How are Hostel Developers responding to the over 5 months ASUU strike?

For the past 23 years, the Academic Staff Union of Universities (ASUU) have embarked on strike actions at least 16 times. The disagreement between the Federal Government and University lecturers is over a 14-year MOU signed in 2008 to address challenges of funding, promotion and other matters plaguing federal and state universities. However, there has yet to be an amicable resolution to successfully solve these issues.

Provision of accommodation for students is a top challenge in Nigerian universities. Historically, public universities across the country have been unable to provide up to 30% of hostel accommodation for students. This situation created an opportunity for the private sector to participate. Under typical circumstances, the student hostel market is not an attractive option to most of Nigeria’s real estate developers due to market peculiarities. The now volatile nature of the academic calendar in public schools resulting from a series of strikes adds to discourage private investment. Reduced occupancy and revenue loss are some major effects of this problem. Still, especially in Lagos, some companies have been tapping into this unique yet zestful market.

In this research piece, we discover how providers of Purpose Built Student Accommodation (PBSA) are responding to the effects of recurring strike actions, keeping in mind this ongoing episode; and how it is impacting investor confidence in the sector.

To start with, how are existing operators adapting?

Some of the hostel operators and existing occupants we spoke with said the tenure model they use is either annual or semester based. Most developers run annual tenancies, similar to typical apartments, while a few others charge rents based on the academic calendar. In order to manage the reduced occupancy that comes with strikes, developers with the annual rent model now let out their facilities to suit young professionals as tenants. This made adapting easier for them while others on a semester basis have remained vacant for long periods.

Private hostel developers are eager to open their doors to young professionals

We visited Wakanda Apartment, a 33-room hostel located along the University of Lagos Road, in Yaba. Interactions with the facility manager and occupiers revealed that almost 100% of its occupants are now young professionals who work remote jobs. Although overall occupancy rates dropped by 29%, it was due to a price increase resulting from a surge in diesel charges.

It is important to mention that this is not a new trend. It started during the COVID-19 pandemic when students were sent home, and young professionals sought well-managed apartments to enable them to work from home efficiently. The ongoing strike only served to exacerbate. As highlighted earlier, operators with annual rent models are able to more easily adapt their facility to young professionals unlike those who fixed their rents on an academic calendar basis. Therefore, the Wakanda Hostel operator was able to easily adapt.

Contrast this with Mirabell hostel which operates a semester-based rent model, also located very close to the University of Lagos. It has been pushed to shut down as students stay home. This means that 50% of projected revenue for the year is already lost with little respite in view.

What does this mean for this delicate market?

Existing operators seek a bail-out and prospective investors are further discouraged from coming in. However, there is hope.

Sustainability of occupancy levels in hostel accommodation is a pressing concern for private developers and the frequent strike actions further deplete investors’ confidence in the sector. With the spate of underfunding in the public school system, it is clearly impossible for public universities to accommodate all of their students. We posit that instead of being discouraged, this gap reinforces a need for private players in the space because there is a very thin line between the student housing market and the market for young professionals. Investors can leverage creativity with their approach to building structural plans for accommodation facilities and financing models to fully harness the opportunities in this market.

What are your thoughts on this? Send us an email at research@buyletlive.com to share. You can follow us on LinkedIn to get live updates as we publish new real estate insight articles.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top