In its report, Student housing: a new asset class in sub-Saharan Africa, global real estate advisory firm JLL identifies tertiary student accommodation as a growth area in the region’s property sector. Demand for new purpose-built student accommodation across sub-Saharan Africa is anticipated to exceed 500,000 beds over the next five years. Public sector budget constraints leave the private sector with an opportunity to bridge the gap.
Higher education uptake in sub-Saharan Africa has seen a significant increase since the turn of the century. In the period from 2000 to 2014, the region’s tertiary gross enrolment ratio increased from 4.3% to 8.2%.
“Student housing has not been keeping pace with the growth of higher education. So there’s been a huge backlog of undelivered supply. We are only scratching the surface of where we might be in terms of the numbers of people going through higher education in due course,” Philip Hillman, chairman of JLL Alternative Investments Group, told How we made it in Africa on the sidelines of the recent East Africa Property Investment Summit, held in Nairobi.
Hillman explained some of the market dynamics: “We do have the private universities as well as the government universities. Enrolment levels in sub-Saharan Africa really have increased dramatically but they are still way below where the rest of the world is. We are seeing that a lot of investors are recognising that there is perhaps an opportunity to develop student housing in sub-Saharan Africa independently from what the university is doing. Very few universities are actually building their own dormitories or halls of residence. In fact almost none are building.”
The largest pan-African providers of private student housing are AfricanIcon and Shelter Afrique, with 44,218 and 30,000 beds respectively, according to JLL’s report. Most of the region’s private providers are, however, based in South Africa, with operators such as South Point and Respublica being some of the most prominent.
According to Hillman, student accommodation is less affected by economic downturns. “In a recession, other properties’ values will go up and down, whereas student housing has been proven to be remarkably resilient to economic turmoil because when it’s time to go to university you don’t put it off 10 years. So it’s a very steady market… It has proven to have a good track record of rental growth so it’s a relatively secure investment. There’s high occupancy and demand massively outstrips supply.”
There is also potential to convert student rooms into hotel accommodation during breaks to avoid idle capacity.
Hillman said location is key to successful student housing development. “You really do need to make sure that you are putting this where the students like to live… Put it in the right place which might be close to the university, or might be in the city centre where the students would like to live.”
Investors also need to be clear on which market they are targeting – affordable, mid-tier or top-end – and ensure the accommodation meets expectations. “Offer value at every level. There will be different pricing points but each of them has got to have good value,” explained Hillman.
“You have to have a really good professional management team. And at the moment, in the early stages of student housing, typically your developer is also going to be the manager because we have developer-operators. And those developer-operators will build their portfolios up and they will start enjoying economies of scale as a result of having more beds… that’s the ultimate ambition of the many of them. Others will be small scale and just remain local,” he added.
Despite it being a young sector, Hillman said there is growing investor interest. “There are quite a number of investors that we have been talking to who have been looking at sub-Saharan Africa as a region where they would like to invest and they are not talking about working with companies who are going to build 500 beds, 1,000 beds – they are looking at platforms. Investing in platforms of 10,000 to 20,000 beds. That’s like a very big hotel chain.”
Source: howwemadeitinafrica.com
