Though analysts say there are a number of reasons student housing is the next destination for yield-hungry investors, three of them are compelling even in this era of global health emergency when every attention is focused mainly on survival.
According to the analysts, the market is huge, meaning that there is ready demand. It is estimated that 70 percent of Nigeria’s growing college population seek alternative accommodation outside poor campus hostels, making the country’s student housing industry a goldmine waiting to be tapped.
Additionally, a UNESCO report says there are over 100million young adults studying courses in Polytechnics, Universities, and Colleges of Education across Africa and, out of this number, 15 million are in Nigeria.
Checks by BusinessDay show that Nigeria’s already dilapidated on-campus hostels are able to provide accommodation for only 30 percent of the university students whose annual enrolment rate stands at 12 percent. This number is not expected to reduce anytime soon.
A recent report by K.Parkwood Property Services on ‘Student Housing’ cites figures posted by the Joint Admissions and Matriculation Board (JAMB) showing that 1.8 million candidates registered for the 2019 Unified Tertiary Matriculation Examination (UTME) and 1.9 million candidates were registered this year, which is the highest number in the 41 years history of the board.
Apart from the fact that Nigeria has the biggest university system in sub-Saharan Africa, the country has seen a surge in students’ enrolment over the years. The surge however, has not been matched by a corresponding growth in quality facilities for student accommodation.
This means there is a huge supply gap which translates into opportunities for investors. “Hostels for students are an opportunity crying for investment and, if a developer has an understanding with an institution, it is a worthwhile investment,” Rotimi Akindipe, MD/CEO of Groveworld Realties, confirmed to BusinessDay.
This was affirmed by Godwin Asuelimen, Head, Core Product, Propertypro.ng who said that investment in student hostel is very viable, especially in areas with high number of tertiary institutions.
“Available accommodation within most Nigeria campus can only cater for not more than 20 percent of the students enrolled and, according to the National Universities Commission (NUC), the provision of student housing is less than 30 percent of its demand which, in turn, means that the market has found it difficult to keep up with the increasing growth,” the K.Parkwood report also affirms.
Return on investment (ROI) is a major highpoint of student housing. “This investment asset gives about 22 percent returns which is more than double what commercial real estate gives, not to talk of residential real estate which gives just 4-5 percent returns per annum. For this reason, we are encouraging other developers to come in”, Abayomi Onasanya, Founder/CEO of Student Accommod8, told BusinessDay in interview.
In terms of rental yield, the K.Parkwood report says student housing has an expected target return of 15 percent in 2020. It cites UAC Property Development Company (UPDC) which has the largest Real Estate Investments Trust (REIT) in West Africa with total assets under management (AUM) of N33.5bn. It has diversified investment in residential, commercial, retail and industrial real estate.
The report notes that the company’s student housing project (Pearl Hostel) at the Pan-Atlantic University Campus in Ibeju-Lekki was their highest yielding asset in 2019 with 6.6 percent rental yield.
It however cautions investors, advising too that investment should be targeted at tertiary institutions with significant enrollment growth. Investment should be done in areas or locations where there is a greater concentration of students.
“Market entry should be in institutions that are expanding but not building new student hostels and campus with inadequate or no hostel accommodation; investors should be taking into consideration the proximity to the academic institution, food market, entertainment centers and access to reliable transportation,” the report says.
