Part Two – Student Housing: The Great Cultural Divide Between Canada and the U.S.

By Shawn P. Lubic, Senior Financial Analyst, Capital Markets, Cushman & Wakefield, Toronto

Canadians are Just Like Americans – Wrong!

What is it that American student housing owners and operators don’t understand about Canadian student housing?  To my surprise, a common refrain has surfaced: “Americans don’t understand our culture.”

Weighing Cultural Differences
In addition to Canadians spelling color, favorite, neighborhood, and center incorrectly, I’ve learned that there are lots of cultural differences between Canadians and Americans. In my two years living above the 49 parallel, I’ve observed the “niceness” we hear about is real, social justice is top of mind, and giving back to the community is big for individuals and corporations.

Once you think you’ve figured things out, you then realize you only know about oneprovince; in my case, Ontario. Next to Russia, Canada is the second largest country by land mass, and its ten provinces and three territories are all unique in their own way. Quebec is even recognized as a distinct society in the constitution, and has its own French language and civil laws. Then there’s the Western and Atlantic provinces, which are whole other stories.

As one Canadian student housing veteran put it: “It’s hard to successfully manage properties in each of these provinces from Chicago or Texas.”

 It’s Not a Party Scene

Of course, closeness to campus is the most desired trait of a Canadian student housing asset, and students appreciate purpose-built amenities such as fitness centres, social /study rooms, and so on, but American staples like one-to-one bed-bath ratios and in-suite washers and dryers are not expected. Neither is a “party atmosphere”, which is a common feature of off-campus, purpose-built housing.

“Canada doesn’t need jiggly leasing agents,” said one source. While this sounds crass, I got what he meant. How many student residences have I toured that had beautiful staff at the front desk? Each complex is a pool party or BBQ waiting to happen. Websites are populated with gorgeous young people having the time of their lives. In Canada, the “party scene” as a selling feature is pretty much non-existent. Housing is more utilitarian in nature.

On-Campus Living is First Choice

Like many U.S. university students, I did my time in on-campus housing for one year and then high-tailed it off campus for the remaining three years (four actually – sorry Mom and Dad). Canadians, on the other hand, see living on campus as a big part of the post-secondary education experience. Universities, as a result, are continually looking to add beds on campus for both first- and subsequent-year students.

The Foreign Student Factor
Canadian universities have a high foreign-student ratio. According to a CBS News study, the number of foreign students at the University of Toronto increased from 10% of enrollment in 2007 to 20% in 2017. Foreign enrollment at the University of Ottawa has tripled in the past 10 years and represents about 23% of total enrollment at the University of British Columbia. Contributors to this blog series consistently commented that 50% of the students living in their facilities were either foreign or first-generation immigrants.

As a source commented:  “Canada is a young country with a large immigration population. A lot of students are first generation. This group is more cost conscious so they’ll live at home or rent housing based on cost. If they were to live away from home, they would prefer to live on campus or in university-controlled housing.”

Another person noted that 50% of the students living in his purpose-built housing were foreign. Unlike new immigrant students, foreign students must pay a hefty premium for being educated here and tend to be well financed. In fact, as my source said, these students desired a higher living standard that his complex provided. This, he saw, as an opportunity.

Close, But No Baguette

Nothing exemplifies the perils of not understanding a culture more than Campus Crest’s entry into Canada. McGill University students in Montreal are a prime example of a community after the “experience” and demand for on-campus and university-controlled housing is immense. Between 2003 and 2010, McGill purchased three hotel properties within blocks of the campus and converted each to student housing. These projects were highly successful.

In an attempt to replicate this success, Campus Crest purchased the Delta and Holiday Inn Midtown between mid-2013 and early 2014, and converted them into the Evo Centre-Ville and Evo Vieux-Montreal. Both properties were well located close to campus and renovated to a high quality. According to an article in RENX, at the beginning of the 2014-2015 school year, Campus Crest achieved a total occupancy level of 10.9%. In order to drive occupancy, management held “the world’s largest Toga party” in the winter, threw an “EvoHouse party” in April, and hosted a McGill varsity sports awards gala. As of May 2015, preleasing for the 2015-2016 school year was 14.6%. Campus Crest sold their interest in the Evo assets in the fall of 2015 (prior to their portfolio sale to Harrison Street).

Seven Years of College Down the Drain
Understanding the culture is key to owning and managing successful student housing properties in Canada. While high living standards are universal, cost-conscious first-generation Canadians, foreign students, and generally more conservative Canadians are not the ideal target audience for extras like planned parties. Students, being students, find other places to have fun.

The upcoming third part of my blog series will delve into the “numbers”. What are the ramifications of cross-border investing? Is there enough demand to warrant U.S. companies coming to Canada? Is it worth the headache?

I would like to thank the following contributors to this blog: Jason Taylor, EdR Collegiate Housing; Mike Porritt, Scion Group; Patrick Miksa, Knightstone Capital Management; Henry Morton, Campus Suites; and Craig Smith, CHC Student Housing.