Private Investors Ready to Help Housing Crisis and Develop More Student Housing in Canada

27 June 2024

Toronto, Canada – On June 26, 2024, the Student Housing Summit successfully convened at the prestigious Goodmans LLP in Downtown Toronto, gathering over 120 prominent industry leaders from the real estate, education, media, and public sectors, both domestically and internationally. Organized by BONARD, the world leader in student housing research, data, and advisory, the summit addressed the student housing shortage and growing needs in Canada.

Industry giants such as Brookfield, BMO, CPPIB, Ivanhoe Cambridge, Harrison Street, Hines, Landmark Properties, Manulife, Mapletree, Oxford Properties, TTC Pension Plan, and University Pension Plan Ontario were in attendance, witnessing five different panels on investments, education, development, operations, and financing.

“Events like this conference will help engage parties, get people talking, and work together to develop innovative strategies to increase our number of high-quality, purpose-built student housing beds,” said Jonathan Turnbull, Managing Director – Head of Canada at Harrison Street, the Summit’s General Partner.

Private Sector Commitment to Help Solve Student Housing Shortage

According to the latest IRCC data, immigration officials handed over 1 million study permits to international students in 2023 (up from 838,000 in 2022). When comparing the total number of students to a country’s total purpose-built student housing supply, there is a significant shortage of beds. The total average provision rate is only 10%.

The limited supply and unprecedented demand continue to push rents higher (15% year-over- year average increase), though the occupancy remains steady and close to 99%. Investors agreed that the Canadian market fundamentals are attractive, and uptake in investments is expected to start. Financing is working well, though it will be key to find the right opportunities.

The private sector further concluded that it is ready to support the development of much-needed PBSA beds in the country and added that tools such as the recently announced government rebates on the GST/HST on new purpose-built rental housing (PBRH) are welcome. “Such mechanisms are essential for developers to pave the way for institutional investments by building scale. Looking ahead, transaction volumes are expected to increase, though some assets may be overpriced. If inflation decreases, we could see a rise in development activities,” said Samuel Vetrak, CEO of BONARD.

Universities Open to Public-Private Partnerships

The event was also attended by representatives from some of the largest Canadian universities, such as the University of Toronto, University of Waterloo, York University, and Toronto Metropolitan University. The university representatives stressed that the institutions are open to P3, dialogue, and collaboration. Universities would like to have influence over design and ensure that private partners understand the value universities bring to the table.

Despite the robust student population in Canada, the market remains fragmented, and the student housing sector hasn't reached the development levels seen in other global markets. However, there has been positive growth in opportunities for developers, especially in Toronto, Waterloo, Kingston (for off-campus), and Vancouver (for mostly on-campus accommodation). These markets are considered prime locations.

“The most important lesson that I learned in my career and also take from the experience today is ‘know your business better than anybody else, and it will serve you well in the long term.’ Think long term, make long-term decisions, because it will always be better for the overall development and management of the project,” said Henry Morton, President of Campus Suites and one of the most experienced developers in the market.

When it comes to operations, experts shared that student requirements are increasing, and operators need to adapt and improve regularly. Good operators can scale more quickly across the country. Creating a brand students can trust is essential to attract students from on-campus housing. “As an operator, as we start to scale to student housing and it becomes a larger business, I think operators should be really keen to understand operational efficiencies and how they apply across the multiple assets that they have, looking for ways to find some kind of patterns and operational standards they can use as a benchmark when they are assessing and operating other platforms,” said Salim Kassam, Senior Vice-President, Real Estate at 4Stay.

Lenders: More Data Needed to Support More Investment

Lenders were also part of the event, highlighting that more data and transparency will bring more investment. According to them, cash flow is dictating how much to lend. Inflation is likely to go down, but they need to start doing deals in a higher interest rate environment. “It’s a dynamic opportunity for student rentals that everybody’s going to pay attention to, and we see a lot of future work coming from this session,” said Sandy Harrington, Managing Director, Real Estate Finance, CMLS.

Data from 856 PBSAs, both operational and in the pipeline, spread across 24 markets and submarkets in Canada (included in 54 off-campus portfolios), were collected, analyzed, and presented by BONARD. “29% of PBSA beds in Canada are off-campus, and there is a 16% average provision rate of the off-campus beds vs. number of international students,” said Martin Varga, Rented Residential Business Development Director at BONARD.

The research firm has recently launched its newest report on Canadian PBSA portfolios, available here.

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For more information, please contact Jaroslav Benus at jaroslav.benus@bonard.com.

About BONARD

Established in 2007, BONARD is a market intelligence and strategic development firm specialising in rented residential asset classes. We leverage our global knowledge and connections to help clients grow in this vibrant market.

www.bonard.com