What Opportunities Lie for Student Housing in Nairobi Metropolitan Area?

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;
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.
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.
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.
About Soko Directory Team
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
- January 2025 (119)
- February 2025 (120)
- January 2024 (238)
- February 2024 (227)
- March 2024 (190)
- April 2024 (133)
- May 2024 (157)
- June 2024 (145)
- July 2024 (136)
- August 2024 (154)
- September 2024 (212)
- October 2024 (255)
- November 2024 (196)
- December 2024 (143)
- January 2023 (182)
- February 2023 (203)
- March 2023 (322)
- April 2023 (298)
- May 2023 (268)
- June 2023 (214)
- July 2023 (212)
- August 2023 (257)
- September 2023 (237)
- October 2023 (264)
- November 2023 (286)
- December 2023 (177)
- January 2022 (293)
- February 2022 (329)
- March 2022 (358)
- April 2022 (292)
- May 2022 (271)
- June 2022 (232)
- July 2022 (278)
- August 2022 (253)
- September 2022 (246)
- October 2022 (196)
- November 2022 (232)
- December 2022 (167)
- January 2021 (182)
- February 2021 (227)
- March 2021 (325)
- April 2021 (259)
- May 2021 (285)
- June 2021 (272)
- July 2021 (277)
- August 2021 (232)
- September 2021 (271)
- October 2021 (304)
- November 2021 (364)
- December 2021 (249)
- January 2020 (272)
- February 2020 (310)
- March 2020 (390)
- April 2020 (321)
- May 2020 (335)
- June 2020 (327)
- July 2020 (333)
- August 2020 (276)
- September 2020 (214)
- October 2020 (233)
- November 2020 (242)
- December 2020 (187)
- January 2019 (251)
- February 2019 (215)
- March 2019 (283)
- April 2019 (254)
- May 2019 (269)
- June 2019 (249)
- July 2019 (335)
- August 2019 (293)
- September 2019 (306)
- October 2019 (313)
- November 2019 (362)
- December 2019 (318)
- January 2018 (291)
- February 2018 (213)
- March 2018 (275)
- April 2018 (223)
- May 2018 (235)
- June 2018 (176)
- July 2018 (256)
- August 2018 (247)
- September 2018 (255)
- October 2018 (282)
- November 2018 (282)
- December 2018 (184)
- January 2017 (183)
- February 2017 (194)
- March 2017 (207)
- April 2017 (104)
- May 2017 (169)
- June 2017 (205)
- July 2017 (189)
- August 2017 (195)
- September 2017 (186)
- October 2017 (235)
- November 2017 (253)
- December 2017 (266)
- January 2016 (164)
- February 2016 (165)
- March 2016 (189)
- April 2016 (143)
- May 2016 (245)
- June 2016 (182)
- July 2016 (271)
- August 2016 (247)
- September 2016 (233)
- October 2016 (191)
- November 2016 (243)
- December 2016 (153)
- January 2015 (1)
- February 2015 (4)
- March 2015 (164)
- April 2015 (107)
- May 2015 (116)
- June 2015 (119)
- July 2015 (145)
- August 2015 (157)
- September 2015 (186)
- October 2015 (169)
- November 2015 (173)
- December 2015 (205)
- March 2014 (2)
- March 2013 (10)
- June 2013 (1)
- March 2012 (7)
- April 2012 (15)
- May 2012 (1)
- July 2012 (1)
- August 2012 (4)
- October 2012 (2)
- November 2012 (2)
- December 2012 (1)