by Jennifer Brown
As post-secondary students resume their studies across Canada this fall, they will be spending less time on campus and more time in front of their computers as colleges and universities begin the fall semester with the majority of learning happening online.
That means where they live and the amenities offered just became that much more important. Many university residences are limiting the number of students living on campus, capping occupancy at 30 to 50 per cent in September to prevent community transmission of the novel coronavirus. Shared dorm rooms will now be for individuals only. Homestays are also in jeopardy, as landlords remain concerned about the virus entering their homes.
That has left some post-secondary students scrambling to find off-campus housing, making the tight rental housing market near Canada’s largest colleges and universities that much tighter and perhaps all that more appealing to the luxury student housing investor market.
Most students are not looking to live in frat-house style Victorian mansions, though. Many international and domestic students, especially those in graduate programs, seek a higher-end experience that is fully furnished with easy access to entertainment, a gym, in-suite laundry, bathrooms for each bedroom and outdoor living spaces with pools and rooftop patios.
Students Look For Shelter in the Storm
Luxury student housing has been a growing segment in Canada for years, but with COVID-19 continuing to linger and many schools limiting onsite student living, investors are closely watching the market. But even as students prepare to take a wide range of studies from home — everything from ESL classes for incoming international students to online MBA programs — student housing experts remain optimistic.
“I’ve been monitoring this very closely, and Canadian enrolment from domestic students is up by more than 10 per cent for September,” says Toby Y. Chu, chairman and CEO of CIBT Education Group Inc. in Vancouver where the rental vacancy rate in 2019 was one per cent in 2019, according to Canada Mortgage and Housing Corporation (CMHC).
CIBT is a 25-year-old company that owns Sprott Shaw College and has a range of student housing properties held under the brand Global Education City (GEC). The company’s real estate portfolio includes furnished student apartment buildings across Metro Vancouver.
Chu says in the last few weeks, he has seen a higher number of inquiries from international students currently studying in the United States now looking to move to Vancouver and the Western Canadian market generally.
“That’s another untapped market,” says Chu. “Students who were eyeing the United States at one time are now looking at Vancouver, which has one of the lowest number of COVID-19 cases.”
Interest From International Students on the Rise
Some students are coming from countries that have been hard hit by COVID-19.
Chu is in discussions with the public universities in the Metro Vancouver area, such as the University of British Columbia and Simon Fraser University, because GEC is a supplier for accommodations off-campus.
“Many are booking isolation units with us, and it seems there is a large number coming back for September classes,” says Chu.
He adds that universities have seen an increase in summer enrolment even with the shift to online learning during the pandemic.
“As some young people see weak job opportunities, they are deciding to return to school to upgrade skills and education,” he says.
As of December 31, 2019, more than 498,735 post-secondary international students were studying in Canada, an increase of 14.5 per cent over the year before, according to the Canadian Bureau of International Students.
Vancouver real estate agent Joyce Soo of Sutton Group Seafair Realty, who works with GEC, says the interest in the luxury student housing market in Vancouver is “very active” right now.
“The pandemic has had an impact on students living in dormitories,” says Soo. “Many students were going to go home, but their families decided it was better for them to stay in Canada.”
Investors Should Look for Opportunities Close to Campus
According to the Real Estate Investment Network (REIN), housing located near certain college and university towns can net premium investment potential.
Vancouver-based REIN’s inaugural report released in January: University Effect: A Report For Rental Housing Providers, says average home prices increase by one per cent for every kilometre they are closer to a university due to the high demand for student housing, especially when located within 400 metres or less than a 30-minute transit commute from campus.
Prairie School Cities Offer Potential
REIN also developed a “University Hot Zone” and “University Goldmine” scorecard for investors to determine whether student housing is “ripe for investment potential.” They came up with a listing of 11 universities in the Hot Zone category, including UBC and SFU, in the top two spots. The University of Ottawa and Carleton University were in the 8th and 9th spots with the University of Toronto in the No.10 spot. Schools in Alberta, Saskatchewan and Manitoba were right after the B.C. schools and are an area of focus for Henry Morton, president of Campus Suites. Morton’s company is based in Toronto, with units located near York University. He has been developing new mixed-use, purpose-built rental student housing projects in Winnipeg and Calgary with close proximity to the University of Manitoba, University of Calgary Southern Alberta Institute of Technology.
“We are finishing 500 beds in Calgary (The Hub) and 570 beds in Winnipeg (The Arc) and building a five-phase development with 800 beds at York University. Except for Vancouver we are working on projects around the country,” he says.
The new Campus Suites amenities will include study lounges, a business centre, a gym, a communal kitchen for larger get-togethers, underground parking and multiple commercial businesses.
Underserved Markets Provide Affordable Options
Eastern Ontario also remains an area of interest for investors who have identified Queen’s University as an underserved market with a vacancy rate of 1.9 per cent as of January, according to CMHC, although rents continue to rise.
On the northwest edge of Queen’s University campus, a new condo development purpose-built for students is scheduled for completion in September 2021. Sage Kingston is addressing the luxury student housing need in the city. Ryan Wood, sales and marketing associate with IN8 Developments, says in markets such as Kingston, investors have been buying up units in the developer’s 325-unit condo building at 652 Princess Street. Units range from 317 to 779 square feet, and feature granite countertops, ensuite laundry, and the building will include a fitness centre, social lounge, rooftop patio and furnished units.
IN8 Developments has more than 13 student properties in the Kitchener Waterloo area serving the post-secondary institutions in those cities and surrounding areas.
The Kingston units start at $449,000 or lease for $2,200 and are located a 15-minute walk to Queen’s University and downtown businesses. As the units are fully furnished, Wood says owners can charge more because students don’t have to purchase furniture. A property management division of Sage handles collecting rent and maintenance of the building.
Alternatives to Older Housing Stock
Wood says the Kingston market is ripe for the luxury student market because the bulk of off-campus student housing inventory is older, often rundown houses where students pay, on average, $800 a month for a shared house with four to five other students with few amenities. Because many of the homes students rent are in a heritage-protected area, there are restrictions on what can be done to improve them.
Investors in the Kingston property are mostly domestic, says Wood.
“We don’t have too many foreign buyers,” he says. “Most are from the GTA and surrounding area,” noting that many parents of students attending Queen’s come from higher income brackets and have typically spent more on private school tuition than they will for their child’s university education.
“They look at it as an investment for the next four to seven years,” he says.