Published Mar 07, 2025 Written by Seth Forward, Wealth Professional
Supply still lagging far behind demand despite recent immigration crackdown
Postsecondary institutions have been thrown into disarray by a federal cap on international students. This has led to a decline in enrolment and the cancellation of certain programs. Despite that, Brendan Brooks sees opportunity in a real estate subsector directly exposed to colleges and universities.
Brooks is the director of real estate management at Forum Asset Management. He says that his firm sees high potential in the purpose-built student accommodation market, a market that he argues has largely been overlooked in Canada.
Brooks is confident that demand for PBSAs will continue to remain steady despite enrolment downturns. He puts the case as a matter of supply and demand. In fact, according to Desjardins there are only 170,000 PBSA beds currently available for Canada’s 1.5 million post-secondary students. He added that federal caps on international students have primarily targeted private colleges, while the properties Forum manages are positioned around Canada’s top universities and colleges.
Even if we stay flat on an admission basis, we still have a lot of room to grow to get to a balanced market,” he said. “It’s absolutely something we keep an eye on, but it doesn't concern us from being able to achieve our investment thesis.”
In December 2024, Forum acquired Alignvest Student Housing REIT, then Canada’s largest PBSA REIT, for $1.7 billion. The deal was backed up by Brookfield Asset Management, who on Feb. 6 invested (up to) $100 million into Forum’s Real Estate Income and Impact Fund.
With such a large gulf between supply and demand, Brooks suggests the market is still ripe for investment. Meanwhile, Desjardins economist Kari Norman, who published a report on PBSAs last fall, pointed to the incredibly high occupancy rates of PBSAs as proof of the market’s strong potential.
Student residences have a near 100% occupancy rate because there's so much demand,” Norman said. “In Canada, 10% of students have the opportunity to live in residence – it’s woefully undersupplied.”
Credit: Bonard and Desjardins Economic Studies
Derek Lobo, CEO of Rock Advisors Inc., said that aside from airport parking, PBSAs are
the most location-sensitive business in the world,”
pointing to the central locations of some of Canada’s best universities such as McGill, the University of Toronto and the University of British Columbia.
These downtown locations are often in fierce competition with condo developments for limited and expensive space. But as condo fees decrease nationwide, Lobo says there is an opportunity for developers to build PBSAs in central student hubs that may have previously been earmarked for condo development.
This is a good opportunity for developers to pivot to building student housing on those same downtown sites, because before we were always competing with the condo guys,” he said. “Now the condo guys have got the site and maybe can't build, but it may be suitable for student housing.”
The PBSA market in countries such as the UK and the US provides a benchmark for Canada, according to Norman. She said provision rates in balanced PBSA markets such as the UK and the US sit around 35%, while Canada’s currently languishes at around 10%. Both Norman and Brooks said that when PBSA supply begins to catch up on the country’s lofty demand, investors will naturally become more confident in the asset.
The PBSA market in Canada is very disaggregated, so I think as the market matures going forward, we'll see some aggregation and that will make it more appealing for investors,” Norman said.
Brooks says the high turnover of students allows the market to stay resilient to inflation compared to multi-family properties with rent controls, where tenants are more likely to remain for longer periods of time. He added that university enrolment has historically proved to be largely recession-proof, as professionals often look to upskill when job markets are tight.
In a rent-controlled unit student housing, there's the natural turnover that occurs, because students will stay there throughout their undergraduate degree,” Brooks said. “They may stay for a master's, but there is a very prescribed timeline that they will be staying and leaving, and then when they leave, you can bring the unit back to market.”
With such a limited PBSA stock, student housing needs have put pressure on Canadian communities’ multi-family housing market, as students have increasingly moved off-campus in search of suitable housing during their degree.
Both Brooks and Norman urged governments at all levels to reduce red tape by slashing development charges and streamlining permits for PBSAs to ensure steady investment and alleviate stress on the overall Canadian housing market.
Builders want to do this. There are builders in this space, there are new residences being constructed,” Norman said. “So don't make it harder for them with policy and red tape.”
Norman’s experience as a parent of a University of Guelph student gives a glimpse at the glaring holes in Canada’s PBSA supply. Her son spent a full academic year living at a Days Inn hotel leased by the university, as on-campus residence buildings filled up almost immediately.
Now the university is looking to build a permanent PBSA on the hotel site, which Norman sees as an opportunity for investors and developers to convert existing buildings, rather than starting from scratch.
That can be an alternative too, is buying existing buildings to convert, whether it's a hotel like this or other types of buildings that could be converted for student purposes. It doesn't necessarily have to be a new build,” she said.
Read the Article published on Wealth Professional here: Student housing an overlooked opportunity: industry experts | Wealth Professional
