Henry Morton
President, Campus Suites
A lack of quality information in and about the Canadian student housing market can be a challenge for American developers.
Henry MortonThe lack of valuable market information creates the following problems, and also marks the largest differences between the Canadian student housing market and the United States student housing market:
1. A lack of purpose-built living for students.
Students want to be provided with high-quality living options and become quickly frustrated when there aren’t any options that meet the needs and demands of their lifestyle. There are some estimates that say that only 16,000-18,000 purpose-built student housing beds have been built in the whole country. A study that I recently saw stated that 50 percent of students in the United States will choose not to attend a particular university based on the availability or quality of on- or off-campus housing. There is already a smaller number of Canadian universities that students have to choose from compared to the United States, and the lack of inadequate student housing could leave a large population of students living at home, or possibly without a college education. In order to address the demand for purpose-built housing, York University initiated an RFP process for the main campus with the expectation of up to a 2,200-bed project that will be transformative for the future of the school.
2. Lending for student housing is newer in Canada and not well defined, which may slow down the construction pipeline.
As of right now, it seems that everybody has a deal that they are working on in the Canadian market, yet confidence is limited when it comes to the point of closing the deal. There seems to be an abundant amount of equity in the market, yet the debt markets uphold stringent qualifications for many transactions, depending on the sponsor. Everyone is looking to bring deals to the market, but it is hard for U.S. developers to get involved in the race. In terms of business, it is very challenging for U.S. developers to bring their business plans here to Canada due to differences in taxes, labor laws, exchange rates, etc. Developers also have to understand that they are also going to be educating the market because of a lack of purpose-built housing experience, by both the parents and the students. Campus Suites has overcome these difficulties because we have always worked on both sides of the border. In addition to our programmatic and purpose-built housing, we have also developed various business models to accommodate schools that are price sensitive, enabling them to compete effectively.
Once these differences have been addressed and understood, I hope that the student housing industry can catch up to the United States’ high standard of housing. Before that can happen though, there is one important issue in this industry that must be addressed: transparency and information flow. When one goes into a new region or market, like Canada, and starts to ask various questions at the project level, the response is often “who’s asking?” Unfortunately, people often don’t know how to ask the right questions when approaching developers across our borders, and therefore don’t always get the most appropriate answers. My advice to all in this industry is to be honest, and we will all be better off. Information flow and transparency often limits risk and increases opportunity, it also helps banks become more interested in financing. Developers will become more prudent in their decision-making, providing the market with a suitable supply of options for the betterment of all concerned.
— Henry Morton, president Campus Suites. Campus Suites has developed more than 11,000 beds.