More High-End Units For ISU Apartment Scene, But Is Slowdown Coming? | WGLT

More High-End Units For ISU Apartment Scene, But Is Slowdown Coming?

Jul 23, 2018

Morgan Anderson is a junior nursing major at Illinois State University. One of her dreams for senior year is to live at the Lodge—the massive apartment complex on Willow Street that, from the outside, looks like where multi-millionaires would spend the night after going skiing.

Anderson says it’s probably not going to happen. It’s too pricy for Anderson, who works and has loans to pay her own way through school. Instead, she’s in a more modest townhome with three other students, paying $615 a month. Even that’s a stretch.

But when you ask Anderson about the Lodge—with its granite countertops, guest bathrooms, pools and hot tub—she doesn’t sound resentful about not living there or the high rent.

“It’s expensive but it’s worth it to have your own place and be on your own. It’s a nice feeling,” she said about living off-campus.

The off-campus student housing business has changed drastically in the last decade, when ISU closed (and later demolished) two giant dorms and pushed 1,500 students into the private sector. Landlords—many of them developers themselves—have responded by building fancier and fancier apartments, trying to meet the demands of a modern college student.

That’s continued this summer, as builders put the finishing touches on three new apartment buildings surrounding ISU. The Summit (25 units with 84 beds) on Dry Grove replaced two older buildings with only four units each. Stadium Suites will have 24 units and 84 beds, where a demolished gas station once stood across from ISU’s Hancock Stadium. And the biggest project is the $18 million expansion of the Lodge, adding 263 beds to the 307 already there.

It’s been like that year after year. Townwide Normal has seen 64 new apartment buildings with over 1,240 units built over the last decade, many for the ISU market, according to Town of Normal records. Twenty years ago, 40 percent of undergraduate ISU students lived on campus. Now it’s 31 percent.

Yet there are signs that new-construction boom may soon be over, including the possibility of more on-campus university housing at ISU.

“With this (Lodge expansion) project and a couple others, we’re probably at a saturation point,” said Andy Netzer, general manager and managing broker at Young America Realty, the largest student landlord in Normal. “The supply and demand has shifted a little. For the next couple of years, you’ll not see a lot of new construction coming on.”

“If we did more of this, we’d be creating our own vacancy somewhere else,” Netzer added.

INSIDE THE LODGE

GLT toured the Lodge construction site with Netzer, who showed it off like a proud father.

The nicest unit at the Lodge expansion has a spacious balcony overlooking the pool and hot tub. Inside, an antler chandelier hangs from vaulted ceilings with exposed wood and track lighting.
Credit Ryan Denham / WGLT

The units have one bathroom for each tenant, plus one for guests. There are stainless steel appliances, granite countertops, and stained cabinets in the kitchens. The nicest unit has a spacious balcony overlooking the pool and hot tub. Inside, an antler chandelier hangs from vaulted ceilings with exposed wood and track lighting.

“We’re expecting some 5-year-old in the suburbs of Chicago may be occupying this in 15 years,” Netzer said. “What kind of expectations will that person have? What kind of home did they grow up in? Did they have granite counters in their kitchen? Did they have their own bathroom? We want to meet that market, not just for today but in the future.”

That comes at a cost. Rent is between $700 and $1,000 per person.

“This is the top of the market,” Netzer said. “A lot of pricing in the Young America portfolio does look at the pricing of the Lodge. Everything can kind of tier down from there. Nothing else on campus can probably expect to command higher rents than here.”

Netzer said they’re not having any problem finding students who want to pay a higher rent for more amenities. Quite the opposite. The new Lodge, co-owned by Young America owner Ralph Endress, has been fully leased since October 2017.

“The appetite for our most economy properties is falling,” Netzer said. “When we hear people say, ‘This Lodge is incredible, but who can afford all that? They’re going to run out of affordable housing.’ We really don’t see that problem. What we see is we’ve got too much of the affordable but not enough demand for it. The softest part of our portfolio is the apartments with the least amenities, with four bedrooms and only one bathroom and no dishwasher.”

Morgan Anderson, the nursing major, is also the secretary of college affordability for ISU’s Student Government Association.

She said it’s hard to find a nice place to live for less than $550.

“I think student apartments are really overpriced. From my one townhome, they make $2,400 from us every month. It’s nothing big or special. For people who pay rent not in a college town, it’s so much cheaper and you get so much more for your money,” she said.

Property owners say they’re responding to demand.

Ed Sauder had owned the two 60-year-old apartment buildings on Dry Grove Street since the late 1970s. With small bedrooms, antiquated bathrooms, and limited amenities, those eight units became harder and harder to rent in recent years, Sauder said.

Owner Ed Sauder said the look of his new Summit apartment building was inspired by Fairchild Hall at Illinois State University. "We wanted it to aesthetically fit in with the rest of campus, like it's an extension rather than, 'Who threw up this building?' We made a real commitment to aesthetics."
Credit Young America Realty / EA Architecture & Design

“We would’ve had to do a major rehab—thousands and thousands of dollars,” said Sauder, who owns several properties around Normal. “Instead, we decided to bite the bullet, tear them down, level the lot, and start from scratch and build a new building.”

That’s how the Summit was born. The $4 million-plus building opens next month. It’ll command higher rents (between $725 and $1,099) in part due to its proximity to campus. (Its mountain theme—with stairwells named after Mount Everest and Denali—was inspired by Sauder’s own passion for the outdoors.)

“We did extensive market research on what the vacancy rate is with various levels of apartments,” said Sauder, a 1972 ISU grad. “We see what’s renting and what’s not.”

The Town of Normal sets certain parameters for new-apartment construction, such as parking, setbacks, or how tall it can be. But nothing in the town code is dictating that places like the Lodge have a clubhouse with stone fireplaces, a leather couch, and pool table.

“Those are decisions that are completely on the private side,” said Town Planner Mercy Davison. “The expense level is tied to the amenities that are being provided on these properties that are far beyond what the code would require.”

In addition to new construction, Normal has also seen many landlords embark on costly summer remodeling projects to make their older buildings more attractive to students, said Greg Troemel, inspections department director for the Town of Normal.

They’re reworking kitchens and changing four-bedroom, one-bathroom units into three-bedroom, two-bathroom units with laundry, Troemel said.

“They’re continually modifying these units to try and avoid having a four-bedroom unit sit with just two people renting it,” Troemel said.

Landlords are even sprucing up the exterior because they know that curb appeal is huge with parents, Davison said.

“Parents are a lot more involved in where their students live than back when I was in college, when my parents literally had nothing to do with my picking where I was going to live. Parents want to see something that looks attractive, well-maintained, and secure,” Davison said. “That’s not cheap to re-clad part of your building in brick.”

MORE CAMPUS HOUSING?

ISU has a good relationship with the major landlords, said Levester Johnson, vice president for student affairs at ISU. Among the biggest are Young America, First Site, and SAMI. Young America has around 50 percent market share, with 4,600 beds, Netzer said.

Still, affordability remains a critical issue across higher education, Johnson said. For on-campus housing and dining for which ISU controls the price, the university wants to offer competitive amenities that impress prospective and current students, like the new Watterson Towers dining center expansion.

“All of those things have to be considered. But we have to do it at an affordable rate. We’re definitely concerned about rates for on-campus housing, as well as what students are paying off campus,” he said.

The foundation of the off-campus apartment boom is ISU’s decision in the 2000s to decommission those older dorms, partly because it would’ve been too expensive to retrofit them with fire sprinklers, and also to make room for a new student fitness center.

Now there are signs ISU may reverse course and move toward more on-campus housing.

ISU recently completed a study of its on-campus housing—what’s already there, and what’s missing. It comes against a backdrop of strong enrollment and the possibility of more as Illinois’ regional universities bleed students and ISU bolsters international recruitment.

ISU requires freshmen and sophomores to live on campus, but today there’s not enough room for everyone. Many sophomores, like Anderson, get exemptions to live off campus their second year.

There are educational benefits of living on campus, Johnson said.

“It plays directly into the retention of our students,” Johnson said. “(Studies show) the more proximity students have to other campus resources, like other upper-class students who know all the unwritten rules and policies to be successful in the collegiate environment, and faculty and advisors who can support them academically, the better they do. The more proximity you have to those resources, the greater your retention rate is going to be.”

That new study, done by consultant Brailsford & Dunlavey, found ISU lacks enough on-campus housing for sophomores. And with the exception of the 6-year-old Cardinal Court on Gregory Street, ISU’s on-campus housing is mostly traditional shared dorm rooms and shared restrooms inside towers. There are no apartment-style or pod-style (shared living space) options, Johnson said.

Does that mean ISU is moving toward building more housing?

“We’re going to take those recommendations seriously and have conversations with senior administration at ISU and our trustees about maybe going to the next level of feasibility and seeing what a business plan would be, and where would that housing be,” Johnson said.

There are several options for where it could go. ISU acquired the site of a now-shuttered Normal fire station on Adelaide Street in 2015, possibly to accommodate expansion at Cardinal Court. Town of Normal officials have also heard rumblings about the now-vacant land east of Main Street near Avanti’s, where the South Campus dorms stood until they were demolished in 2012.

That would have major implications for local landlords.

“This is the world’s simplest supply-and-demand economic loop. You just have a supply of students and the available off-campus beds,” said Netzer, who watches fall enrollment figures very closely to project where the market will go the next four to six years. “It’s a 1-to-1 tradeoff. Every bed they add is a bed that comes out of the off-campus market. Our assumption is that ISU beds will always be filled.”

"We're definitely concerned about rates for on-campus housing, as well as what students are paying off campus."

There are parallels to 2010, when ISU announced it was building Cardinal Court. Landlord-developers criticized ISU, saying it backtracked on plans to get out of the housing business, even though Cardinal Court only replaced around 900 beds lost by the dorm demolitions.

Landlords just waged a very public fight over property taxes. Young America, First Site, and other owners objected when Normal Township’s assessor revalued 57 different apartments, raising their assessed values—and therefore their property tax bills. Last year they reached a deal with Unit 5—the largest beneficiary of those property taxes—to resolve the dispute, though that agreement allows for re-valuation if ISU enrollment rises or falls by more than 1,100 students.

Sauder said it’s a good business to be in. He lives in Roanoke and is part-owner of a John Deere equipment dealership. If something goes wrong at one of his investment properties in Normal, he knows it right away—more control than “sending your money to Wall Street.”

“The business is a slow process of discipline, of making your payments, of renting, of doing maintenance. It’s not a home run. It’s a series of base hits,” said Sauder.

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