• Thursday, July 25, 2024
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Growing population, 15% yield offer investors compelling opportunities in student housing

student housing

Growing student population and rising number of universities with few accommodation facilities are offering investors and developers investment opportunities that guarantee about 15 percent yield.

Out of Nigeria’s estimated 200 million population, about 70 percent are those below 30 years, forming the bulk of the student population.

Available statistics show that there has been a 12 percent annual average growth of student enrolment in Nigerian tertiary institutions while the provision of purpose-built student accommodation is less than 30 percent of the demand, hence the opportunity.

Student housing is still a green field which some investors remain risk-averse to. But now that other investment asset classes, especially Treasury Bills, have plummeted with yield in low single digit, the next destination for yield-hungry investors is student housing with its ready market.

“The ability to sign a long lease on land belonging to a higher institution or acquiring land adjoining a higher institution, building and charging a ready pool of student off-takers a market rent with 100 percent occupancies leading to a stable cash-flow, sounds like any developer’s dream,” says Munachi Okoye, CEO, MCO Real Estate, in a market report.

The report says many developers are already taking advantage of this development. Universities are latching on to the trend, offering land parcels to developers under a long-term Build Operate and Transfer model and seeking a share of revenues in exchange.

Okoye reasons, however, that for this new investment frontier to be attractive, it has to be sustainable. He explains that allocating funds to risky green-field development in exchange for a 15 percent yield does not sound so attractive.

According to him, international investors to whom a 15 percent yield may sound very attractive also have to contend with the currency risk inherent in a potentially depreciating naira eating up dollar returns, especially over a long period of time.

“A market that appears to offer stellar returns may hold dangers lurking beneath. However, attractive returns may exist for the investor that is able to create a well-branded, scalable, institutional offering that can roll out a high volume quality product at low cost,” Okoye said.

Student Accommod8 is one of the leading lights in this segment of the property market with two existing purpose built student accommodations (PBSAs) serving Pan Atlantic University in Lagos and Olabisi Onabanjo University in Ogun State.

“Our goal is simply to continuously deliver the best experience for students across the country. Nigeria’s students are the future and we intend to serve them the best way possible,” said Abayomi Onasanya, founder/CEO of Student Accommod8.

Onasanya pointed out that Student Accommod8 was operating in a sector with substantial unmet demand and its PBSAs would contribute to meaningful improvement in student welfare.

“Our hostels are strategically placed close to universities or within the universities’ campuses and each hostel comes equipped with all the necessary facilities every student needs to feel at home away from home,” he said.