Why Investors Are Declining to Build Apartments in Nairobi

Wealthy investors are shifting their focus from residential apartments to invest in purpose-built student accommodation (PBSA).

According to Knight Frank, an estate agency, residential and commercial property, purpose-built student accommodation registered a return of 8 per cent.

The proceeds collected from students organised hostels investments doubled returns in prime residential apartments, which only gained 8 per cent of total earnings in the real estate sector.

Defending the shift in investment, Knight Frank report covering the second half of 2022 (Quarters 3 and 4) indicated that the struggle to accommodate the ever-increasing number of students was the leading cause.

Photo collage of studio apartments’ interior.

File

Knight Frank further projected that investments in purpose-built student accommodation was set to continue expanding in the real estate sector.

“It is expected that PBSA will remain more profitable in the foreseeable future as universities (public and private) struggle to accommodate the ever-increasing number of students,” the report read in part.

“This may provide the developers of PBSA with increased demand in a market that is dominated by Acorn Holdings Limited (AHL) – the promoters behind Qwetu brand of hostels,” Knight Frank further observed.

In Kenya, purpose-built student accommodation  are designed and built specifically for university students by private developers or a redevelopment of an existing building. 

They mostly studious or cluster of flats that share communal spaces such as kitchens and bathrooms.

In the report, Knight Frank projected that more than five other companies would launch purpose-built student accommodation by 2024.

Among the areas attracting investors building purpose-built student accommodation include Hurlighum, Parklands, Northland city, Juja and areas adjacent to Kenyatta University.

According to the report, purpose-built student accommodation offers a unique experience compared to other students hotels in public universities.

With the recent investment in affordable housing projects, Knight Frank projected a boom in purpose-built student accommodation.

File photo of Qwetu student residence apartment located in Nairobi.

Qwetu