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What Opportunities Lie for Student Housing in Nairobi Metropolitan Area?

BY Soko Directory Team · March 4, 2022 10:03 am

KEY POINTS

In Nairobi, investment opportunities lie in markets such as Karen, Thome, and Madaraka with relatively high rental yields of 11.1 percent, 10.5 percent, and 9.2 percent.

KEY TAKEAWAYS

With Kenya being an emerging market for student housing, the concept has continued to gain traction by attracting private sector developers, investors, and operators.

With Kenya being an emerging market for student housing, the concept has continued to gain traction by attracting private sector developers, investors, and operators. The current available stock stands at 301,060, leaving a huge gap that the private sector is looking to fill.

These units, which are also known as purpose-built student accommodation (PBSA), are designed specifically to meet the demands and requirements of the modern-day student.

In Kenya, the student housing market comprises studio units and shared units of up to 8 beds with the most stock of shared spaces being that of 2 beds in a unit.

These facilities have continued to offer amenities such as tuck shops, backup generators, CCTV and 24/7 security teams, secure biometric access, common rooms with DSTV, gyms, and game rooms. The units are also equipped with laundry machines, separate study rooms, and some even offer shuttle services.

The rents for PBSA range from 10,000 shillings with the highest in the market currently being 34,000 shillings per month.

ALSO READ: Obesity Likely to Affect 1 in 10 Children in Africa by 2023; WHO

Over the past few years, the demand for student housing has gradually risen thanks to the rapidly growing student population.

The 2021 Economic Survey conducted by the Kenya National Bureau of Statics (KNBS) showed that the student population in universities and vocational centers stood at 997,904 in 2021 compared to 664,000 in 2015.

This represented a 5-yr CAGR of 8.5 percent, which further expanded the student housing deficit by approximately 60,000 units. The numbers are set to increase as the university/college age demographic continues to grow.

An increase in tertiary institutions has also contributed significantly to the high demand for student housing in Kenya. Between 2019 and 2020, the overall number of Technical and Vocational Education and Training (TVET) institutions increased by 7.5 percent to 2,301.

Government measures such as scrapping visa requirements for other African countries is a boost for enrolment of international students to local institutions has also driven up the demand.

Despite these developments, the incoming supply of student housing over the past 2 years has been limited by the COVID-19 pandemic. The pandemic presumably slowed down the investment volumes and brought about the trend of online learning which further limited demand for student accommodation.

However, as vaccination programs accelerate to manage the spread of the virus, the market has witnessed growing investor confidence and initiative in unlocking growth opportunities.

Status of Student Housing in Nairobi

Despite challenges such as inadequate funding and expertise, high costs of land, and ineffective public-private partnerships, the student housing market recorded a slight improvement in 2022.

The average rental yield stood at 7 percent, a negligible improvement from the 6.9 percent registered in 2020. The average rent per SQM increased by 18.3 percent to 505 shillings in 2022, from 427 shillings in 2020.

However, the average occupancy rate registered at 1.7 percent points declines to 79.6 percent in 2022, from 81.4 percent in 2020.

The table below gives a summary of the comparison in market performance between 2020 and 2022;

student housing

Some of the best performing PBSA in NMA include the upper mid-end segment (hosting private universities) remained the best performing as it generally attracts relatively higher rental rates that average at 622 shillings per SQM in comparison to the low mid-end markets with 456 shillings per SQM.

In terms of rental yield, the upper mid-end segment registered a 0.5 percent points increase in rental yield to 10.0 percent in 2022 from 9.5 percent in 2020.

Student Housing

On the other hand, rental yield in the lower mid-end segment remained unchanged at 7.5 percent, similar to 2020. These are the segments that largely host mid-tier colleges and public universities.

student

In Nairobi, investment opportunities lie in markets such as Karen, Thome, and Madaraka with relatively high rental yields of 11.1 percent, 10.5 percent, and 9.2 percent. These are the areas that host private universities in Kenya popular with international students such as the United States International University (USIU) and Strathmore University.

According to Cytonn Investments, the region will continue to present a large gap for quality purpose-built accommodation.

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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