Young People in China Face Job-Hunting Challenges, Leading to a Surge in Graduate Applicants and Resulting in Insufficient Dormitory Space

Social Capital Enters the University Dormitory Market

On January 18, 2024, the National Development and Reform Commission and seven other departments jointly issued the “Guidance on Strengthening the Construction of University Student Dormitories,” mentioning the use of new dormitory construction, renovation of existing dormitories, and other multi-channel methods to expand student dormitory resources. Among them, “encouraging universities to purchase or rent talent apartments, commercial and residential buildings, and other social housing around the school to supplement dormitory resources” was proposed, attracting attention from the apartment industry.

The head of the graduate student department at a certain university in Shanghai mentioned that although many universities have been operating by renting off-campus social housing for student dormitories, there has been no specific policy clarification until now.

Lin Fan was somewhat pleased with the policy’s introduction. In terms of leasing, universities have “no problem” with their bidding ability, even offering slightly higher prices than the enterprises they were simultaneously in touch with. In the projects he has cooperated with and negotiated, depending on the geographical location, the schools could offer rental prices ranging from 700 to 1,000 yuan per room, higher than his expected target.

At the same time, the document mentioned “encouraging universities to purchase,” which means the project has one more exit path. However, Lin Fan is still puzzled, as the policy is too new, and the related situations are not clear. “For example, in terms of purchasing, whether schools are willing to buy, whether schools as units receiving financial subsidies have the funds to buy, and under what commercial conditions to buy, are all unknown.”

In some European countries, the investment and operation of student apartments are an important sector for long-term rental apartment companies, but in China, this business model has not yet attracted sufficient capital attention.

The head of a well-known long-term rental apartment investment institution mentioned that the key to long-term rental apartment investment is the exit channels and methods. Currently, the situation regarding student dormitories in China is not clear in this respect.

If sold to schools through bulk transactions, under the current policy and market environment, the certainty of the exit channel is not enough, which will also increase the difficulty of capital fundraising.

The “size of the cake” is also a concern for capital and long-term rental apartment companies regarding investment and operation of student dormitories.

Lin Fan mentioned that although the demand for apartment rooms from schools is not small in terms of quantity, such demand and contradictions are still concentrated in universities in first- and second-tier cities. “When we conduct project research, we consider the demand from universities as a factor, but only a very small factor.” He gave an example of a project near a university town, “If there was only demand from the university town, we definitely would not undertake the project. We focus 70% of our attention on surrounding enterprises and industries.”