The blinds in Ray Huff’s office remain permanently drawn up. Outside, a cacophony of nail guns and jackhammers sputter away while an endless line of traffic budges ever so slightly through a shaded West Glenn Avenue. But there are no clouds in the sky.
West Glenn Avenue has been the epicenter of new, unprecedented development. In the past five years, onlookers have seen 160 Ross, West & Wright, The Standard and 191 college rise up from the rubble of old storefronts. The rate at which these complexes, no smaller than 450 bedrooms, are developing worries local real estate managers who say that the market, which was full to begin with, is becoming dangerously oversaturated.
Huff has worked in the student housing vein of real estate for 23 years. He owns Auburn Realty, a local group that manages many smaller apartment buildings throughout the City.
“There were already vacancies around town, but there are vacancies at a magnitude I’ve never seen with the construction of these large private dorms,” Huff said.
Auburn City Manager Jim Buston said he believes that the market is not yet facing issues of overdevelopment. The student housing market, which he believes is represented accurately in the City of Auburn’s Student Housing Task Force Report, is either at or approaching saturation, meaning the construction of additional bedrooms could be excessive.
“This year, our company is at 96% occupancy ... which is great, but it’s the lowest occupancy that I’ve ever had,” Huff said. He added that his company usually rests between 99%-100% occupancy.
With regard to the unusual vacancy rate of 4%, Huff said that a stinging portion of this quotient consists of one-unit condominiums sitting unoccupied.
“A lot of the property up and down Magnolia are condominiums, and if you’re a condominium owner renting to students and your one unit doesn’t rent, you’re at zero percent occupancy; we’ve got twenty-something of those.”
When vacancies are present at such a high rate in these apartment buildings, the health of the market is harmed as property values decrease. Subsequently, rent rates drop and property managers often struggle financially.
“Large private dorms” is a term that the City of Auburn and independent market researchers have introduced into the City’s list of technical housing jargon. Large private dorms are defined as apartment complexes where residents overwhelmingly are undergraduates.
According to a pamphlet from the University, Auburn currently houses around 65% of its freshmen students on campus. There are currently 5,943 freshmen students enrolled at Auburn. That leaves approximately 2,080 freshmen with little option but to live off-campus — often in one of these large scale, highly compressed units.
The statistics do show a need for private developers to accommodate housing requirements unmet by the University, but Huff thinks these numerous developments are an overcompensation.
“All of the reports that I’m hearing; the only one [of the apartments with over 450 beds] that may be close to 100% full would be 191 College,” Huff said.
Some owners are suspicious of the occupancy rates reported by these large apartment complexes because there is an economic incentive to appear healthier. Banks generally offer better loan rates to developers that have high occupancy rates.
The corporations behind the occupancy rates aren’t lying, however. Huff described a way the market is made to appear healthier than it actually is, which takes advantage of two different ways of determining occupancy: physical occupancy and economic occupancy.
An apartment reaches full physical occupancy when there is one person in each bedroom unit.
For example, take a four-bedroom apartment at a large complex. If four individuals live in this four-bedroom apartment, the unit has attained physical occupancy because all rooms are physically occupied.
Economic occupancy compares the possible amount of rent that could be received to the actual amount paid by residents. When determining economic occupancy, if only one of the four rooms in a four-bedroom unit is filled, the unit can be considered full.
Forrest Cotten, the planning director for the City of Auburn, also holds reservations about estimating a market’s health based on occupancy rates.
“Reported occupancy rates have always been a point of contention because you’re basically relying on the honesty of the person reporting the information,” Cotten said.
The managers who report occupancy rates often rely on banks or corporate bureaucracy who will cooperate only under seemingly profitable conditions, which incentivizes these complexes to report statistics that reflect favorably on the property.
Despite the covering up of true occupancy rates, Cotten isn’t ready to totally dismiss the self-reports provided by the companies.
“Everyone that criticizes it can’t do any better a job of getting their arms around it than what we’ve tried to accomplish through the Danter Report,” Cotten said.
The Danter Report was a market analysis of Auburn student housing conducted by an independent research and consulting firm called Danter & Associates. The Danter Report is a separate report from the one produced by the Student Housing Task Force.
The most recent report conducted in 2018 concluded that, if developed within walking distance of the University, apartments in the Auburn market could be absorbed at roughly 300 to 400 beds per year in the short term.
In 2019 alone, The Standard and 191 College have added 683 and 495 beds to the market respectively, well exceeding the number that can currently be absorbed.
The Plainsman reached out to Landmark Properties, the owner of The Standard, for comment on occupancy rates. Landmark is a large, national student housing developer from Athens, Georgia, with properties all around the country.
Cody Nichelson, a spokesman for the company, declined to share The Standard’s occupancy rates but said that any business decision made was carefully executed.
“We do not build new developments if we don’t think there’s a need, demand and interest in them, or if we don’t think there’s a chance for us to succeed in the community,” Nichelson said in an email statement.
American Campus, the national developer based out of Austin, Texas that also owns property across the country, is the owner of 160 Ross and 191 College. The developer responded similarly:
“We have developed two properties in the Auburn market over the last five years, one in 2015 containing 642 beds and one in 2019 containing 495 beds, both of which were conceived over several years to ensure they would meet students’ needs and be well absorbed into the local purpose-built student housing stock.”
It’s difficult to know for certain the true extent of Auburn’s market saturation because accurate occupancy rates are often withheld and company spokespeople are not third-party analysts.
Cotten said there won’t be any more large-scale developments downtown because recently-passed City ordinances do not allow further construction of large private dorms in downtown proper.
“The ones that you see under construction actually date as far back to before that regulation went into place, therefore, they were grandfathered in under the old regulations,” Cotten said.
The recent additions of 320 West Mag and The Union on West Glenn Avenue were allowed to be constructed because they do not lie within downtown proper.
“I do believe that more quickly than we anticipated, we are approaching a threshold where we need to be very vigilant about how much more supply we can bring online given what’s been built,” Cotten said.
If things don’t change, more problems may arise.
“What we don’t want to do is flip that threshold and begin to head down a path where we’re going to have issues with over-saturation,” Cotten said.
Residents and developers have each voiced complaints about the continual housing development in the City, and City government is searching for a way to resolve this contentious issue.
“There are going to be some tough decisions that City Council is going to have to make on how they want to move forward,” Buston said.
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