Dubai student accommodation - a leading real estate investment opportunity

Research commissioned by ENBD REIT (CEIC) Limited (“ENBD REIT”), the Shari’a compliant real estate investment trust managed by Emirates NBD Asset Management Limited (the “Fund Manager”), and conducted by GSA, a leading international provider of purpose-built student accommodation based in Dubai, has found that Dubai’s market is ripe for investment in an emerging student accommodation asset class. Dubai has grown rapidly as a hub for private higher education, with rising enrolments increasing demand for accommodation facilities.

In the last 12 years, the United Arab Emirates has established five public and 58 private institutions with over 100,000 total student enrolments. The rapid growth in educational institutions is a direct response to growing demand for higher education in the region, with many students enrolling from overseas. More recently, enrolments in Dubai have since 2009 increased at an annual growth rate of 6.4% to over 60,000 students currently studying in the city. This rate of growth is almost double the international average (3.7% p.a.) over the same period. The Emirate’s rapidly growing higher education market is supported by continued population growth, its relative geographical proximity to many overseas students and strong government support for the sector. Commenting on the findings, Anthony Taylor, Fund Manager at ENBD REIT, said: “With student enrolments in Dubai growing quickly, accommodation supply has some catching up to do. Total student accommodation beds in the city currently stand at around 4,000, providing for just 6.5% of all enrolled students. Compared with a mature higher education market such as the UK, which provides for around 24%, there is an obvious opportunity to develop more purpose-built student residences. Having recently acquired GSA’s newly completed Uninest Dubailand building, our team is now on the look-out for similar assets or developments, which we believe will deliver attractive yields.” Dubai is the single largest market for global branch campuses, with 10 different types of international curriculum offered across 24 institutions. Only China, with a total of 38, hosts more branch campuses than the UAE, which has 34. Students from the surrounding Arab region, Africa and South Asia are attracted to Dubai’s wide-ranging higher education offering. Aaron Maskrey, Head of Research and Intelligence at GSA commented: “Recent US research has shown almost a 40% decline in international applications from potential students coming from the Middle East. Looking ahead, Dubai is in an excellent position to use its strengths as a regional leader to offer excellent higher education and related services, capitalising on increased demand. Newly enrolled students will need a convenient, safe and welcoming place to live, and this is where the investment opportunity lies.” Comparison with the UK, a well-established market for higher education, shows that purpose-built student housing has become a safe option for property investors. The historic rental performance of student accommodation in the UK has shown stronger growth as compared to the market’s IPD All Rent Index. The sector has a strong track record for rental growth against other types of real estate. This evidence shows the obvious appeal of PBSA (purpose built student accommodation) to investors in Dubai seeking consistent income from assets experiencing a high level of demand.