6 Thoughts on the Student Housing Market

As originally published by Places4students.com with comments added by the Somerville Team about the the Guelph student housing market.

While it’s difficult to predict the future, one thing is for certain – the student housing market will continue to grow. How exactly it will grow and evolve is something a bit more difficult to predict.

By looking at current and forecasted trends, it is possible to paint a picture of what the future might hold for the student housing industry. Here are a few predictions being discussed.

1). The amenity race will come to an end

At some point, purpose-built student housing professionals will simply run out of ideas when it comes to one-upping the competition with unique amenities. They will also identify some luxury amenities that aren’t attracting residents and determine the additional cost may not be worth it. Campus Advantage agrees, and predicts that the end of the amenity war is in sight. Campus Advantage stated that location is the most important amenity; far more important than the bells and whistles stuffed into luxury buildings.

How Does This Apply to Guelph? Guelph has recently had the first “experiment” completed.  The purpose built building on Gordon Street sold out before completion, yet as we write this comment eight units are currently on the market as resale units and NOT for the price you might have imagined.  While other properties in Guelph have increased by an average of 13.2% in 2016 alone, a 978 Square foot, 3 bedroom unit at 1291 Gordon St has only increased by 5.8% since September 2013! 

Our advice at the time these units were built was to avoid them!  Some of our reasons were: too many students in one area will mean noise and chaos; noise and chaos will mean added security will be required; added security will mean higher condos fees which affects profit; rents are too high for the current market; guaranteed rent will only last so long then students will not pay $675 per bedroom any more; and finally, long bus stop line ups.  Other issues which we did not predict were, bad cell phone reception, and building material flying off the sides.  

Having said all that, the extra amenities that this building has to offer, which is impressive, is not only costly, but not desired by as many students as once thought.  Rents have decreased from $675 per bedroom, to as low as $490 per bedroom.  Hopefully the next purpose built buildings will get the balance right! We have our eyes on Solstice 3.

2). Student housing centralization will be the focal point.

This point should come as no surprise. With location being the most important aspect of student housing for developers and students alike, we’ll continue to see centralization around campuses. Housing located miles away from campus will become increasingly less desirable as more properties become available in close distance to campus. Many college and university towns are now seeing high-rise purpose-built student developments being built and it is enabling a higher volume of students to live near campus. Axiometrics demonstrated that there is a direct correlation between proximity from campus and higher rent levels, leasing velocity and occupancy. As the saying goes – location, location, location!

How Does This Apply to Guelph? Although it is true that location, location, location are the three rules of real estate, University of Guelph students view location as being close to the bus stop rather than proximity to the university.  For a variety of reasons, walking to school has become taboo. This could be related to harsh winter weather, time constraints, or even convenience. 

3). A rise in middle-market student housing will take place.

Middle-market or student-competitive housing is increasingly attracting the attention of major student housing players like The Scion Group. There has been lots of discussion in the media about luxury student housing, but there hasn’t been much talk about middle-market student housing. This will likely gain more attention as its profit margins have shown to be impressive; often better than profit margins of newer purpose-built projects. Eventually, the novelty of luxury student housing will wear off and more communities will see an increase in middle-market housing.

How Does This Apply to Guelph? Guelph has seen an up tick in luxury student rentals, but there is still an over whelming desire for the well-kept middle of the road detached house or townhouse.  Students love to live in a great home, but budget is a factor.  Most students are willing to pay more for a nice place, but they have a cap.  Not everyone drives BMW or Mercedes to school.

4). Less on-campus housing developments and more P3 partnerships.

Building on-campus housing is incredibly expensive, as well as staffing and maintaining it. For this reason, many colleges and universities haven’t built a lot of new on-campus accommodation during the past decade. Many that have, entered into some form of P3 partnership with a private developer to help ease the cost. It’s fair to predict that moving forward, the majority of new on-campus housing developments will be financed in some way by a public-private partnership.

How Does This Apply to Guelph?  We are seeing the 3rd party partnerships and even private investments take place right now.  The corner of Gordon St and Stone Rd, is a property to watch.

5). A decline in single-family student homes.

There will likely always be a market for students wanting to share a three or four bedroom house to save on rent, but our predictions lead us to believe that fewer students will inhabit single family homes in the future. As far back as 2013, this trend was already taking shape. In a 2013 J Turner Research surveyed over 7,000 students and found that only 13% of respondents indicated a single-family home was the style of building they would most like to live in. Mid-rise apartments came in first with 38%, followed by community cottage/townhouse at 33%. With an increase in purpose-built student housing communities directly surrounding campuses, it is foreseen that more students will move out of single-family homes in coming years.

How Does This Apply to Guelph? Although I am not armed with any statistics for this one, experience tells me that students prefer a nice place to live, regardless if it is a townhouse, apartment or detached house.  If it is close to the bus, and nice, they want it.  I would say given a choice, with everything else being equal, students would prefer a detached house.  Statistically speaking I would suggest that more students live in townhouses, mainly because there are more of them, and their locations are conveniently located next to bus routes.

6). A rise in micro-unit student housing.

This trend is already starting to take shape. One example is the micro-apartments project that is underway at the University of British Columbia. In response to a lack of student housing and increasing rental rates, this new project aims to help provide students access to affordable housing. It’s reasonable to predict that other cities with extremely competitive rental markets boasting higher rents may introduce micro-unit student housing nearby major campuses.

How Does This Apply to Guelph? We are not seeing anything in Guelph that indicates micro-units will be arriving anytime soon. Unfortunately students will have to accept sub par accommodations in order to cut costs.  There is always a market for crappy rooms for cheap rent, we just don’t like to participate in that end of the market. Although it is the students choice in where they live, we feel landlords should have a responsibility to provide a better standard of quality.  This is one sector of the student market that we see a positive improvement in.  Landlords are starting to care for their properties. There are fewer and fewer slumlords. 

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Here’s the link to the original article: places4students.com