Article
Student Housing and Data Centres: Alternatives Attract Lenders in Uncertain Times
December 8, 2020 3 Minute Read
Sometimes it seems like all anyone ever wants to talk about is office, industrial, retail and multifamily.
Well, CBRE’s new Canadian Lenders’ Report offers a look at the alternative property types that lenders are viewing with keen interest heading into 2021. Topping that list is student residences: 54.3% of lenders said they planned to lend to this property type if the opportunity arises.
That’s music to the ears of CBRE’s James Craig, a Kitchener-based broker who specializes in student housing. “For a long time lenders shied away from student housing for various reasons,” he says. “So it’s refreshing to hear that lenders are opening up to it now.”
The only problem is there haven’t been that many transactions in 2020, Craig notes, and there’s not much student housing product on the market at the moment to invest in or trade. The growing appetite to lend could change things.
Alignvest Student Housing REIT is the nation’s largest provider of university-focused purpose–built student accommodation, with a $420 million portfolio encompassing 3,394 beds across eight properties in Ottawa, Waterloo, Hamilton, Edmonton and Oshawa. Centurion Apartment REIT is Canada’s other major student housing playerwith nine student housing properties in London and Waterloo, Ontario and one in Montreal, for a total of 2,751 rental units.
While Craig is pleased to see student housing topping the list of alternative property types lenders like the most right now, he isn’t surprised. The return that investors make on an investment tend to be higher on student residence properties versus traditional multi-res. “They can be 100 to 200 basis points higher depending on the location and quality of the property,” he says. “That’s a big spread.”
Data centre darlings
Data centres are also looking good to lenders right now, with 45.7% of respondents to the CBRE survey saying they would lend to the property type in 2021. This jibes with what David Cervantes and Scott Harper, who run CBRE’s rapidly growing data centres business, told Advantage Insights earlier this year.
The amount of data centres space in Canada is more than doubling every year, and data centres are actually outpacing the industrial sector in most performance metrics. REIT have done very well in this space, and more investors are looking to build and financially back data centre transactions. Investment in data centres was up 7.0% in the second quarter of 2020. “As COVID drove traditionally focused REIT values down,” Harper said, “capital went looking for more fertile fields.”
After student residences and data centres, lenders told CBRE’s survey they had a healthy appetite for lending to mobile home sites, with 40.0% expressing interest in the property type, followed by life sciences laboratories (31.4%), co-working spaces (22.9%); cannabis facilities (17.1%) and film studios (17.1%).
In 2021, will your organization lend to the following alternative property types/users?
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