Education boom in Gulf nations spurs construction

Education boom in Gulf nations spurs construction
Education boom in Gulf nations spurs construction | Courtesy of Shutterstock

A recent study on education in Dubai and elsewhere in the GCC community shows a spike in demand for private schools is going to fuel big building activity in large cities around the Gulf region.

The “School’s In” report, which is part of Cityscape Global, shows a total student population of over 1 million projected in the cities of Dubai, Abu Dhabi, Jeddah, Riyadh and Cairo by 2020.

A firm called JLL has done the research and found there is a need for 1,100 additional schools in these cities within the next four years -- as the firm conducting the “School’s In” study, JLL suggests that the building of new schools will provide an alternative investment choice for investors tired of putting money into conventional residential and commercial real estate projects.

JLL cites a “shortage of quality income-producing assets in traditional sectors” as a stimulus for the move toward education investments. It also goes back to the question of demand.

“This demand is being driven not just by a growth in expatriate children, but also (by) growing demand for private education from national families,” Craig Plumb, MENA head of research for JLL, recently told Gulf News Journal.

Plumb explained that while public education is free to nationals in the Emirates and other Gulf countries, expatriates have to pay for education; and, as a result, they often choose to enroll their children in private schools. But even nationals are choosing to invest in enrolling their children in private schools in higher numbers.

“Despite the cost involved, a growing number of national families are recognizing the importance of education and are willing to enroll their children in private schools, which they recognize provide a higher quality of education,” Plumb said.

It might be nice to use some existing real estate for some of this boom, but Plumb said due to the specific instruction requirements and other factors, most schools will be built new and not converted from other buildings in renovation projects.

“The vast majority of these additional schools will require new, purpose-built premises,” he said.

As for investment, Plumb said diversification is driving a lot of interest and leads to situations where investors put money into schools and hospitals -- or, in other ways, invest their money in the fields of education and health care.

“This interest has resulted in the creation of new funds to invest in the education sector,” he said. “These funds are currently all privately held by leading fund managers in Saudi (Arabia) and the UAE, but as interest grows we would expect the launch of publicly listed real estate trusts (REITs) over the next five years.”

The REIT as a relatively new form of investment product is not only facilitating this kind of domestic investing in education -- as many venues reported earlier this year -- it also helps Gulf nations look abroad, as in this Morningstar piece on Qatar’s investment in an iconic U.S. REIT holding the Empire State Building. 

Inside these countries, the REIT can help “regular investors” become part of the movement to improve education for a new generation of students.