Dubai, United Arab Emirates, 4 September 2016 – The massive increase in demand for private schools is stimulating interest from real estate investors, developers and builders seeking ‘alternative investments’ as the supply of quality assets in more traditional sectors such as offices, retail, residential and hotels remains limited, according to JLL’s latest report.
To be released as part of Cityscape Global in Dubai, ‘School’s In’ reveals private schools are becoming increasingly preferred in the MENA region. The demand for private education is being driven by both the growth in the number of expatriates and the desire of more national families for better quality education for their children.
“The requirement for around 350 private schools presents significant opportunities for real estate investors, developers and builders,” says Mr. Craig Plumb, Head of Research, MENA, JLL, who will deliver a keynote presentation at the Cityscape Global summit tomorrow.
“The education sector has sparked the interest of many real estate investors right across the MENA region. Private equity firms in particular have been very active in recent years, and they will continue to play a pivotal role in the expansion of the private education sector here.”
Historically, real estate investors and developers in the MENA region have focused on four traditional asset classes – residential, offices, retail and hotels. However, ‘alternative investments’ including the likes of education, healthcare, infrastructure, logistics and student housing have become more popular in recent years.
“The shortage of quality income producing assets in traditional sectors and declining returns in some locations has further prompted the interest in alternative asset classes,” added Mr. Plumb.
“With new investment vehicles facilitating the investment in schools, alternative investments diversify the investor portfolio and have the potential to improve the overall risk-return profile. Both retail investors and institutions are seeking greater exposure to non-correlating alternative investments that provide consistent income with low volatility.”
As the school age population is growing in the region, Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo all require investment in new private schools by 2020. According to the Federal Competitiveness and Statistics Authority (FCSA), the majority of students in the UAE attend private schools, with the total number of students reaching 629,000 last year, 75 per cent of which were in private schools.
While the percentage of pupils in private education is somewhat lower in Saudi Arabia and Egypt, this has been the fastest growing sector of the market in both countries in recent years. Private schools in Saudi Arabia have increased from 5 per cent of new enrolments in 2011 to 11 per cent in 2014. Similarly, in Egypt the private sector accounted for 10 per cent of the total of 18 million students enrolled in the academic year of 2015-2016.
The growing demand for private schools has resulted in strong financial returns from this sector of the market. According to a report prepared by Abu Dhabi Education Council (ADEC) in 2015, private schools in Abu Dhabi earned close to AED 3 billion in profit over the preceding four years. Investment in private schools in Abu Dhabi between 2010 and 2015 reached AED 2.3 billion between 2010-2015, with 45 new private schools being delivered.
“Education is regarded as a lucrative business opportunity,” said Mr. Plumb. The school age population is growing and this is the main attraction for the education sector. In Dubai, for example, we expect the expatriate population to grow at average rate of 4.7 per cent over the next five years, and as expatriate workers move with their families, this creates demand for private education facilities.”
“There are three major drivers of the education sector for real estate investors; the strength of demand, the attractive financial returns available and the alignment of this sector with government policies to improve educational standards across the region.”
Country summary highlights
United Arab Emirates
In its 2021 vision, the UAE Government emphasizes the importance attached to improving the education sector. Following the safety of its people, knowledge was addressed early in the vision summary, indicating the weight it holds.
Recognizing the need to improve the quality of education in KSA, the government has allocated an average of 23 per cent of the national budget to building new schools and improving existing schools over the past ten years.
In its “2030 Egypt Vision”, education and training was a main pillar for the Egyptian government. The vision highlights that a high quality education and training system will be available to all, without discrimination within an efficient, just, sustainable and flexible institutional framework, providing the necessary skills to students and trainees to think creatively, and empower them technically and technologically. The students will then be aa creative, responsible, and competitive citizen who accepts diversity and differences, and is proud of his country’s history.”
Cairo is the largest city in the region and benefits from a young age profile, with 28 per cent of the total population aged between five and 19 years. Cairo is forecast to require a total of 424 new schools by 2020, with 68 of these being in the private sector.
Given the growth of the school age population (which JLL has defined in the report as 5-19 years of age), and our assumptions regarding the public private split and the average number of students per school for each city, JLL has calculated the total number of additional private schools which will be needed by 2020 as follows:
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About JLL: JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6 billion, JLL has more than 280 corporate offices, operates in 80 countries and has a global workforce of approximately 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management.
About JLL MENA
Across the Middle East, North and Sub-Saharan Africa, JLL is a leading player in the real estate market and hospitality services market. The firm has worked in 30 Middle Eastern and African countries and has advised clients on real estate, hospitality and infrastructure projects worth over $1 trillion in gross development value. JLL employs over 300 internationally qualified professionals embracing 35 different nationalities across its offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar and Cairo. Combined with the neighbouring offices in Casablanca, Istanbul, Johannesburg, Lagos and Nairobi, the firm employs more than 1,100 staff and provides comprehensive services in the wider Middle East and African (MEA) region. . For further information, visit www.jll.com; www.jll-mena.com; www.jllvantagepoint.com