When she was an undergraduate at England’s University of Warwick, Linda Newman and her friends “didn’t aspire to luxurious environments.”
But, as U-M’s housing director well knows, that is so 20th century. “I think today’s 18-to-25-year-olds have grown up with expectations that are very different than when I was in school,” Newman says.
You don’t have to look far in today’s Ann Arbor to see one of the most conspicuous effects of those changing expectations. In fact, if you’re anywhere near the South University and State Street corridors, you simply have to open your eyes. Six privately owned apartment buildings, ranging from eight to 14 stories high, have opened in the last nine years, five since 2009. Two more are shovel-ready. All target the undergraduate market. Properties already on line or in the pipeline eventually will add about 1,000 units and 2,600 bedrooms to the local housing inventory.
The more recently completed buildings bill themselves as luxury high-rises, and rightly so. They come with plenty of amenities—fitness centers, game rooms, yoga studios, flat-screen TVs on living room and bedroom walls, on-site grocery stores, bars, and restaurants—that would blow the mind of anyone who graduated more than 10 years ago. Rents, ranging from $1,000 to $1,800 per person per month, are commensurate with the facilities.
As a result, Ann Arbor’s changing skyline is increasingly etched with slick brick towers, replacing many funky and fondly remembered establishments from the college town of yore. And these new edifices reflect and portend cultural shifts that transcend mere aesthetics.
Municipal zoning changes recently signaled an end to the era in which tall buildings, with few exceptions, were anathema in Ann Arbor. The upward trajectory caught momentum with Corner House Lofts at State and Washington streets. Developers had struggled to gain city approval for years before finally getting the green light to open in 2004. This marked the beginning of a philosophical shift on the part of city leaders toward the “walkable urbanism” concept as a way to grow Ann Arbor, linking dense downtown development to viable commercial activity.
This shift converged with other forces reshaping the national economy. The financial meltdown of 2008 pushed capital markets into what were perceived as safe investments, i.e., the nation’s undergraduate population, especially at vast institutions like the University of Michigan, which are stable at worst. Many undergrads are subsidized (at least in part) by their parents. As a rule, they are a better financial bet than graduate students, who may be on their own dime with families to support. In addition, today’s undergrad is accustomed to certain amenities, from personal privacy to wireless Internet, and University leaders and real estate developers have picked up on that trend.
When the University completes its Residential Life Initiatives program in 2016, it will have spent nearly $900 million over 10 years to renovate and rejuvenate student housing facilities on campus. In 2010 the striking North Quadrangle Residential and Academic Complex opened at the intersection of State and Huron streets, U-M’s first new residence hall in 43 years. In 2015 a new state-of-the-art residential complex for graduate students is slated to open on the north side of East Madison Street between South Division and Thompson streets. The new complex is financed in large part by a $110 million gift of securities from Berkshire Hathaway Vice Chairman Charles Munger.
The monthly tab paid by U-M’s on-campus residents is about the same as that paid for high-rise living, but the inclusion of meals in residence halls keeps them competitive with their off-campus counterparts. The real competition for undergrad tenants isn’t the private sector’s downtown high-rises, says Hank Baier, associate vice president for U-M facilities and operations. It’s Michigan’s peer institutions.
“We’re in a situation where we’re competing for the best students, and their expectations have moved upward,” Baier says. “We’re not doing anything crazy [in the residence halls]. We don’t have spas. But students today kind of expect air-conditioning.”
Even more important, “We think we offer a greater academic benefit,” Baier says when comparing the residence halls to the high-end apartment complexes. “In all the places where we do major renovations, we include student learning spaces. That’s not the private sector’s mission, but it’s our mission.”
North Quad, for example, is dubbed a complex because, in addition to 450 beds, it also houses the Department of Screen Arts and Cultures, the Department of Communication Studies, the Language Resource Center, and the Sweetland Writing Center, all components of the College of Literature, Science, and the Arts. North Quad also is home to the School of Information. There are TV studios, a media gateway, a dining hall, media-intensive classrooms and research areas, and exhibit space, as well as faculty offices, academic administration space, and graduate student workspace.
“I have a deep-seated belief in the importance of the residential experience as a complement to the classroom experience,” says housing director Newman. “We play a really important role in providing the backdrop that helps [students] be successful.”
In addition to supplemental learning/community spaces, “one of the things that differentiates us from the apartment communities is security,” Newman adds. University Housing has its own security officers who are present overnight in residence halls “helping students in all kinds of ways.”
The surge in new off-campus development impacts more than students, however. It illuminates a host of new economic and cultural implications for residents and business owners in Ann Arbor.
“This is adding huge amounts of new supply in big chunks,” says Chris Leinberger, an oft-quoted urban planning authority and Brookings Institution fellow who was the first director of the University’s graduate program in real estate development. “Sure, the people who are living in those high rises are well-to-do, but it’s going to add inventory to the system and will drive down the price of rental housing in general, and that’s a good thing.”
Peter Allen, a longtime Ann Arbor real estate developer and consultant who has taught in the Ross School of Business since 1981, expects that neighborhoods close to campus, like Burns Park, the Old West Side, and the Old Fourth Ward, will see single-family homes that had been converted to student housing return to their original purpose. He foresees a time when those homes will be “fixed up and occupied by young families and young professionals” as undergrads increasingly move toward high-rise living downtown.
One of the chief arguments espoused by proponents of urban density is its effect on the environment. Unlike suburbanization, which gobbles up ecosystems with breakneck speed, the new “walkable urbanism” builds housing up rather than out. In Ann Arbor in particular, whose voters approved a millage to create and sustain a “green belt” around it in 2003, vertical expansion is the only significant way the city can grow. Many of those same voters are concerned about maintaining the city’s character amid all this new development, however.
Doug Kelbaugh, professor of architecture and urban and regional planning, and dean of the Taubman College of Architecture and Urban Planning from 1998-2008, teaches a course on sustainable urbanism and architecture in which, he says, “the environmental paradox of cities and the many advantages of urbanism are central. As I am wont to say, ‘If you love nature, give it a break and live in the city.’ The density is not only environmentally greener, if less leafy, than the suburbs, it also sponsors a more vibrant, diverse, walkable, bikable, transit-friendly place to live, work, and play. I think it’s a positive social trend.”
But some observers see serpents lurking in this sparkly student Eden. Even Kelbaugh notes “the growing wealth disparity in American society is reflected in the contemporary student body, with an increasingly wealthy component able to pay higher rents while the majority have become mired deeper in debt.”
And there are those in the housing industry who voice more practical apprehensions. All the high-rises essentially have been full to date, but will there be enough demand when all of the University’s housing is back on line in 2016?
Amy Khan manages Corner House Lofts for her family’s company, CMB Property Management. “It’s much more difficult to lease it out now [that the city has] allowed so many apartment buildings to be built,” she says. “There could be a bit of concern when the University is 100 percent open. I think the city is going to be really sorry in five or six years unless the University increases enrollment.”
“There’s way too much development in the short term and it is a concern,” says Brian Dinerstein, president of the Houston-based Dinerstein Companies, which owns the 11-story Sterling 411 Lofts at 301 E. Washington St. “All of the properties are targeting the highest price point in market.” Dinerstein has designed and built 58 such properties, but Sterling 411 is one of only three it owns.
“We bought this property as a long-term play because we love the asset and we’ve been very happy with it,” Dinerstein says, “but there are definitely some challenges in the market right now, with the influx of new product.”
“If I were a real estate investor, I would have stopped investing in student housing about three buildings ago,” says Ann Arbor Mayor John Hieftje, who was a realtor himself before he was first elected in 2000. “But they must know something we don’t.”
Supply and demand
A cursory look at the numbers suggests some basis for a rosy outlook. The University’s total undergraduate housing capacity, when all buildings are on line, is 10,500, representing 37 percent of the undergraduate population. That leaves about 15,000 undergraduates in need of off-campus housing. When you include graduate students, that number jumps to about 30,000. And despite the seemingly dramatic upsurge in high-rise construction, Ann Arbor is adding “only” 2,600 beds to its existing inventory.
Besides, says Leinberger, “Real estate developers are optimists by their very nature. Boom and bust [is] the nature of the business. We overbuild any market no matter how good it is.”
The limits of that optimism may be in for a test. A review of zoning laws is underway, in the wake of Ann Arbor City Council’s controversial approval in May of a 14-story development at East Huron and Division streets. The location abuts an historic neighborhood to the north.
Whether one welcomes or recoils from recent developments, Ann Arbor’s skyline is certainly changing. So are the streets below. As the towers began to rise, knowledge companies like Google and Barracuda Networks came downtown. Experts like Allen suggest that students, who have increasingly shunned the automobile (which frees up money for rent, after all), may be drawn to this modern blend of congenial employment, full-service residential living, and a pedestrian-friendly downtown after they graduate, further contributing to Ann Arbor’s economy.
“Adding a lot of density to downtown will improve the sidewalks, the shops, and the overall vitality, creating a downtown culture that attracts these students to stay as graduates,” says Allen. “High density is what makes great cities, whether it’s Chicago or New York or Ann Arbor.”
Tell us about your experience as a college student living in Ann Arbor.