Investing in Waterloo student housing

Is Waterloo’s student rental market a boon for investors – or one to be avoided at all costs?

Investing in Waterloo student housing
Depending on who you ask, student housing in Waterloo is either an incredible investment opportunity or a risky prospect.

“Student rental has been overbuilt,” says Karl Innanen, managing director at Colliers International. “A study was recently put out, which found that there is an oversupply of [rental units] – 27% more than the market needs. It’s something [investors] should avoid.”

According to the Waterloo Region Record, the city has an oversupply of approximately 1,200 beds, and that number is expected to jump above 8,000 as planned buildings come to fruition. According to Colliers, there are 41,440 post-secondary students in the Waterloo region, but nearly 10,000 of those are commuters who don’t require student housing.

However, the key to the Waterloo market is to evaluate its ‘student’ housing as much more than just homes for students, according to veteran investor Matt Elkind.

“We’re thinking less in terms of student housing and more about the market overall; the typical student stays in a house for three years, but we’re finding people are staying longer, getting jobs and choosing to live in the city,” Elkind says. “The units are close to the universities, but Technology Park is close by as well. The buzzword is ‘student housing,’ but that’s not what it’s all about.”

Billed as the Silicon Valley of the North, Waterloo has recently seen companies such as Microsoft, Google and other tech start-ups and incubators set up shop. That’s due in part to attractive real estate prices.

“Commercial property goes for about $15 per square foot, as opposed to $45 per square foot in Toronto neighbourhoods such as Liberty Village,” Elkind says. “[Waterloo] has a very powerful long-term growth story, and it’s only one hour from Toronto.”

And the city is certainly booming – 500 active start-ups made their home in Waterloo in 2014, according to Canada’s Technology Triangle. It’s also home to 1,000 tech firms.

In regard to the Colliers report that argues student housing is overbuilt, Elkind says it’s a certain type of home that has been overbuilt. 

“The problem is there is an oversupply of a certain type of unit we wouldn’t touch – five-bedroom units,” he says. “One- or two-bedroom units [are a good investment];
wealthier students and graduate students who want to live alone are attracted to these.”