An increase in demand for residential accommodation around campus communities by students has resulted in the establishment of niche market because students market appears to be robust.
Recent observations (source: https://www.vanguardngr.com/2015/11/students-varsities-hostel-and-shylock-landlords/) shows that a large proportion of student’s populations in most public universities in the country, are living in privately rented accommodation. With the rate at which population is growing around this region and the relative supply of “quality” housing, there seems to be an imbalance.
Some local investors have been diverting their funds into real estate property development within this market due to the profitability and stability of the market.
This report tries to highlight the ongoing trends in this market in the form of challenges to expect and the opportunities available to local and foreign investors.
What are the challenges?
There are a number of challenges specific to Nigeria, including but not limited to:
Security Concerns: Safety and security in student residences is a major issue for parents and students across Nigeria, given the prevalence of high crime rates. Increased access control infrastructure and surveillance cameras which monitor lobbies, exits, elevators, and laundry rooms have become essential elements of new developments.
Supporting infrastructure shortages: Student housing typically makes use of supporting infrastructures such as sports facilities, recreational rooms, laundry rooms, security infrastructure etc. Most purpose-built student accommodation in Nigeria lacks these support infrastructures as a result the cost implications of having to set up and maintain any. Given current public expenditures patterns, such infrastructure upgrades will have to be funded predominantly by the private sector.
Affordability and financing: Limited government spending makes the construction and maintenance of student accommodation unaffordable to universities. Students and parents tend to find student accommodation excessive given the relatively high
levels of poverty and lack of access to reasonably priced credit or any credit at all.
Developers also often find new developments unaffordable due to lack of easy access to funding.
A lack of foreign students: Most Nigerian universities do not nearly attract as many international students to their campuses as do universities in developed markets. However, the government is increasingly opening up to inter-regional movements of students which could go some way to mitigating the impact of this challenge. Favourable macroeconomic trends should also attract more international students to SSA.
Transparency: A lack of institutional transparency (on the part of, among others, banks, courts, universities) could be a major hurdle to the effective supply of student housing in the market. Even with the recent upsurge in activities within this market, investors and developers must approach with caution. Corruption and regulatory ordeals come without warning. Joining with a strong local partner is accordingly necessary to avoid the downward spiraling effect of a reactionary approach amongst unexpected obstacles.
What are the opportunities?
According to stats obtained from webometrics, Nigeria and South Africa, are by far sub-Sahara Africa’s largest tertiary student hubs in terms of size. Once can also see that Nigeria is the only country that has many more public universities than private universities, highlighting it’s potential as a regional hub for public private partnership student accommodation projects.
The Nigerian student housing market shares the following key appealing attributes with developed markets:
Constant supply and demand imbalance: Strong demand has historically outweighed supply, causing a significant student housing infrastructure gap in markets across Nigeria. This trend is expected to continue, exacerbating the chronic shortage.
Strong demand drivers: The buoyant demand conditions are expected to continue with a steady rise in university enrolments.
Developments: There are many on-campus development opportunities, due to the limited funding capacity of universities to start new student housing projects. With most universities located in rural areas in the country there are massive opportunities for developments within areas close to the school premises.
Acquisition and consolidation opportunities: In less mature markets, non-specialised residential developers often get involved in the student housing sector due to the relatively high returns that can be earned, but they often lack operational expertise. As the market matures, lucrative buy-out opportunities should arise for larger operators that can benefit from the economies of scale that come along with consolidation.
First-mover advantage: Unlike developed markets, there are many large school city markets that are under-served in Nigeria. This presents a valuable first-mover advantage for those willing to seize upon the many opportunities that others have not yet appreciated.
Steady income and rental growth: Typically, the sector delivers stable and secure income which grows ahead of inflation.
Resilient Performance: Student housing is relatively decoupled from the macro economy. The sector tends to perform well in downturns, as evidenced by the recent global downturn, student enrollments rose as students sought to remain competitive in the job market by upskilling themselves.
High Occupancy: Strong demand for well-managed, purpose-built student accommodation is reflected in high occupancy rates, even in locations far from the school’s immediate environment.
Demand for purpose-built student housing is growing. Supply is severely lacking. Governments simply do not have the budgets to address the imbalance. Within this environment, we believe that the private sector will become progressively more involved, because student housing projects in Nigeria are not only viable but are among the most attractive investments that one can make on the continent.
FYI: Over the years our focus @livekampus has been centered around solving the student off campus accommodation discovery problem which is still prevalent, gaining key market experience and understanding student consumption patterns on the available types of residential properties within the market in a bid to provide affordable, conducive and accessible accommodation options for them.