The SHURE Initiative checked in with The Doctor of Student Housing, Mike Porritt, for analysis and review.

DR. OF STUDENT HOUSING: More large-scale investors are looking to the Great White North where higher interest rates are baked into the cake

July 17, 2023

SHURE Initiative

This is an unusual period in real estate. With once in a generation shifts at play such as the conflict in Eastern Europe, adjustment to post-Pandemic life, and global inflationary challenges, The SHURE Initiative checked in with Dr. Mike Porritt of The Scion Group Advisory Services.  Dr. Porritt, a sought-after industry expert, is a veteran of the university and student accommodation arenas, having worked on both sides of the game (for university and for private developers).

How are these macro factors impacting the Canadian and global student accommodation outlooks in terms of demand-supply, new development, and changes in enrollment?

Dr. Porritt offered his analysis in this SHURE Initiative interview.

SHURE: How has the current debt environment (rising interest rates) impacted your business, if at all? 

MP: The interest rates in Canada are having an impact on construction and borrowing but it is not really having much impact in the campuses acting on student housing. Scion, as an advisory group in Canada, is busier than we have ever been with Universities and Colleges across the country seeking Market and Demand Studies; Financial Feasibility Analysis; and Development Strategies that often include some form of alternative financing. The higher interest rates are just baked into the cake for now and they are expected to come down – in most cases they are expected to come down before construction projects start but financing is being planned around them. The need for housing is too great and tied to institutional and student success so there is a need to move forward.

SHURE: What have you observed with the Canadian housing crisis for students in the first half of 2023?  

MP: It’s just getting more and more dire though the light at the end of the tunnel is that more housing is coming to campuses through alternative financing and for some campuses, their own money. The province of British Columbia is starting their second round of the funding program for student housing on campus.  The first round supported, primarily through low interest loans, more than 8,000 beds being approved for construction on campuses across the province and the second is starting. I hope other provinces will take from the BC strategy and the one used in California to create their own strategy to push forward to get more housing on campus. Even if it is all through low-interest loans and no grants and/or includes some flexibility in alternative financing, it would be a huge help. Every bit of student housing helps the students, the campuses, and the cities with the campuses. For each bed built on campus, that city gets 2 beds – one for the student on campus and one for the bed in the city that the student isn’t using.

SHURE: What have you observed with changes in international student enrollments in Canada and globally in 2023? 

MP: In Canada, the Colleges continue to see a surge in International students, predominantly from India. The Colleges are nearly 40% International now, with some over 50%. Canada allows for a work permit after completing a 2-year program and that is the pre-dominant style of program at the Colleges. The Universities are also seeing rises in International students from a more diverse set of countries, but India is rising fastest and has caught up to China as a source country. The Universities are approximately 18% International with a broader range between institutions and China continues to decline as a source country in Canada and across much of the world as more of their students stay home or go to nearby countries. 

SHURE: Is university re-opening post-COVID a continued challenge, and in what ways? 

MP: The primary post-Covid issues in Canada and in many other countries are these: 

1) Students and faculty have been slower than expected in returning to campus for activities other than classes.  It seems to have slowly improved over 2022/2023 but activity was still down, and we continue to hear that consideration for hybrid course delivery is more common and/or more requested by faculty.  If this goes back to ‘normal’ within a year or two and/or hybrid education delivery does not become extensive it will not have much impact on housing.   

2) Incoming classes in the last 2 years have been generally larger than typical, which likely reflects more students having taken ‘gap years’ after high school. Over the next couple of years this should re-balance itself.  It has led to a housing squeeze on many campuses. One of Scion’s main roles right now is working with campuses to separate what is a 2-year post-covid blip in enrolment and what is the overall upward trend in enrolment to avoid building capacity above what it should be. 

3) Lastly, the issue of the bathrooms. Semi-private bathrooms and/or ‘gang-style’ bathroom conversions to private units is going to be the norm going forward in new construction and renovations. This is the element from a design perspective that can make managing a covid-like situation in campus housing much easier and safer, plus it matches the changing preferences of students for more bathroom privacy and essentially makes gender issues related to bathroom assignments a non-issue. 

SHURE: What has been most interesting to you about 2023, perhaps a trend that has emerged that you didn’t expect in January? 

MP: More and more large-scale investors are looking to Canada and student housing as an investment option. That is not unexpected in and of itself – Canada is among the leaders in the quality of post-secondary education and is relatively affordable in the world, it was only a matter of time before the major players started paying Canadian higher education more attention. What has been surprising is the large differences in knowledge about Canadian higher education and how those differences impact housing. Some firms have conducted deep research and know it quite well and contact me for some context but generally show a solid background. Others have been surprised to hear that the Colleges and Universities are two different systems with quite significant differences and the rapid rise in International students is largely at the Colleges (the Universities are generally rising too, but not nearly as fast) and do not recognize the real differences that impact student housing. Canada needs more student housing – and lots of it – but there are a lot of contextual differences between Canada and the UK or US that will impact what someone would purchase and/or develop depending on the market and the type of institutions being served. 

Join Dr. Porritt in-person at upcoming SHURE Inititive events, including SHURE: EU Emerging Markets on October 10, and SHURE: GTA & Eastern Canada on November 15-16.

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