Institutional investors are pouring money into the country's student housing in a bet that the Canadian government’s decision to cap international students won't disrupt demand.
The strong level of investment reflects the confidence that the need will continue to outweigh supply, even with the number of study permit holders falling to 725,000 in September from over 1 million 20 months earlier.
“It goes back to the supply-demand imbalance — the number of demanded beds is outstanding and substantial, and the number of available beds falls short,” Jonathan Turnbull, head of Canada at Harrison Street, told CoStar News. “If you look at markets like the United States [and] the United Kingdom, which are very well developed, you’re looking at 30% to 40% availability ratios, but in Canada it’s closer to 15%. We just don’t have the beds.”
Harrison Street is among a slew of large American institutional investors that have begun focusing heavily in Canadian student housing, becoming one of the most prominent over the past four years by pouring over $500 million across a portfolio spanning 4,500 beds in British Columbia, Quebec and Ontario.
While investors expect demand for student housing to remain resilient, the country's decision to reduce immigration has affected demand in the overall multifamily housing market.
In addition to Harrison Street, several other global investors have put money into student housing. Brookfield, with more than $1 trillion in assets under management, has invested in the Forum Real Estate Income and Impact Fund, a notable owner of purpose-built student housing in Canada, and particularly in Ontario, that’s reportedl valued at up to $100 million.
BGO enters North American student housing market
Manulife Investment Management partnered with Cedar Podium Investment Management to build a 15-storey, 178-unit student housing tower with 389 fully furnished bedrooms in Kingston slated for delivery near Queen’s University in 2027, while BGO’s acquisition of a two-tower purpose-built student housing complex in Edmonton’s Garneau neighbourhood serves as the latest example of its bullishness toward the sector.
The acquisition marked BGO’s entry into the country’s and North American purpose-built student rental market. Moreover, the complex that contains Eleanor and Laurent and became fully leased in October is near the University of Alberta North, University Hospital and a light-rail transit station.
“This acquisition represents a strategic milestone for BGO as we expand into purpose-built student housing in Canada,” said Simon Holmes, a BGO managing partner and its Canadian chief investment officer, in a statement. The buildings "combine best-in-class design with a desirable location adjacent to one of Canada’s leading universities.”
University enrollment in Canada increased by 5.8% year-over-year to 2.3 million students during the 2023-2024 academic year, according to data from Statistics Canada.
Much of that growth is attributed to international students, whose share of enrollments increased by 22.2% from the previous year to 103,953. Most attended colleges, bucking a decade-long trend of universities receiving the lion’s share, according to StatCan data.
Indeed, the federal government's capping of international students isn’t as exclusionary as it may seem, according to Harrison Street's Turnbull, who notes that non-accredited, education-oriented businesses are the policy’s primary target.
“People were complaining that students were taking up a lot of the multifamily homes, and that’s why we had low vacancy and such [high] increases in rents — because our population growth couldn’t find anywhere to live, and people were pointing to 800,000 new student visas being issued every year,” he said.
Non-accredited institutions targeted
Also, Turnbull said, “The Canadian government stepped in and targeted the non-accredited institutions like the English language schools, the private and non-accredited colleges, and we saw a dramatic decline in the availability of visas. What the government really said was, ‘We’re targeting the bad actors, the bad eggs.’ "
In Ontario, 22 of the province's 23 universities maintained the same international student visa allotments in 2024 as the previous year, giving credence to Turnbull’s statement that the government was rectifying a snafu with only minimal disruption to the market.
That doesn’t mean privately owned student dwellings in small markets haven’t borne the brunt of the student cap. But Nick Morrison, owner and operator of Flinnco Property Management & Rentals in London, Ontario, noted that residential rents have declined across the board, not just in student housing. Therefore, he said, some investors probably have some buyer’s remorse.
“After COVID, it seems like every man and his dog bought a rental place for students,” Morrison said in an interview. “A lot of landlords are getting nailed by these mortgage rates, and they’re expected to do renovations every year. A lot of these landlords were promised high rents when real estate agents sold them their properties, or whoever promised a certain rent roll, without actually doing the research and understanding how the market fluctuates.
"Rent has pretty much dropped in all sectors by about 10% from what we’ve seen.”
Turnbull said the federal government telegraphed to the world that international students weren’t welcome, and that while recovery time is needed in smaller markets, the turnaround is already underway in major cities, especially around McGill University, the University of Toronto, and the University of British Columbia.
“It’s not something that’s making me lose sleep at night, because in markets where international students are down, domestic students are up. In Ontario, the student-based profile of first-year applicants and registered entrants this year was up over 4% — that’s a crazy number,” he said.