The concept of student housing as a Real Estate asset class has continued to gain traction globally, and in Kenya, its niche in the market is evidenced by the increased investor appetite which has supported launch of numerous student housing developments, especially in areas surrounding institutions of higher learning, with Acorn Group as the leading brand in the sector.
With Kenya being an emerging market for student housing, the concept has continued to gain traction by attracting private sector developers, investors, and operators. Given the current available stock at 301,060, the student housing gap has attracted private sector participation to increase supply in order to cater to student preferences. Some of the factors that have driven demand for student housing in Kenya include; i) rapidly growing student population, ii) Increase in Tertiary Institutions, and, iii) public policies boosting enrolment of international students to local institutions. However, incoming supply of student housing over the past 2 years has been limited by the COVID-19 pandemic which presumably slowed down the investment volumes and brought about the trend of online-learning which further limited demand for student accommodation. Additionally, the shortage of purpose-built student accommodation has further been attributable to; i) insufficient access to funding, ii) ineffectiveness of Public- Private Partnerships (PPPs), iii) high land costs, and, iv) inadequate expertise.
We conducted research and analysed data of 10 areas in the NMA namely, Parklands, Madaraka, Ruiru, Kahawa Sukari, Thome, Juja, Rongai, Athi River, Karen, and Thika to evaluate the market performance of student housing. In the overall performance, the student housing market recorded slight improvement in 2022, with the average rental yield coming in at 7.0%, a 0.1% marginal improvement from 6.9% recorded in 2020. The average rent per SQM increased by 18.3% to Kshs 505 in 2022, from Kshs 427 in 2020. However, the average occupancy rate registered at 1.7% points decline to 79.6% in 2022, from 81.4% in 2020. The table below shows market performance of student housing in 2022;
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Student Housing Performance in Nairobi Metropolitan Area - 2022 |
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Number of Persons per Room |
Average Rent 2022 |
Average Rent per SQM 2022 |
Average Occupancy 2022 |
Average Rental Yield 2022 |
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1 |
15,930 |
690 |
80.4% |
11.3% |
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2 |
10,191 |
526 |
81.6% |
8.7% |
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4 |
8,071 |
445 |
77.9% |
7.1% |
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6 |
7,677 |
357 |
78.7% |
5.7% |
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Average |
10,467 |
505 |
79.6% |
*7.0% |
*The average is a weighted average based on the number of people sharing per room
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Source: Cytonn Research 2022
In comparison to other asset classes within the Real Estate sector, student housing posted a relatively high rental yield averaging 7.0% and outperformed serviced apartments and residential sectors which recorded yields of 5.5% and 4.8% as at 2021, respectively, as shown below;
Investment opportunities in Nairobi Metropolitan Area (NMA) lies in markets such as Karen, Thome and Madaraka with relatively high rental yields of 11.1%, 10.5% and 9.2%, respectively. This is attributed to the areas hosting private universities in Kenya popular with international students, namely, United States International University (USIU) and Strathmore University, and as such, we expect that the region will continue to present a large gap for quality purpose-built accommodation. For more information, please see our topical on Student Housing in the Nairobi Metropolitan Area.
