Canadian developers have recently been playing catch-up with their American counterparts when it comes to privately built student housing. The industry has only begun to realize that behind many university students current living in so-called ‘student ghettos’ are parents who are willing to pay for higher-end housing that specifically caters to their kids’ unique needs.
According to the Association of Universities and Colleges Canada (AUCC), there are 898,400 full-time post-secondary students across Canada. However, the number of private purpose-built beds pales in comparison to this market.
While the number of developments for students in on the rise, the total number of beds at these institutions — both on campus and off — has barely made a dent in the demand. In fact, there is talk of a student housing shortage in a number of cities.
Almost half of all Canadian tenants in student housing find themselves within commuting distance of two universities: Wilfrid Laurier and the University of Waterloo, both located in Waterloo, Ont. There are now more than 9,000 privately built beds available to students, with more projects on the way to be added next year.
And this is no coincidence. Waterloo is an excellent case study of how private developers, educational institutions and municipal governments can work together to foster a nurturing environment for purpose-built student housing.
The partners in Waterloo’s student housing boom all had considerable incentive to work together. The universities needed housing for their students. The Waterloo city council wanted student housing to be safe and secure, and it wanted to minimize the potential conflicts between student housing developments and the established community. Private developers had the capital to make these changes happen.
As a result, the City of Waterloo implemented a series of bylaw changes that encouraged private developers to build high quality mid- and high-rise student housing within appropriate areas.
Today, the City of Waterloo has been transformed. The ‘student ghettos’ that had been stereotyped as rife with poor-quality housing and conflicts with non-student neighbours now features quality high-rise buildings on prominent streets. The converted single-family homes that had acted as student housing in the past are now being converted back to single-family homes.
In cities like Ottawa, Kingston, Toronto and Vancouver, students usually occupy converted single-family homes, or live in conventional apartments that were not designed with students in mind. The locations of these units can also work against students, and lead to longer commute times to get to classes.
This is a tremendous market demand just waiting for developers to move in and build up supply. However, building student housing isn’t as easy as putting up a building near a university and waiting for the students to come. Developers that do not carefully study the market before entering risk leaving money on the table when it comes to their investments.
Developers who find the right piece of land will have an easier time renting out their units than those who are located even a kilometre away. However, sometimes such a property doesn’t exist.
For example, both the University of British Columbia and Simon Frasier University in Vancouver are surrounded by acres of greenspace. Any future student housing developments would therefore have to occur in partnership with the universities on university land.
Toronto faces its own set of challenges, as the land around the universities is so built up that student-housing developers must compete with condominiums and private apartments in a hot real estate market.
But when the right opportunity presents itself, developers can act quickly and reap rewards. Like Toronto, Montreal has a hot real estate market around its many downtown universities. However, savvy developers managed to find an old office building near McGill University that was ultimately renovated into student housing. Thus, they were able to tap into the marketplace of one of the most prestigious universities in Canada that also features one of the largest populations of international students.
The key to success is knowing the markets that one is looking to enter. This is why it’s important for builders to obtain an impartial feasibility study from expert consultants. They can provide information as to where the largest markets — and where the opportunities to develop— are. All of these data points can be used to find the locations with the highest return on investment.
Waterloo has shown what is possible for student housing in Canada when institutions, municipal governments and private developers all work together. Going forward, developers can spread this strategy to universities across the country — and then the student housing boom will truly be on.
Derek Lobo is the CEO of Rock Advisors Inc., an Ontario-based commercial real estate company that focuses on the apartment sector. For more information call 905-331-5700 or email info@rockaptadvisors.ca.
