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There are currently more than 1.5 million full-time students studying in Canadian universities and colleges. This has created a huge demand for rental housing, especially in large urban centres with high rents. And now, students are not the only ones interested in student housing.
This previously neglected area is a good opportunity for investors, as Savills, a British real estate service provider, points out that yields are now higher than in many industries.
Earlier this year, the Canadian Pension Investment Board (CPPIB) announced that its joint venture Scion Student Communities had acquired $1.1 billion worth of student housing products. The product covers 20 university campus markets in the United States, with a total of 13666 beds.
As sovereign wealth funds increasingly target this area, student housing attracted $16 billion in global investment in 2016, according to a recent report by economists.
There is such an opportunity in Canada. The growth of student-centered housing here cannot meet the increase in the number of college students or above. Demand is greatest in cities like Toronto, where StudentDwellTO, a collaborative project sponsored by the presidents of four Toronto universities, aims to find solutions for student housing.
Although universities may try to gain a larger share of student housing through their own greater participation, this is wrong. Universities are engaged in the educational business rather than renting accommodation. They should encourage and promote the development of the private sector, which has the experience and resources to help the emerging student housing market mature in Canada.
The brokers of SVN Rock Advisors specialize in student housing financing. They estimate that the unmet demand for Canadian student housing exceeds 416000 beds. This should not come as a surprise, since millions of people have enrolled in Canadian universities, but the total number of beds on campus is only 121164.
SVN estimates that there are currently 39178 dedicated off-campus beds across Canada, nearly half of which are in the Kitchener-Waterloo area.
It is estimated that there is a high demand for such housing, with 51000 beds in Montreal, 32000 beds in Toronto and 21500 beds in Ottawa.
From an investment point of view, the following figures are beneficial to student housing rather than other residential rental projects. For example, 140000 square feet of dedicated rental space can accommodate 140 sets of about 220 people. Derek Lobo, director of SVN, said the same space could accommodate 450 students and the rent could be increased by 30 per cent.
The demand for student housing in Canada is expected to rise. The current demographic situation in most parts of Canada and the increasing demand for education around the world mean that international students will account for a higher proportion of college enrollment in the future.
During the 2011-12 and 2015-16 academic years, the number of full-time Canadian students enrolled in undergraduate or equivalent programmes increased by only 2 per cent. By contrast, the number of international students studying in Canada has increased by 52%. In Manitoba and British Columbia, the number of international students increased by 88 per cent and 74 per cent respectively.
As Canadian universities compete globally to attract international students, they must recognize that “residential life” is an important part of the educational experience. Since universities specialize in providing educational services, they should work with private sector investors and property managers to provide quality housing services.
Dilapidated student housing is out of date. Students and their parents expect and demand high-quality housing. Given stable sources of demand and willingness to pay, the private sector can develop student housing into a mature category of real estate investment.