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Why student housing is the next big thing in real estate


ejwpgw4qvqj7labs855901772d5b00d Why student housing is the next big thing in real estate

Kenya is lagging behind in unlocking the business potential in student accommodation despite the high returns it attracts in developed countries, says real estate management firm JLL. Currently, student accommodation shortfall accounts for 40 per cent of Kenya’s housing shortage. This has strained on-campus accommodation facilities, forcing students to seek private accommodation.

Speaking at the just-concluded East Africa Property Investment summit in Nairobi, Phillip Hillman, chairman of JLL’s Alternative Investment Group, said accommodations in the education sector has not been given much attention despite the large number of students in need of suitable accommodation.

“Student housing in Kenya is now a powerful alternative asset class with definite growing investor appetite for the sector,” said Hillman.

However, Hillman said most local investors shy away from developing student accommodation due to the perceived rowdy and sometimes violent nature of university students.

Varsities ill-equiped

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JLL said universities have been financially ill-equipped to deal with the increased demand for purpose-built student housing. Ideally, Kenya as well as many other African countries spend between 5.5 per cent and 13.9 per cent of their gross domestic product (GDP) on education, with very little room to increase this spending to cater for student accommodation.

Local universities have also had to deal with existing student housing stock becoming outdated and in need of repair or redevelopment. This, Hillman said, should make the private sector increasingly involved in developing purpose-built accommodation aligned with student needs.

Still, Hillman said, students across the world have shown respect for well constructed and managed student accommodation: “A good number of students come from well to do families and are willing to pay for well managed accommodation.”

Research by Jumia House says there are 280,000 bed spaces in universities and colleges in Kenya, compared with a student population of 769,000 and rising.

In 2015, the student population rose by 80,000, driven by expanded enrolment across both self-sponsored and government-sponsored students.

However, this is set to change following local universities’ push to build accommodation for more than half a million students in the next five years, driven by public-private partnerships.

If all goes according to plan, Public Private Partnership (PPP) projects will create more than 500,000 bed spaces for university students in the next five years.

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Kenyatta University is among the public institutions negotiating for such projects under Kenya’s Public Private Partnership Act of 2013. The university’s PPP initiative will result in housing for an additional 10,000 students that is well regulated, fairly priced, and eliminates transport costs in getting to classes.

According to Dr Paul Gachanja, chairman of the Department of Economic Theory at the university, building accommodation through PPPs mitigates risks, reduces the requirements for real estate expertise, and lowers the development costs for universities.

Shorter turn-around time

“It speeds up procurement and delivery. Universities take about five years to procure and start construction. However, with PPPs, the process takes less than five years. Moreover, such initiatives on student housing lead to expanded campus capacity and develop high standard facilities for students,” he said.

The Kenyatta University model seeks to spend Sh5 billion on the project and hopes to break ground this year.

It will be a “build, operate and transfer” framework, which will be transferred to the university in 20 years.

The model will keep the university financially stable since it will not have had to incur construction expenses.

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The JLL report presents such investments as significant opportunities based on student incomes and stable rental periods, as well as the scale of demand, which assures high occupancy rates.

Globally, student accommodation through PPPs has been successful in South Africa, Belgium, Egypt, and India.

In Kenya, it is hoped the PPPs will deliver the progressive clearance of student admission backlogs that have grown since 1992 so that students no longer have to wait for long periods before joining universities.

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