REIN releases student housing formula

Proximity to universities is an often overlooked fundamental that enhances property values, but there’s another reason student housing should be a staple of every portfolio.

“There’s massive media coverage of the student housing crisis and research shows it isn’t getting any better. There’s colossal demand for student housing,” said Jennifer Hunt, vice president of research at the Real Estate Investment Network. “Millennials make up the largest demographic in Canada, superseding baby boomers, but at the crux of the demand [during 2011-2012 and 2015-2016] is domestic student enrollment, which increased 2%, and international students, which rose 52%.”

REIN’s inaugural University Effect: A Report for Rental Housing Providers determined that a house’s price will increase 1% for every kilometer closer to a university it is because of high demand for student housing within 400 metres of the institution. Given the dearth of student housing provided by the university—most of what is available goes to first-year students—there exists a monumental opportunity for investment.

But investors first have to know where to look. REIN has established what it calls a long-term formula to decipher which areas produce the highest ROIs. For example, universities increase GDP and employment also grows 4.6%.

Understanding where the demand comes from is paramount, says Hunt.

“Millennials form a large demographic among students because many are going back for master’s degrees, but what does the student profile—the student tenant—look like, and what do they want in a property?” said Hunt.

“If you consider Canada is attracting immigration and universities are actively pursuing international students and only about 3% of university students live on campus, that means 97% of students need housing from the rental pool.”

As for the suite of amenities this student cohort expects, Hunt noted resort living is hot right now.

“Utilitarian amenities are out of style,” she said. “Free coffee in the lobby, granite countertops, stainless steel appliances—these are things millennial students look for in student housing today.”

Using its “University Hot Zone,” REIN has identified Canadian universities it believes warrant further study because of the investment potential of nearby properties.

  1. University of British Columbia – Okanagan (UBCO)
  2. Simon Fraser University – Surrey & Burnaby Campuses (SFU)
  3. University of Alberta (U of A)
  4. University of Calgary (U of C)
  5. University of Lethbridge (U of L)
  6. University of Saskatchewan (U of S)
  7. University of Manitoba (U of M)
  8. University of Ottawa (U of O)
  9. Carleton University
  10. University of Toronto (U of T)
  11. University of Prince Edward Island

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