see a rise in enrollment, many of them are facing student residence shortages.
“New York City is a huge market that is underserved,” said developer Bruce Becker, whose company Becker and Becker Associates has developed educational facilities and tackled master planning for colleges and universities. “The need is increasing, but the supply is dwindling.”
The student housing shortfall might be as high as 42 million square feet, said Stanley Conway, a consultant in the transaction services division of Coldwell Banker Hunt Kennedy Commercial Properties. That’s around the size of four World Trade Centers.
Part of the problem is the extremely competitive market for places to build. Not only do schools have to compete for plots with other colleges and universities, but also with developers of condos, co-ops and rentals.
“As rents rise, [the city isn’t] seeing as much new rental development because condo development has emerged,” Becker said. “They can afford the higher land prices, so that’s also a factor in driving up costs for student housing.”
Despite the difficulties, many schools are finding building new housing to be imperative. Around the city, several new projects are going up (see list below).
“More and more colleges are finding that to attract and retain students, housing is the secret formula,” said Gary Shillet, chief financial officer at the School of Visual Arts.
SVA recently signed a long-term lease agreement for a brand-new, 100-bed dorm going up at 47 Third Avenue at East 10th Street, to be built by Levine Builders.
The new housing is the result of failed negotiations for the space between Levine and New York University. When the deal fell through, SVA grabbed the site.
Like many Manhattan schools, SVA is seeking to increase the percentage of students they can house. Currently, the school houses 30 percent of their undergraduates, but it’s hoping in the future to accommodate 40 to 50 percent of them.
The building at 47 Third Avenue will be the fifth one in SVA’s collection of residence halls. The school owns 17 Gramercy Park, where 76 students reside, and leases 23 Lexington Avenue and 215 East 23rd Street in Manhattan and the St. George Hotel in Brooklyn Heights. The school hopes to own all the buildings that it leases.
Since prices in Brooklyn and Queens are much cheaper than Manhattan, it’s likely that more and more schools will branch out to the boroughs to find space for student housing. The problem is that one of the major draws for students is being in Manhattan.
As a compromise, areas where students can get into Manhattan more easily will likely see more student housing development, particularly areas like Williamsburg, Long Island City, Astoria and Downtown Brooklyn. Shillet is placing his bet on Long Island City and areas in Queens even a bit further from the East River, such as Sunnyside.
“The challenge,” he said, “would be to convince the students to stay there. They want to be in Manhattan. They want the New York experience.”
Though students want to live in Manhattan proper, one problem is that with the luxury craze, there are hardly any “fringe” neighborhoods in Manhattan anymore.
Yet student housing developments are often controversial ones in residential neighborhoods that are home to a lot of luxury high-rises.
As Shillet put it, “High-rent districts don’t want a dorm next door. They don’t want the kids being next door.”
Another idea is to put student housing on Governor’s Island — as opposed to the Disney theme park or luxury condos and hotels that some have speculated about. This, Conway said, “would be a beautiful solution to the problem.”
“Governors Island is an excellent location,” Becker said. “I think it’s a phenomenal place. It actually looks like a college campus. The trick would be to get some institutions to move some academic buildings to the campus as well.”
Developers find dollars in student housing deals
As it becomes more difficult to negotiate deals for student housing, there are four major ways for schools to get student housing projects developed, said Gary Shillet, chief financial officer at the School of Visual Arts.
Some are quite lucrative to developers.
The first way, and the riskiest for the school, is for the institution to buy and develop the land on its own. With land so expensive, this type of development is extremely uneconomical for the school, said Woody Heller, executive managing director and group head of the capital transactions group at commercial brokerage Studley.
Still, the school is pressured into this path because institutions “have to build student housing. It’s in the interest of the greater good,” Heller said.
A slightly less risky way for a school to fund a student housing development would be for it to enter into a joint venture with a developer. Some schools work with the same developer on a regular basis.
The third way, less risky still for the school, to create a student housing project is for the school to simply lease a building from a developer.
This could be an incredibly lucrative deal for a developer, especially if the developer is smart, Shillet said. An example: a two-bedroom apartment rented to a family might cost between $4,000 and $6,000 per month in rent. Yet if this same apartment was a student residence, up to six students could be housed in the same space at the cost of $1,250 per bed per month — for a total of $7,500 per month.
Developers also save money because students don’t need luxury finishes, brokers said.
On the flip side, though, some of this profit can be lost in the money spent refurbishing the dorms at the end of each school year.
Also, the numbers don’t work with a super-luxury residential building, since it may very likely bring in more than $4,000 to $6,000 a month for a two-bedroom.
A fourth way for a school to fund housing, and the safest for the school, would be to go through a third-party lender. There are many companies, such as Educational Housing Services, that specialize in this, and oftentimes they will manage the building for the school as well.
“An institution would typically want to own their own housing and not be dependent on a third party,” speculated developed Bruce Becker, “but it’s getting harder and harder for them to do their own housing.”
Major student dorm projects in the works
West 130th St and St. Nicholas Terrace
The City College of New York plans to open The Towers at CCNY, a 180,000-square-foot residence for 600 students, in August. Turner Construction is the general contractor.
West 60th St and Amsterdam Ave
Fordham University plans a 26-story dormitory as part of a major expansion of its Lincoln Center campus. In the second phase, Fordham’s law school building will be replaced by a 21-story dormitory.
406 West 31st St
The Fashion Institute of Technology is converting the 15-story, 320,000-square-foot former manufacturing and office building into a 1,100-student residence. It is scheduled to open in August.
110 East 12th St
New York University plans to open a 26-story, 700-student dormitory on the current site of St. Ann’s Church in 2007. The Hudson Companies is the developer.
47 Third Ave
The School of Visual Arts plans to open a new 100-student residence hall at the site in August 2007. Levine Builders is the developer.
605 East 9th St
Developer Gregg Singer wants to build a 19-story dormitory on the former site of P.S. 64. He is suing the city over a landmark designation of the site.
81 East Third St
New York Law School opened the 13-story, 99-student dormitory last December.
205 State St (Brooklyn Heights)
Brooklyn Law School opened the 360-student residence, Feil Hall, last August.