Student management

Understand the opportunity to invest in student accommodation

This article was first published by Cytonn and has been slightly shortened. See the original here.

With the current available stock of 301,060, the shortage of student accommodation in Kenya has attracted private sector participation to increase supply.

Some of the factors that have driven the demand for student accommodation in Kenya include:

  • A growing student population: According to the Kenya National Bureau of Statistics (KNBS) Economic Survey 2021, the student population in universities and vocational training centers stood at 997,904 in the financial year 2020/21, up from 664,000 in the of the 2014/15 financial year. This represented a compound annual growth rate (CAGR) of 8.5% over five years, further increasing the student housing deficit by approximately 60,000 units. The numbers are expected to rise as the university/college age population continues to grow. According to data from the 2019 population and housing census, the number of people aged 18 to 24, who mainly represent university and professional students, was 6.4 million, or 13.4% of the total population. Kenya of 47.6 million.
  • Increase in higher education institutions: According to the KNBS, the overall number of technical and vocational education and training (TVET) institutions increased by 7.5% to 2,301 in 2020 from 2,140 in 2019. This increase, especially in branches satellites, is supported by government policy to increase the number of higher education institutions to accommodate the growing student population.
  • Public policy: Government measures such as the removal of visa requirements for other African countries are boosting the enrollment of international students in local institutions. In addition, the Kenya National Qualifications Authority (KNQA) has become more aggressive in fast-tracking recognition and equivalence of qualifications obtained in different countries, as well as verifying certificates to ensure that they are genuine. To make Kenya more attractive, KNQA has planned to improve accommodation facilities, establish clearly defined academic calendars and create international student directions to help learners. This will result in increased demand for quality student accommodation.

A few private sector players have taken an interest in the student accommodation concept, with institutional investors focusing their investment grade portfolio in Nairobi County. The main players in the market are presented below.

Incoming supply of student accommodation over the past two years has been limited by the Covid-19 pandemic which has likely slowed investment volumes and caused the trend towards e-learning which has further limited housing demand students. However, as vaccination programs ramp up to manage the spread of the virus, the market has seen growing investor confidence and initiative to unlock growth opportunities. One of the key developments seen in the Kenyan market is Acorn Holdings listing of its Development REIT (D-REIT) and Income REIT (I-REIT) on the Nairobi Stock Exchange in February 2021.

Despite the factors driving demand, the supply of student accommodation continues to lag due to the perception that providing student accommodation is the role of higher education institutions. The shortage of purpose-built student accommodation is further attributable to:

  • Insufficient access to finance: Unlike in developed markets where investors can easily obtain debt and equity financing, obtaining financing for local developments has been difficult due to the reluctance of lending institutions to finance these private developers and therefore to apply standards strict underwriting. Moreover, local capital markets, which can be a source of long-term financing, remain relatively underdeveloped. For example, in Kenya, capital markets contribute just 1% of housing finance while banks contribute 99%, compared to 60% and 40% respectively in developed countries.
  • Inefficiency of public-private partnerships (PPP): PPPs in Kenya face challenges such as: i) difficulties in managing the multi-stakeholder nature of most PPP projects, ii) the lack of appropriate legal frameworks in Kenya to enable the transfer of public land into public-purpose vehicles. special in order to attract private investors. capital and bank debt, and, iii) the extended lead time of PPPs as private developers prefer to exit projects within three to five years. P3 hostel projects have a design, build, own, operate and transfer model, where developers will recoup their return after a period of around 20 years, which is not attractive for the investors who prefer to exit early.
  • High land costs: Land in Kenya’s urban areas has continued to soar, driven by demand for development land which has also led to its scarcity, particularly in Nairobi where the price per acre averages 134.8 million Ksh in 2021, according to Cytonn Research.
  • Insufficient expertise: Purpose-built student accommodation requires a great deal of development and management expertise, which the majority of developers lack the capacity to do, making them reluctant to invest in the area.

Nairobi Metropolitan Area (NMA) Student Housing Market Performance

We conducted research and analyzed data from 10 NMA areas, namely: Parklands, Madaraka, Ruiru, Kahawa Sukari, Thome, Juja, Rongai, Athi River, Karen and Thika. The student accommodation market in Kenya includes studio apartments and shared units of up to eight beds, with the largest number of shared spaces being two beds in one unit. These facilities continued to offer amenities such as storage shops, backup generators, 24/7 CCTV and security teams, secure biometric access, common rooms with DSTV, gymnasiums and game rooms, laundry machines, separate study rooms, and some even offer shuttle services. Rents for purpose built student accommodation (PBSA) range from Kshs 10,000 with the highest in the market currently being Kshs 34,000 per month.

The student housing market saw a slight improvement in 2022, with an average rental yield of 7%, a marginal improvement of 0.1% from the 6.9% recorded in 2020. The average rent per square meter (SQM) increased by 18.3% to Kshs 505. in 2022, compared to 427 Kshs in 2020. However, the average occupancy rate recorded a decrease of 1.7% to 79.6% in 2022, compared to 81.4% in 2020. The table below gives a summary of the comparison of market performance between 2020 and 2022.

Main takeaways include:

  • The relatively marginal improvement in 2022 has been attributed to the Covid-19 pandemic which has seen students switch to online learning, reducing demand for student accommodation. However, with the reopening of the economy, landlords have increased their rental rates in an attempt to compensate for the losses experienced in 2020, hence the relatively high rent per m² at Kshs 505 in 2022. Compared to other Property themes, rent per m² in student accommodation is in line with that of the residential sector which stood at Kshs 508 per m² in 2021. However, it is relatively lower than that of the commercial office and retail sectors.
  • Single-occupied rooms recorded the highest rental yield at 11.3% in 2020. However, this represents a decline of 0.4% from the 11.7% recorded in 2020.
  • Double rooms recorded the highest occupancy rate at 81.6% in 2022. On average, private hostels charge Kshs 10,467 per month compared to university hostels, which charge a maximum of Kshs 3,000 per month .

We also analyzed the data according to market segments, namely high-end markets, which tend to host private universities, and low-end and satellite cities which largely host mid-level colleges and colleges. public universities. The mid to high end segment remained the strongest performer as it generally attracts relatively higher rental rates which average Kshs 622 per sq m compared to the low end markets at Kshs 456 per sq m. In terms of rental yield, the medium-high segment recorded a 0.5% increase in rental yield to 10.0% in 2022 from 9.5% in 2020. On the other hand, the rental yield of the medium-low segment is unchanged at 7.5%, similar to 2020.

Rental rates: Thome and Karen Estates attracted the highest rent per square meter at Kshs 657 and Kshs 646, respectively. These areas are home to leading private universities such as the Catholic University of Eastern Africa and the United States International University, thus attracting students largely from middle class and high-income families. . Generally, the average monthly rental rates fluctuate depending on the location, the type of establishments targeted, which tends to justify differences in terms of quality of student accommodation and equipment expected by students. Additionally, hostels in Nairobi County tend to charge more than satellites due to relatively high land costs, which are passed on to tenants.

Approvals: Rental properties in the off-campus market offer a number of amenities, many of which are absent from on-campus housing. Three amenities are available off-campus and almost non-existent on campus: hot showers, wireless Internet access, and DSTV.

Occupancy rate: The middle low-end segment recorded an average occupancy rate above 81.5% compared to the high-end areas with 79.1%. Indeed, the former tend to attract more student populations due to their affordability, with some choosing to move.

Compared to other real estate asset classes, student housing posted a relatively high rental yield, averaging 7% and outperforming serviced apartments and residential sectors which recorded 5.5% and 4.8% respectively. % in 2021, as shown below.


To make purpose-built student accommodation more attractive to students and enable investors to benefit from high occupancy rates and steady rental income, we recommend that investors:

  • Develop accommodation facilities that meet international standards such as: i) high quality finishes and fittings, ii) thoughtful and market-specific design, and iii) are located close to universities, ideally within five minutes on foot, and
  • Conduct extensive research to identify niche markets.

Investment opportunities in the Nairobi metropolitan area are found in areas such as Karen, Thome and Madaraka with relatively high rental yields of 11.1%, 10.5% and 9.2%, attributed to areas hosting private universities in Kenya popular with international students.

It is clear that there is a demand for student accommodation and purpose built student accommodation is becoming increasingly important. As such, we expect to see more developments to cater for the growing number of students in higher education institutions. However, the trend towards online learning due to the pandemic poses a challenge to the incoming supply of purpose-built student accommodation, as it can reduce occupancy rates in developments.