As real estate suffers nationally, an oversupply of housing in Tempe may be putting developers in a tight spot but benefiting students financially, a professor said.
Housing for students near the University — such as condominiums, apartments and other units — is typically in very high demand, finance and real estate professor Anthony Sanders said.
But developers have put up too many housing units in the area around the Tempe campus, and there are not enough students to meet the supply, Sanders said.
The overdevelopment of housing to accommodate students, which largely began around 2003, is unique to Tempe and a few other areas around the country, he said.
None of the other ASU campuses have seen the same level of overdevelopment, he said.
“Places like West and Polytechnic are … more commuter campuses,” Sanders said.
The oversupply means students have a better and cheaper array of housing choices, he said. Developers will likely continue to see more vacancies in housing units and, in turn, less revenue.
“A lot of real estate markets are not doing well in Phoenix,” Sanders said. “But Tempe is getting absolutely annihilated.”
According to ASU’s latest Repeat Sales Index, home prices in the Phoenix metropolitan area declined by 24 percent from July 2007 to July 2008.
Housing values in the Phoenix area have declined for 17 months straight, according to the index.
Even as real estate around the nation drops in value, student housing tends to do well because there is a limited amount of space around campus for developers to offer students housing, Sanders said.
Student housing has to be close to campus, and there’s a limited supply of properties that students can walk to classes from, he said.
“Student housing, generally speaking, has been a very stable form of investment for people wanting to stay in real estate,” Sanders said.
“Even I, for example, own some student properties in Columbus, Ohio, where I used to teach.”
But Tempe, along with areas in Las Vegas, Florida and Southern California, is one of the few areas where student housing is not as profitable due to an oversupply, he said.
But there is a market for high-end student housing, said Michael Yeagle, vice president of Campus Acquisitions — a company that specializes in building education-related and student housing.
Campus Acquisitions plans to open The Vue — an 11-story mixed-use development that includes commercial space and 130 apartments —on Apache Boulevard east of the Tempe campus in August, Yeagle said.
The project will include amenities like plasma televisions in each room, granite countertops and a 2,000-square foot workout space, he said.
“It’s a unique product for the market,” Yeagle said. Building quality student housing in Tempe makes more sense than constructing cheap housing, he said, because there’s a big supply of other housing.
But Chris Salomone, community development manager for the city of Tempe, said he’s not sure if students will choose high-end housing over other options.
Salomone said he hopes housing developments like The Vue and Campus Suites on the Rail are filled with ASU students — a market they hope to cater to. If places like The Vue aren’t filled up, the development cannot easily be converted to house nonstudents.
“It’s up to the market to decide,” he said.
Sanders said residence halls at ASU continue to do very well and offer relatively cheap prices compared to the amenities offered.
This is because ASU, a government institution that’s not in the housing business, runs residence halls, he said.
“They’re not charging what we would call ‘free market’ prices,” he said. “[Residence halls are] still priced fairly low below what they would be if the private sector funded them.”
Reach the reporter at matt.culbertson@asu.edu.
