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Globally, the student housing market has become a mainstream real estate asset class, no longer considered a niche or specialist segment. Last year, the sector saw a record level of institutional investor interest, paving the way for it to gain traction in many countries outside of the traditional markets of the UK and the US.
The nature of higher education is changing and the human capital needs of organizations are making universities a key component of a student's path in a competitive job market. The growing middle class in emerging economies is likely to ensure the expansion in global student population in the coming years. Participation in higher education globally is estimated to grow from 196 million enrolments in 2012 to 263 million by 2025.
These changes are being witnessed in the UAE as well, with the country increasingly focusing on diversifying beyond oil-based revenues. In this respect, the move towards a knowledge economy is among the many drivers of this change. According to the Global Student Accomoda tion (GSA) Group, over the last 12 years, 35 universities have been established, with total enrolments reaching 120,000 in 2015. Of these, an estimated 60,000 enrolments are in Dubai. The UAE, today, has the highest number of international branch campuses in the world, of which 26 are in Dubai.
Purpose-built student housing
Most universities have limited accommodation facilities on campus. They, either, rent apartments in bulk for students or they allow students to search for options themselves. A unique format that has been launched in the market recently is purpose built off campus student accommodation. Based in the UK, GSA launched their first project in the MENA region at Dubailand, close to Dubai Academic City, in February. The Uninest facility features studio, twin sharing and single bedroom options, providing a total of 424 beds. Prices start from Dh3,290 per month and are all inclusive of fully-furnished bedroom, fully-fitted kitchen and seating area with television (shared for twin and single rooms or within a studio), WIFI access, utility bills, and use of all common facilities. The facility also has a full-time student management and security team on hand to help students.
GSA has been in the business of building and managing student housing projects for 25 years, with existing properties in Europe and Asia-Pacific. ''We are a research-led organisation, tracking monthly fluctuations in the student sector. We have seen a significant shift in higher education. From 68 million students being mobile (leaving their countries of origin to study) in 1999, the figure has reached 40 million in 2012 and 200 million in 2015,'' says Bobbi Hartshorne, Strategic Partnerships Manager at GSA.
While commenting on choosing Dubai as a location for their facility, she says the group is looking to support the growth of the education sector in the region. ''Dubai's strategic location, along with a large number of international universities already being present, makes it an interesting addition to our portfolio. The international exposure [that] students receive here with easy accessibility to home countries has made it a popular choice among young students from countries in the MENA region as well as South-East Asia. We foresee a gap in suitable accommodation for this segment. In Dubai, at present there are an estimated 19,000 students in need of residences, while only about 3,000 to 4,000 university beds are available.''
The Uninest facility in Dubai, which was launched in February, was occupied to about 22 per cent at the time of launch and this is expected to be 95 per cent full by September. The focus of the project is to bridge the gap between the current private rental market offering and the under-supply of university campus student housing. Future growth plans include possible Uninest facilities in areas such as Knowledge Village, Al Safa, Deira, Garhoud and Design District, where GSA is actively looking for suitable land.
Student housing is also an appealing asset class for investors because it has low correlation to the traditional real estate classes, making it effective in diversifying property portfolios.
''Void rates are typically low and income stable, and the expansion in global student populations underpins demand. Record levels of institutional investment into the global student housing sector were recorded in 2015 at $13.5billion (Dh 49.5billion), double the level of 2014. For the first time, the UK was the biggest recipient of investment, overtaking the US, with $6.9billion of global investment in 2015,'' highlights Paul Tostevin, Associate Director – World Research, Savills.
The investment potential of student housing has also brought in players from developed markets, who are now looking to showcase investment projects in the UAE. Select Property, which operates projects under the student brand Vita in locations such as York in the UK, is also seeing increasing interest from UAE buyers for their UK properties.
''Our end-to-end service means that we develop, sell and manage our properties, ensuring the best possible service for both customers and investors. With 435,495 international students studying in the UK and spending £6.3 billon (Dh33.6 billion) on living expenses, this is the ideal addition to any savvy investor's portfolio. We're looking forward to sharing the opportunity with investors in the GCC region and showing them around our show pod in our Dubai offices,'' says Adam Price, Managing Director – Middle East, Select Property.
''We offer a minimum guarantee of 7 per cent for five years on our Vita brand, with expected returns being around 9 to 12 per cent on average. The re-booking rate among students at our properties is 65 per cent higher than industry standard,'' he says. Almost 25 to 30 per cent of all Vita student brand apartments are sold via the Dubai office and these remain the best performing assets with prices ranging from £125,000 to £650,000. The payment plan involves 25 per cent down payment, 25 per cent in six months and the balance on completion.
The York project comprises 16 buildings with 652 apartments of which 440 units had already been sold between August and December last year. Vita student has residences in Manchester, Bristol, Liverpool, Exeter, Southampton and Sheffield. Residences in Edinburgh, Glasgow, Newcastle and York are currently in development, with 1,406 bedrooms under contract for delivery between 2015 and 2017. Plans to bring the Vita student brand to Dubai are underfoot and Select Property is currently studying the market in locations such as Silicon Oasis and Dubai Academic City.
With the greatest concentration of branch campuses of well-known institutions in the world, Dubai is emerging as an alternative to established Western centers for students seeking to study abroad.
''Dubai is already the number one destination for students in the Middle East region. It is well positioned to tap into the large, lower income tiers of students currently unable to stretch to Western institutions. Outside the Middle East, it already attracts large numbers of Indian students. Purpose built student accommodation is an important part of this growth,'' says Tostevin of Savills.
Here's a glimpse on the buy-to-let uptake in Dubai
Source: Manika Dhama, Special to Property Weekly