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By Derek Lobo

Student Housing represents a major opportunity for a residential apartment owner/developer.

Demographics
Let’s look at the basics of Student Housing. Today, there are approximately 800,000 students enrolled in Canadian universities, and these numbers are expected to grow over the next 10 years, to well over a million students. This demand is being driven by the eco-baby boom, students staying in school longer, and getting more than one degree.

Growing international enrolment at Canadian universities and colleges is also an important factor.

Participation rates at Canadian universities increased from 14 per cent in 1996 to 20 per cent in 2001. The forecast is for over 50 per cent of students to attend post-secondary institutions by 2026.

Factors That Drive Student Housing
In real estate, the old adage is “Location, Location, Location.” No other real estate (except maybe airport parking) is more sensitive to location than Student Housing.
Students (and their parents) will pay significantly more for good location, quality product, and good management.

Purpose-built Student Housing, which, in the future, will replace over-crowded houses in student ghettos across the country, will contain updated amenities like fully-equipped fitness centers, movie theatres, games rooms, study rooms, board rooms, etc. The multi-bedroom units will also be fully furnished, with dishwashers, flat screen TVs, double beds, and all the amenities that you would find in a mid-range condo building.

Development Opportunities
The Student Housing development industry is relatively small in Canada, when compared to the United States. There are opportunities to develop off-campus, and to joint venture with universities and develop on university lands.

Today, many universities have limited funds for development, and those funds should be channeled to building educational buildings, equipment, and hiring world-class faculty. We believe that it will become more and more likely that universities will look to private developers to build Student Housing, both, on and off campus.

We believe that there is a first-move advantage available in Canada for a public or private entity to roll up existing Student Housing buildings, and develop new buildings. We also believe that there is a significant hole in the market, in the luxury Student Housing sector. The best sites for development will be close to the university, and it will be difficult for competitors once the best site is gone.

Student Housing Management
When you think of the housing spectrum, apartments are the least management-intensive, and seniors housing is the most management-intensive. After leasing up many thousands of beds, I have concluded that Student Housing is more like Seniors housing (drug problems in both, but of a different type). Anyone entering the Student Housing business needs to fully understand the difference between managing a conventional 100-unit apartment building, with 150 renters, versus managing a 100-unit apartment building with 400 second-year students at the end of exams.

Today’s students are focused on school and have significant disposable income, i.e. we call them six-pocket children—two parents and two sets of grandparents. They come from large, well-furnished homes, where they have their own bathroom, and they would like to have the same when they go to university. They drink Heineken.

What to Build, and Where
If you build one and two-bedroom apartments for students, you are no different than the conventional rental market that surrounds most universities and colleges. Students are looking for two things—community and privacy. This can be achieved with a well-designed four-bedroom, two-bathroom units with individually locking bedroom doors.

With a well-designed product, you can get more dollars per square foot than a conventional apartment. The cost of additional amenities and security required for Student Housing is off-set by the higher dollars-per-square-foot achieved.

Generally speaking, a developer will be more successful at destination universities—institutions where the majority of students are from out of town—such as Queen’s University in Kingston, versus a commuter school, like George Brown College in Toronto, where most of the students are local.

When looking at various postsecondary institutions, the developer needs to look at existing Student Housing demand, future enrolment projections, the current and future competition, the university’s national and international reputation, and the availability of sites to develop on. Many of the best universities in Canada are located in barrier-to-entry locations, making development difficult.

We believe that Student Housing in Canada is an opportunity for investors, developers, and managers with the majority of the opportunity located in the provinces of Ontario and Quebec.

Derek Lobo is the CEO of Rock Apartment Advisors Inc., a boutique apartment brokerage firm and Derek A. Lobo & Associates Inc., a performance-based consulting firm with its sole focus on the apartment industry. If you would like a copy of our soon to be released White Paper, Canadian Student Housing, please contact us: info@rockaptadvisors.ca.