Student housing in the UAE holds untapped opportunities for developers and investors alike
Successful management of the Covid-19 pandemic, and a vaccination drive that is stacking up the numbers of those that have taken their shots, have put the UAE in a position to make the most of several unique opportunities. Some of these advantageous positions are obvious, while a few others take a bit of analysis, to become apparent.
As one of the locations to have resumed physical classes in several of its educational institutions, the UAE is witnessing an upswing in student intake and admissions – from within the country, regionally, and internationally as well. The presence of several world-class academic institutions, within its borders, is reinforcing these positives.
One of the opportunities being generated by this rise in the number of enrolled students is the need for dedicated housing – both on and off-campus developments.
A nascent segment, that’s set for extended growth
The growth of the UAE student housing sector pre-dates the pandemic. In a report published in April 2020, real estate firm CBRE noted that investors were achieving returns of around 8 to 9 percent(1), in the segment. At the time that report was issued, the majority of the Purpose Built Student Accommodation (PBSA) in the UAE, was in the Dubai International Academic City.
With life beginning to return to near-normal conditions, the number of international students in the country’s universities is set to rise. In addition, the 2.57 million of the UAE’s 9.9 million residents(2) are currently less than 24 years of age, indicating the scale of future PBSA requirements, and that this is no passing phase.
Although the PBSA segment is just beginning to make its presence felt within real estate circles in the UAE, it represents a robust and established piece of the global pie, for the industry. In a 2019 report published by Knight Frank – which are still the most recent such figures available – investments in student housing had reached a whopping $16.3 billion worldwide(3) – the highest ever recorded.
With the UAE beginning to emerge as a preferred destination for students pursuing higher education, the segment will emerge as a segment that offers developers steady and ongoing returns.
A means for developers to skirt the oversupply issue
While the UAE real estate markets have been on the verge of a significant upswing for the last two years, the pandemic stopped this growing momentum in its tracks, for a few months. Now, with the nation beginning to emerge into a post-vaccination new normal; growth generated by the rescheduled Expo 2020; and a number of people who were renting moving to outright home-ownership; the UAE real estate sector appears to have a lot of positives lining up. However, the market is still feeling the effects of current and scheduled oversupply, with experts taking varying positions on how significant an effect this will have.
One of the major advantages of the PBSA segment is that it is unaffected by the oversupply issue, given the scale of the growing requirements. Even existing student accommodation will need to be adapted to the post-Covid world, given the uncertainties that remain around possible future waves, and the emergence of variants that current vaccines are unable to defend against. Given these variables, PBSAs represent an avenue for assured business growth, for the UAE developer and builder community to pursue.