Investing in student housing real estate is increasingly becoming a lucrative opportunity, particularly in university-centric cities like Nairobi. The demand for quality student accommodation outweighs the supply, creating a strong and consistent demand. This demand, coupled with the resilience of the education sector, makes student housing an attractive investment option.
Universities often lack sufficient and high quality well-kept on-campus accommodation. The need to cater for international students also creates an opportunity for investing in student housing. Companies like Acorn Holdings have capitalized on this opportunity by developing Purpose-Built Student Accommodation (PBSA) under the Qwetu and Qejani brands. Qwetu offers premium housing for students who seek high-end living conditions, while Qejani provides more affordable alternatives. Other key investors in PBSA include Students Factory Africa Limited, Century Developments Limited and Defoca.
One of the key benefits of investing in student housing is the high demand for off-campus accommodation. With universities unable to provide enough housing, students must turn to private sector options, ensuring low vacancy rates for well-located properties. Additionally, rental income from student housing is often stable, as leases typically align with academic calendars, reducing the risk of sudden vacancies. The sector is also relatively resilient to economic downturns, as education is considered to be a recession-proof sector, ensuring a steady stream of tenants even in uncertain times.
While student housing offers strong investment potential, it also comes with challenges. High tenant turnover is a common issue, as students frequently move in and out based on their academic schedules. This results in increased maintenance and marketing costs to attract new tenants each year. Additionally, properties rented to students often experience more wear and tear compared to traditional rental units, leading to higher maintenance expenses. Managing student housing can also be demanding, requiring active involvement in addressing tenant concerns, enforcing lease agreements and maintaining property standards. For individual investors, the high land and construction costs present a challenge.
Despite the challenges, student housing remains a viable and attractive investment opportunity. The continuous growth of the student population and the shortage of quality accommodation ensure a steady demand for purpose-built housing. This sector is profitable and with structured investment vehicles like REITs, investors can access this market without the complexities of direct property management. However, individuals and organizations may opt to make private investments in PBSA, especially those looking to directly oversee and manage the properties themselves.
