Mike Porritt, Vice President, International, Advisory Services at The Scion Group discusses the unique features of the Canadian PBSA market, including the difference between college and university markets and opportunities to make more housing more affordable while maintaining revenue.

Mike Porritt started Scion Group‘s Advisory office in Canada and has worked with institutions in nine Canadian provinces and Nunavut. He has 15 years of Executive Director or Director level experience in student housing at institutions in the United States and Canada, as well as purpose-built off-campus student housing in Waterloo and London, Ontario. His work includes the development of academic integration programs now in place today within residential programs at McGill University (Quebec), Trent University (Ontario), Winona State University (Minnesota) and Appalachian State University (North Carolina). Combined with his experience in market analysis, planning for new construction and major renovations, he contributes a wealth of knowledge in the Canadian higher education and residential landscape, the US student housing sector, and is expanding Scion’s reach internationally.

GSL News: What types of issues are important for developers entering the Canadian PBSA market to consider?

Firstly, it is important to realise that Canada is not the UK, and Canada is not the US. We have had companies come to Canada and fail because they just assume that Canada is so much like the US. The department store Target’s move into Canada is a good example. They planned to open hundreds of stores, but they withdrew from Canada. Similarly, Krispy Kreme Doughnuts planned to come to Canada with thousands of stores, but they have maybe a dozen. There are significant cultural differences between the two countries in general, and this extends to what students want.

In Canada, far more of our students are first-generation or new Canadians. Canada is a much younger country, and our immigration is much more fluid. We are also much more conservative in our spending habits in general. We don’t have private institutions in the same way that the US does, and we don’t have $40,000 a year tuition bills to go to Harvard. Canada’s higher education system is a public system, and so you can go to one of the best institutions in the world, such as McGill, UBC, or the University of Toronto, and if you are an undergraduate, you’re in the $5,000-$6,000 range for your tuition, and you will get an education on par with an Ivy League school.

Another issue is that some of the amenities that work down south don’t work up here. For example, having a lazy river where you are floating around all day long, might work in the summertime, but most of our students go home in summer to work. So, for eight months of the year, it’s not cold enough to build a rink, and it’s not warm enough to float around. So, our amenities focus is very different.

In Scion Advisory’s work across the country, students tell us over and over that it’s great to have some study spaces outside of the apartment. Obviously, they need a laundry, so it’s either in the unit or a laundry room set up, and you can put study space in the laundry room. If you are not close to campus, then a fitness centre is nice too. But they don’t want anything else except good service.

Developers, especially the ones from the States, have had trouble adjusting to that. The impact of this is that we have buildings in cities that aren’t full of students. Operators have had to adjust and let other non-students live in the building, which isn’t the end of the world when it’s a new graduate or someone like that moving in. However, when it’s not recent graduates but families or people in their 30s, 40s and 50s moving in because the landlord needs to fill the place to pay the bills, and then you mix them in with a bunch of students who had signed up for this place because it was for students, it doesn’t work well.

We also need to adjust to the fact that in Canada, colleges and universities are very different. In the States, those are two interchangeable words, but in Canada, they are two different things. In Canada, the college market is where a much higher proportion of international students come from, and those international students have a much lower disposable income level and are much tighter with their money. In Canada, we have seen less students from China, and now India is our largest international population. At our major Universities, China is still a major source country.  At the Colleges and some universities, the students from India have become the largest population and in some cases, they are the dominant source country.  This has impacts, including that Indian students generally have 10 times less money than students from China, so they are looking for places to share bedrooms and cut costs. The problem is that none of our purpose-built housing has shared bedrooms, and PBSA costs literally twice as much or more than they can afford.

Our studies highlight a lot of adjustments needed for campuses to go forward, especially the colleges. One of these is shared bedrooms. Architects are coming up with unique designs so that a bedroom can be shared, but when you put your head on the pillow to go to sleep, you can’t see your roommate because of the way the rooms are laid out. So little things like that are important to get the cost down. That’s been the biggest barrier to working with the private sector to date – especially for something that’s off campus – the ability and willingness to adjust to the reality of the student population.

GSL News: Is there anything that you think universities should be prioritising moving forward that they are not prioritizing now?

Demand studies show that the college market is the most price-sensitive market and that it has the most international students. Most of the colleges in Ontario and across the country will have anywhere from 35% to 70% international students, and the colleges will have a disproportionate cohort of students from India and other countries with much lower income levels.  

The universities are not as heavily reliant on India as the colleges, but this is shifting. College students are the most price sensitive, then the universities in general are next. Students from the U15 Group of Canadian Research Universities are the least price sensitive. The U15 includes large institutions such as McGill, UBC, the University of Toronto, the Universities of Alberta and Calgary and Ottawa, and Western, where I went to school. These institutions have more resources, and their students, in general, are the least price sensitive.

 So, it varies depending on which campus you’re at, but we need to consider shared bedrooms, shared facilities, smaller bedrooms, shrinking down kitchens and living rooms.  If you are building something a little bit more traditional or semi-traditional, making the kitchen and the lounge one space, really emphasising the kitchen much more than we have in the past.

When I went to school, there was a stove, a microwave and a sink tucked in the corner of a lounge. There are a lot of buildings still like this. These days, what our students need, and it’s also a way to save money, is to buy their groceries and have access to a serious kitchen. So, think multiple cooktops; you can use an induction cooktop so they’re safe, and there’s no fire risk and they’re also easy to clean; maybe one stove or oven range because students don’t bake very much; cubby holes with locks on them that are assigned to each room so they can keep their dry goods and pastas and spices and everything else in the kitchen; small fridges in the bedroom and you have some refrigerators in the lounge.

We need to look at ventilation because both our international students and domestic students do a lot more serious cooking. Their cooking is a lot more complicated than a quick box of mac and cheese. So, there’s a lot more oil, and when it smokes, you need serious ventilation and also multiple cooktops. The focus should be on building a community around the kitchen—it’s also a great way to share culture and save money. It doesn’t cost that much more to build than what was done previously if you’re putting in ventilation from the start.

The next thing is to make the bedrooms simple. So, make the community space really nice and built around food, and then make the bedrooms a little simpler. A lot of places now have at least semi-private bathrooms, but those are the big adjustments.

Get back to the basics for the bedrooms and get with the times in terms of the kitchens. When I was growing up, you might see Julia Childs on TV one afternoon a week, but now, students are exposed to a lot more cooking and know a lot more about it and we know our international students (and new Canadians) crave their own cultural food.  So, we need to match our provision to that a bit more.

As students move through their academic years, housing can get progressively more independent and they can move into studios or small apartments. Again, it is important not to get too crazy about making the bedrooms and the rest of the building luxurious. Being on campus is part of the luxury. Rather, it is about controlling some of the other costs by not having lots of bells and whistles in the building.

Students just need a place to study and a place to eat, and if there’s not a good Campus Recreation situation, they need a fitness centre. These are the basics, but we also need to be willing to let the students say they’re willing to share bedrooms to save on costs and give them the chance to share bedrooms. We also need to use furniture appropriately when doubling up rooms  – shrink down the desk with a lofted bed and a small desk and dresser underneath or use murphy beds.

GSL News: Have you seen any housing providers move in this direction yet?

I haven’t seen anybody willing to try it off campus yet. However, we are seeing some innovations in building design happening. There are two new buildings at the University of Victoria. The first one is 650 beds and is built on a relatively traditional first-year model for housing but with some new twists. There is much more emphasis on the kitchen, cooking and community. The bedrooms are relatively small and are more focused on the community spaces and less focussed on the bedroom spaces. That also takes the students out of their bedrooms and forces them to talk with other humans rather than just online.

Of course, these things are easier to do on campus than with the purpose-built stuff that’s off campus. Developers are always worried about what if students don’t work out and they need to use the building for something else. The challenge, then, is what do you do with a room that’s merely a walk-in closet in multi-family layouts, as it is in some of our buildings. But this is where we have to face the fact that if all the evidence is saying that the students want smaller and cheaper, and if you’re committed to giving them independent bedrooms, then the only way to do that is to give them smaller bedrooms, and then focus on the community aspects of the building.

The University of British Columbia has innovated in this area. They have entire studio apartments called nano suites that are 134 square feet (12.44 square metres). It has a Murphy bed – that is, it is a desk and a bed combination. They do have a bathroom – a sink, toilet, and a shower. The kitchen has two induction cooktops with a small bar fridge underneath, a sink, and a bit of a counter. They have an armoire for storage, but they are pretty tiny. You wouldn’t want to live your whole life in one, but for eight to 12 months as a graduate student, at around $800 a month, it is incredibly inexpensive for downtown Vancouver which has some of the highest rents in the country.

Everyone agrees that you wouldn’t want first-year students like 18-19-year-old students living in studio units like that. They need more community and interaction. But for upper-year students and graduate students, they have been very successful.

The other option that is getting bounced around a lot through our work and also through student discussions and meetings is to look at the nano suites and learn from their ‘smart furniture’ and take standard studios to make them for 2 people.  Take 2-bedroom apartments and set them up for shared bedrooms with elements of privacy in the bedrooms (room dividers, curtains).  Two-bedroom apartments can be easily transitioned to other housing purposes if student housing doesn’t work out. Switching from a two-bedroom for students to a two-bedroom for families is really just a change of furniture. You can make the kitchen simpler to cut down on the space in there. Two-bedrooms units for either 2, 3, or 4 students are becoming increasingly popular for students after the first year here with the ability to have different price point options related to whether or not you are willing to share. So, we are increasing the density and shrinking the size at a lower price for students, and that’s what a lot of the students want. This is especially true in the college markets that are heavily dominated by international students who have less money than international students in years gone by.

GSL News: Do you have any advice for investors looking at the Canadian market?

Yes. There are lots of opportunities here. Our education system is one of the strongest in the world. But the most important thing is to know your markets. That starts with knowing that college and university are not the same thing here. They’re both fantastic institutions and systems, but they’re not the same thing or the same students.

It is also important to understand what it means if you’re investing in a market that has multiple institutions of different types. For instance, if you’re investing in a project in downtown Toronto, you’ve got the University of Toronto, one of the best 20 institutions in the world, George Brown College, one of the campuses of Humber College, York University, which is a subway trip away because now they have a subway station on campus, and you’ve got Toronto Metropolitan University and the Ontario College of Art and Design. Those are 6 distinctly different campuses with distinctly different students, especially in terms of price points, comfort levels, cultures, adaptations, and what you need to provide when you’re trying to target these markets.

So, if you’re thinking you want to get more of the high-end student market, well, that’s great, but it means that you are probably only talking about students primarily from the University of Toronto. Of course, every school has wealthy students, but except for a very small slice of the other five institutions, you’ve eliminated most of several institutions, even though you’re in a city with 6. So, you’ve really got to think about what you’re doing. If you’re thinking about looking at the biggest growth opportunities, the biggest growth opportunity is for the first person who’s got the courage to put up targeted housing in a college-based market, which is where the biggest crisis is. It won’t be something that’s necessarily easily convertible to family housing. They could enter partnerships with the campus that can have direct linkages to the campus, but it doesn’t have to be on campus. They could do something that would succeed for a very, very long time, but it’s going to take some courage and some guts to do it.

The other thing I would say is to recognise how different Canada is from coast to coast. There are opportunities to invest in housing in just about all of our cities that have institutions, but it is important to understand how different those places are. Lots of people get drawn into thinking that they must go to Toronto, Montreal and Vancouver. Those are the three most expensive cities in our country by far and may not be the best opportunities to start looking at, but they’re the ones that people automatically focus on. It is important to also consider some of the other cities where there are lots of students and just as much housing crisis, but the cost of land acquisition and construction might be lower and the process much simpler.

There are a lot of factors to think about when you are building downtown in a big city. I would also advise people to look at some of the partnerships and linkups, especially in places that don’t have much of their own housing. The biggest thing is just recognising that Canada is different. Just like Australia is different and the UK is different. If you go into a market thinking it’ll be just like the other ones, even if you’re within Canada, you’re setting yourself up for a lot of nights of no sleep.

About Scion Advisory

A division of the Scion Group, Scion Advisory Services provides best-in-class, independent campus housing analysis for more than 250 campus markets, empowering our clients to enhance the residential experience for their students.