Developers and investors are flocking to college towns looking to make real estate plays. Without in-person learning and unable to rely on the influx of fans, the pandemic hit the hospitality sector in college towns hard. With the new season set to kick-off and fans eager to get back to games, the real estate industry in growing college towns is looking to get back on track. This fall, small cities backed by the growing student and permanent resident populations may be a more solid bet than major metros if major teams play ball.
A university helps to keep local economies afloat. Their budgets bring in faculty and their rosters bring in fresh students every year, anchoring financial and human capital. The bigger the school and further away it is from a major city, the more pronounced the effect. A Brookings study looked at 16 regions that suffered manufacturing job losses yet maintained overall job growth, finding that half were major university towns like Athens, Georgia (University of Georgia), Charlottesville, Virginia (University of Virginia), and Corvallis, Oregon (Oregon State University). Students flock to the area and are more likely to stay after they graduate. Many that stay close visit often for collegiate sports. Retirement communities are also taking off in college towns, offering retirees a chance to reconnect with their youth and plenty of ways to stay active. The transitory nature of students and fans means rentals in particular are booming.
The real estate industry is taking notice, putting as much effort into new developments in small university-backed cities as they do for projects in the country’s largest metros. In College Station, home to Texas A&M University’s 70,000 students, high-profile Houston-based developer Miday is flexing serious development muscle. Known for groundbreaking mixed-use developments in Houston, Midway developed Century Square, a 60-acre mixed-use complex featuring over 200,000 square feet of hotel, retail and residential space just north of the campus. In South Bend, Indiana, home to Notre Dame, Kite Realty Group is expanding its Eddy Street Commons mixed-use development, adding another 530,000 square feet to the 170,000 square feet of existing mixed-use space. Commercial development in and around a college campus is a somewhat more complex affair. In Kite’s case, they’ve partnered with the city and the University on the project. Public-private partnerships are common in college towns, putting university dollars or property behind commercial development.
The proof of booming college town real estate is in the numbers. In College Station, commercial permits are up 45 percent compared to two years ago. Single-family permits are up 57 percent, a clear sign that construction is booming in the town of more than 113,000. College Station isn’t unique, all around the country, you can find small towns home to universities with numbers just as big. Where new construction isn’t keeping pace, prices are rapidly rising. The issue is most pronounced in mid-size cities. Austin and Raleigh, both home to or adjacent to several universities, are also experiencing demand from job growth. Housing prices around Raleigh are up over 20 percent, in Austin they’re up nearly 40 percent, according to Zillow.
Short-term rentals are becoming big business as well, especially in towns that host Division 1 NCAA football, making housing concerns even worse and investment opportunities even greater. ‘Game day’ housing has become its own subsector of the short-term rental market. Services like Gameday Housing and Rent Like A Champion specialize in niche college markets. Airbnb and VRBO each have sections on their sites dedicated to game day housing. This isn’t student housing we’re talking about, this is luxury single-family or rental units that can easily earn $2k in one weekend. Rent Like A Champion boasts the average host earns $1,100 each weekend.
Like other popular tourist destinations, college towns are running into problems accommodating so much housing speculation. Because of the overall smaller total number of residential homes in most college towns, the massive influx of demand for short-term rentals has an outsized impact on the local housing markets. Without the existing housing stock or surrounding towns to absorb demand, prices skyrocket.
In Starkville, Mississippi, home to Mississippi State University, the median home sale price increased 63 percent over the last 10 years. A majority of the growth in prices happened because of gameday home development. During the 10 years of skyrocketing prices, Mississippi State was establishing itself as a contender in the lucrative South Eastern Conference (SEC), selling out games regularly and expanding its stadium capacity. A study estimates 10 percent of Starkville’s entire housing stock is likely gameday homes.
“We’re not building more apartments for residents. It’s mainly for tourism,” Brandi Duncan-Herrington, executive director of Starkville Strong, a grassroots volunteer organization, told Next City. “That would mean gameday homes, gameday rentals or even college students who are coming here to stay. So the rent is astronomical because they are intending for there to be two families, or two or three college students, who are going to split the price.”
In Ann Arbor, home to the University of Michigan, the issue was addressed head-on by officially banning short-term rentals that aren’t owner-occupied. The City of College Station voted unanimously to require short-term rental owners to register with the city, submit hotel occupancy tax, and have a health and safety inspection. State College, Pennsylvania, home to Penn State, recently passed a similar ordinance. Most college towns don’t have the leverage to seriously challenge the growing influence of short-term rental providers or platforms. Most don’t want to. Gameday tourism is a serious boon for local business, life without it, as they experienced last year, is a terrifying prospect.
For Champaign, Illinois, home to the University of Illinois, a home game can generate $3 million of local economic impact in one weekend, over $20 million a season. That’s on the low side. The city of Tuscaloosa, home to the University of Alabama, lost an estimated $200 million without college football fans last year, according to President of the West Alabama Chamber of Commerce, Jim Page. Local economies around the country are relying on college football being back in full force this season. At least $4.1 billion in potential revenue is at stake just for the local economies of the schools in the most popular ‘Power Five’ conferences.
The college football season has already started for many teams, but this weekend things begin in earnest. Powerhouse teams from the nation’s top conferences will finally take the field to stadiums (hopefully) full of fans. Nearly 50 million people attend college football games in an average year, according to NCAA figures. The SEC averages over 75,00 fans per game. The influx of fans can spike earnings for hospitality and retail by 200 percent over the course of the weekend.
“College football home games are the weekends we’re waiting for. We’re always adjusting for those volumes,” Jerry Roberts, owner of Gator Dockside in Gainesville, Florida, home to the University of Florida, told Skift. “It requires almost double the amount of staff and amount of groceries and food coming in.”
The surging Delta variant is threatening the even best-laid plans. Like with everything these days, what the new normal of college game days will look like is anyone’s guess. This weekend Georgia will open its season in a high-stakes matchup against Clemson in Charlotte’s 75,000 seat Bank of America Stadium. Alabama is playing Miami at Mercedes-Benz Stadium in Atlanta, which also holds 75,000 fans. Tailgating numbers and attendance at game time in each matchup will be telling. Will this season be back to normal, with fans packing into standing-room-only seating, or will pandemic hesitancy persist? It’s no stretch to say that’s a billion-dollar question for small towns across the country relying on colleges and their fans.