News

A Shifting Skyline

Flagpole Magazine – September 11, 2013
By Blake Aued

Anyone who hasn’t set foot in downtown Athens since last football season might have a tough time recognizing the skyline. The same applies to people who’ve lived here their whole lives.

An unprecedented development boom is transforming downtown. Within a couple of years, downtown’s population could triple, as about 3,000 new residents, mainly University of Georgia students, move into four massive new apartment complexes and a number of smaller projects in various stages of completion.

Why the Boom?

For more than a decade, Athens-Clarke County officials have been trying to steer density intown and preserve rural land with development restrictions in the green belt bordering neighboring counties. The county’s 1999 land use plan—written with input from hundreds of citizens—set a maximum density of 200 bedrooms per acre. Design guidelines passed in 2006 and a historic district in the downtown core added some protections, but the local zoning code intentionally encourages high-density development downtown.

“What’s happening is basically the result of some policies the commission previously adopted,” Mayor Nancy Denson says. “Downtown is where density belongs… It’s much more economical to serve dense populations than spread-out populations. That’s the way society is moving, anyway—moving downtown.”

Banks think student apartments are a good investment, because parents often co-sign the lease and will pay the rent on time. Developers love student apartments, because they can charge higher rents by the bedroom. Students are drawn by the new buildings’ luxury amenities—rooftop pools, gyms, stainless steel appliances—and the proximity to campus and downtown bars, restaurants and shopping. Studies show that millennials (the current generation of students) drive less than other generations did at their age, and many prefer to walk or take transit.

“Athens is actually, in our opinion, underserved in downtown student housing,” says Wes Rogers, president and CEO of Landmark Properties, an Athens-based company that manages numerous student housing complexes in several states and is building The Standard, a 610-bedroom student-oriented development at the corner of Thomas and Strong streets downtown, slated for completion next summer.

“Athens has one of the coolest, most vibrant downtowns in the country,” Rogers says. “We feel like downtown is a very desirable place to live.”

It’s the same way in other college towns. News outlets like The New York Times, National Public Radio and others have reported on the trend of upscale student housing in urban college-town neighborhoods from Savannah to Stillwater, OK, to Columbia, MO.

“We’re seeing a real move toward the urban core in a lot of cities,” says Athens real estate consultant David S. Dwyer.

Tuscaloosa, AL, has seen the addition of 12,432 bedrooms in new student-oriented developments since 2002, with 8,711 more in the works, according to the Tuscaloosa News. Although enrollment at the University of Alabama has increased by 13,000 during that time, with the addition of 3,700 on-campus beds, there is a potential 12,000-bed surplus in Tuscaloosa’s rental housing supply, leading residents there to ask if the city is being overbuilt.

Tuscaloosa Mayor Walter Maddox, in the midst of a re-election campaign, appointed a task force in June to study that very issue. The situation is not quite the same as in Athens—most of Tuscaloosa’s new developments are in greenfields a mile or two outside campus, which is separated by historic neighborhoods from downtown—but the reaction has been similar.

“There is a growing concern here that we might be becoming overbuilt, that there may be more units specifically for students than there are students,” says John McConnell, planning and development director for the City of Tuscaloosa.

“Is it true? Do we have a problem? If so, what do we do about it?” McConnell says.

While it has undergone a renaissance in the past decade, downtown Tuscaloosa does not compare to downtown Athens. McConnell and other city and university officials recently traveled to Athens to swap ideas with their Athens-Clarke County and UGA counterparts and came away impressed with the “interface” between campus and downtown. “Gosh, we’d love to have that kind of density,” he says.

An Unpopular Trend, and a Popular One

While downtown Athens is the envy of a lot of cities, the growth hasn’t always worked out the way many locals had hoped.

Athens residents have roundly criticized Selig Enterprises’ Oconee Street development and its 990 bedrooms, more than 100,000 square feet of commercial space and nearly 1,500 parking spaces as an out-of-scale monstrosity. Except for a minor variance and easement agreement, it met ACC’s zoning code.

Down the hill off Oconee Street, the 568-bedroom Flats at Carr’s Hill towers over the North Oconee River Greenway. It didn’t need any permission from county officials to move forward. “We knew that bad development on the Boys & Girls Club property was coming for at least five years,” yet ACC did nothing to stop it, environmental activist Elizabeth Little said at a recent greenway meeting.

When UGA College of Environment and Design professor Jack Crowley, who is writing a master plan for downtown Athens, asked about 250 people at a town hall meeting what kind of residential development should be encouraged, only 3 percent said “student.” Twenty percent favored “family,” 44 percent wanted “urban professional,” 19 percent said “workforce” and 15 percent said “senior” or “empty nester.”

Yet student apartments are mostly what we’re getting. Originally, the Selig development was supposed to include one- and two-bedroom apartments aimed at professionals, but the company was forced to switch to the student-friendly three- and four-bedroom format in order to secure financing for the $80 million project, Senior Vice President Jo Ann Chitty told Flagpole in May.

In addition to The Standard, Flats at Carr’s Hill and Selig, there’s the Eclipse at East Broad, a 128-bedroom tower near the Multimodal Center and 909 Broad, another massive student complex fronting Willow Street that was built in 2008. A couple of older apartment complexes on North Avenue are expanding. Existing commercial spaces like the old Colonial Hotel building that houses Five Guys Burgers & Fries, offices on Dougherty Street near Good Dirt and three floors of the former Southern Mutual Building (now called The Fred after owner Fred Moorman) have been or may be converted into residential units.

“At least what we’re hearing is they’re having a hard time finding commercial tenants,” ACC planner Gavin Hassemer says. “They’re competing with other commercial office space around town that seems to be either cheaper or more accessible.”

Rents in the new developments are mostly in the range of $600-$750 per bedroom per month. Charging per bedroom allows landlords to make more money off student apartments than those that are rented out by the unit, in turn allowing developers to recoup construction costs and land costs that can exceed $1 million per acre. They need to charge about $1.80 a square foot per month to break even, according to Rogers.

“Most families can’t afford to pay more than $2,000 a month, and if they did, they’d probably want to buy something,” he says.

Dwyer also doesn’t see a market for families living downtown right now, because mid-rise condos, a cheaper alternative in most cities, would be more expensive than most houses. “We have such terrific intown single-family neighborhoods with reasonably high density,” he says. “The quality of life in those neighborhoods is extremely high. At some point, it becomes an economic tradeoff.”

For comparison, the average rent in Athens was $705 per month for a whole house or apartment in 2011, according to Census data. Fees for on-campus housing range from $2,238-$3,587 per semester, which works out to about $600-$900 per month, including utilities like power, heat, water, cable and Internet, according to University Housing Executive Director Kerry Kowalski.

Flats at Carr’s Hill resident Chris Marks says his rent, which he splits with his parents, is “pretty good” because it’s all-inclusive. “I think a lot of student housing is falling more toward a flat rate,” he says. “A lot more of the newer neighborhoods are going to be flat-rate and more student living, like this. Almost like upscale dorms.”

That’s an attitude University Housing is keenly aware of. While UGA’s 7,600 undergraduate beds remain in high demand (at least in part because approximately 5,000 freshmen are required to live on campus) students and parents want more and more amenities, especially individual thermostats and private bedrooms and bathrooms, Kowalski says. Gone are the days when living in the dorm meant arguing with a roommate over the top bunk and shuffling down the hall in flip-flops to the shower. “There’s been some conversation about what people refer to as the ‘country club-ification’ of student amenities,” Kowalski says.

UGA has added 800 new beds in the past three years. “Those beds were built to meet student demands, meet student needs,” he says. Newer dorms like East Campus Village are apartment-style or laid out with two private rooms connected by a bathroom.

When UGA embarked on its latest round of dorm-building about a decade ago, there were concerns in the community about what it would do to the local real estate market, according to UGA Vice President for Facilities Danny Sniff. The effect was to ease upward pressure on rents—they fell from a high of $798 in 2005.

Now, Rogers contends that the downtown apartment trend will benefit working families as students flock to new downtown developments, opening up space in older complexes that aren’t laid out in the four-bedroom, four-bathroom style popular with students. “Other housing stock will be converted into affordable intown housing, which Athens desperately needs,” he says.

What the Future Will Bring

Dwyer believes the new student apartments will be successful—unlike residential developments like the Georgia Gameday Center and Georgia Traditions built during the tail end of the last boom in the early aughts—because the developers behind them have a longer track record.

“This is nobody’s first shot at this,” Dwyer says. “That’s what it comes down to: the strength and the ability of the developer to do a project that’s right for the market and at the right time in the market, and that’s what’s happening here in Athens, I think.”

ACC officials are also confident the new developments will fill up, but they aren’t so sure Rogers is right about the older ones. “People don’t invest their money in things that don’t bring a profit,” Denson says. “What does concern me is the fate of the units that people are abandoning for the new units.”

Owners of existing apartment complexes apparently have similar concerns. “Maybe all the developers coming to Athens, GA should look at the Columbus, OH market. Seems they actually have a need for additional student housing,” reads a post on the Athens Apartment Association Facebook page. The post links to an Associated Press article about Capital University putting up students at a water park resort due to lack of living space.

“Right now, I feel like the market is kind of eating its own tail,” ACC Commissioner Kelly Girtz says. “I don’t know that Landmark’s stuff that’s 10 years old is going to be as successful with the new stuff on the ground.”

Several property managers at existing complexes declined or did not respond to interview requests. Rogers, for one, is not worried about competing with himself, though. “Our stuff will hold up [but] we won’t see the rent growth,” he says.

In the coming months, the commission’s Legislative Review Committee, chaired by Girtz, will be studying the question of what will happen to older apartment complexes when students flock to greener (or redder and tanner) developments downtown.

“I think everybody knows there’s some pretty crumbling housing around town,” Girtz says, citing aging, poorly-maintained structures like duplexes on Freeman Drive. “So I want to see for myself, block by block, sector by sector.”

Girtz is worried that, if older complexes clear out, they’ll become havens for crime. “We’re going to continue to see lower occupancy rates in places like Gaines School Road, Epps Bridge or elsewhere, places that were built 15, 30, even 50 years ago,” he says. “We don’t have a big enough workforce to occupy them as workforce housing.”

At the same time, some ACC officials and real estate professionals believe the student housing boom is running its course. Chris Blackmon, an Athens Downtown Development Authority board member and Dwyer’s partner in Athens Real Estate Advisors, says he thinks that once downtown adds more residents, the next phase in its growth will be additional office and retail space to serve those residents.

If there’s new residential growth, it may not be aimed at students. Crowley calls them the “pioneer population,” saying that they will draw businesses that will in turn draw other demographic groups to downtown.

At least one planned development, which will replace part of the SunTrust building and a parking lot at North Lumpkin and Broad streets, isn’t specifically for students. That mixed-used development is intended for “a person who has moved to Athens and is used to an urban environment and likes that,” such as a professor, retiree or young professional, says Dwyer, who is working on it with a Chicago development firm.

Still, county officials are keeping a close eye on development patterns. At a retreat last week, ADDA board members said they are starting to explore potential grants and tax incentives to encourage other types of development besides student housing.

“We do need to make sure we have a mix of housing stock for all the different kinds of people who want to live downtown,” Executive Director Pamela Thompson says