Student Housing & Commercial Investor

timthumbIf you think about student housing, a number of images come to mind, and many of them unfavourable, but like most urban myths, the reality is very different. These days are exciting days to be investing in the purpose-built rental apartment industry, and the niche of student housing offers many unexpected rewards for those who enter the market with their eyes open. Here are four reasons why you should consider student housing as a development or an investment opportunity:

1.     The Demographics are Favourable
In Canada, there are currently 800,000 full time students attending colleges and universities across the country. By 2021, that number is expected to increase to 1,000,000. And not only will 200,000 additional students be looking for accommodation, many will have a lot of disposable income to put towards that accommodation. These young men and women will be looking for their first places to live outside of the home, and they will be backed by parents and grandparents who will want their children to be housed in the best accommodations possible.

2.     The Universities Are Looking to Private Developers to House their Students
Universities, like other public organizations, are facing challenging fiscal times, as well as a need to renew their infrastructure and prepare for the pressures an additional 200,000 students will place on the institutions. One area they are backing away from is student housing. Developers are already finding good markets building student housing developments close to major universities, and these universities and the communities that house them are actively encouraging this work. Substantial new developments are being built in university towns across the United States, and similar activity is taking place in such university centres like Waterloo, or London. Developers can take the burden of student housing off of universities, leaving the universities to concentrate on the students’ educational experience.

3.     Student Housing Developers Who Give More, Receive More
Students, with more disposable income in their pockets than in years past, are willing to pay top dollar for developments which address their specialized needs. They are also backed by parents and grandparents who want their children’s first steps out of the nest to be as safe and comfortable as possible. Students want to be close to their schools, and they are looking for other amenities which complement their experience. Games rooms, study rooms, even fitness centres and movie theatres may seem costly to developers, until you realize that student housing developments rent by the bed rather than by the unit. The rate of return for a building that looks after the students’ needs far exceeds a traditional apartment building that would be overlooked in the market.

4.     The Market Has Only Just Started to Develop
Student housing has been slow to build in Canada, in part because of the inaccurate and unfavourable images it has generated in the past. Times are changing, however. Student housing has helped generate strong growth in a number of American centres, and the boom is slowly coming to Canada. In the past six months, ROCK Advisors Inc., helped broker over $215 million in student housing deals. Student apartment buildings have commanded multi-million dollar prices in Waterloo, London and Montreal. Developers who take the time to learn about the unique challenges and opportunities of student housing may get in on the ground floor of a market that will see considerable growth in the coming years.

5.     More dollars per square foot
In a traditional apartment building, the landlord rents the apartment by the door. In purpose-built student housing, the apartment is rented by the bed, meaning that in a four-bedroom, two-bathroom purpose built student apartment, you rent that four times. For example, in London, Ontario, one may be able to rent a 1,200 square foot conventional rental apartment for $1,200. If you built a 4-bedroom, 2-bathroom purpose built student housing apartment at 1,200 square feet, you will be able to rent it at $450 per bedroom, or $1,800 per unit. That $600 difference is the premium that one gets for student housing. That premium is off-set by higher operating costs and higher turnover costs, but those costs are much less than $600.As another example, a new apartment building in downtown Montreal might rent for $2.25 per square foot. A similar purpose-built student housing property, furnished and leased by the bed, would rent for $3.25 per square foot.

6. Apartments and, moreso, student housing, are not tied to the normal economic cycle.
We have just been through an economic recession in 2008 and 2009. While most sectors of real estate suffered, the apartment sector did not. Occupancy rates remained strong, and financing remained available. Student housing is even more recession proof than apartments. In recessionary times, students tend to stay in school longer, and recent graduates return to school to upgrade their skills because of the lack of jobs.

Entering the Market with Eyes Open
Not everybody is suited to develop, invest in or manage student housing. One needs to learn the ins-and-outs of the marketplace and carefully assess where to build and how to finance such a development. But those who enter the market with their eyes open reap considerable rewards for their efforts.

And that’s the key. One should always carefully examine potential investments before entering into them. ROCK Advisors has years of experience in this field and has helped clients conduct in-depth, impartial analysis of the best sites to develop, and the best properties to develop them with. ROCK Advisors can help you secure the best financing for such investments, and ensure that you enter the marketplace informed, and in the best position to make the best return out of your investment.

ROCK Intelligence Services conducts feasibility studies for the development of new purpose-built student housing or the conversion of an existing asset to student housing. ROCK’s feasibility studies assess the residual demand for purpose-built student housing by comparing student enrollments against the supply of existing accommodation, and include a full survey of university-operated accommodation, private student housing, and the conventional rental market. With this powerful market intelligence, ROCK’s feasibility studies provide a series of actionable recommendations to maximise the success of the student housing development in hand.

Student housing is a young, up-and-coming marketplace with a bright future. If you are ready to engage in the unique challenges that student housing represents, you can reap considerable rewards.

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