Commercial Investment Real Estate

SEP-OCT 2017

Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.

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September | October 2017 33 CCIM.COM 98 2015 | 52 14,665 2015 | 7,045 32,968 2015 | 15,753 $1.962M 2015 | $880K $149,879 2015 | $163,931 $54,863 2015 | $54,748 Tier Two and Tier Three 2016 Year-End Report 0–10K and 10K–20K Enrollment Source: Real Capital Analytics published by Colliers International Student Housing Group 88.5% Total Transactions 108.2% Total Units Sold 109.3% Total Beds Sold 145.3% Total Sales Volume -8.57% Average Price per Unit 0.21% Average Price per Bed commuting students. For example, the University of Minnesota in Minneapolis traditionally had 80 per- cent commuter students, and now it has a 50/50 split between commuters and on- site dwellers. As a result, student hous- ing has expanded by 5,000 units in the last five years. A long w ith additiona l housing has come the need for more retail, which is targeted for students' tastes and budgets. On the retail side of stu- dent housing, Barry Brot- tlund, CCIM, has seen mixed-use projects change the commercial property dynamic near the University of Minnesota's campus."The merchandise mix for stu- dents has to be determined carefully," says Brottlund, principal at InSite Com- mercial Real Estate in Vad- nais Heights, Minn. For example, near the University of Minnesota campus, Target has plenty of bedding, potato chips, nuts, and beef jerky, with a smorgasbord of sandwiches and highly caffeinated drinks. Students gravitate toward local ethnic restaurants, mobile phone ser- vice providers, fitness centers, and coffee shops like Starbucks, according to Brottlund. With their busy schedules, students want retail shopping close by — saving them time, money, and resources, he says. "What doesn't sell well are soft goods, especially fashionable clothing," Brottlund says. While student housing continues its solid per- formance for multiple investors, caution is creeping into some local markets for U.S. universities. Inves- tors have to evaluate each market individually and look closely at trends for each college. Sara S. Patterson is executive editor of Commercial Investment Real Estate. Boon for Canadian Universities by Sara S. Patterson Student enrollment at all Canadian colleges in the province of Ontario — including University of Waterloo and Wilfrid Laurier, two world-class uni- versities in Waterloo, Ontario — was supposed to decline from 2017 to 2021. Instead, the two Cana- dian universities will be at maximum capacity in September 2017, with a combined total of more than 55,000 students in a city of 120,000 people. International student applications increased by 48.3 percent at Wilfrid Laurier, and 27 percent for undergraduates and 31 percent for graduate stu- dents at the University of Waterloo. A weak Cana- dian dollar explains some of the surge, while im- migration concerns about attending universities in the U.S. and U.K. are another factor. "Due to immigration changes in other countries and the ensuing visa concerns, increasing num- bers of international students are coming to Ca- nadian universities," says Mike Milovick, CCIM, BBA, broker at Royal LePage Grand Valley Realty in Waterloo. "I see both universities poised for tremendous short- to medium-term growth dur- ing the next four years." Both the surprise boost in student enrollments and recent changes in local zoning laws allow- ing for mixed-use developments contribute to a surge in constructing high-rise student housing with ground-level retail space. The tallest build- ings — up to 25 stories — are being built closest to the universities' campuses. While increasing enrollments and mixed-use property zoning compel new construction and renovation of older residences for students, se- curing financing for these projects can be chal- lenging, according to Milovick. Unlike in the U.S., Canadian banks are national and implement financing programs to lend nationwide. Since Waterloo contains about 50 percent of the off- campus student housing in the country, it defies national trends. To overcome this barrier, developers often turn to local Canadian credit unions, which have a better understanding of differences among spe- cific markets, according to Milovick. Also, Cana- dian financial institutions are wary of investing in mixed-use properties, but retail space is being absorbed by the likes of health food stores, eth- nic restaurants, and smoking apparel shops. He expects amenities-driven student housing to continue its momentum for the next five years in Canada.

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