OPPORTUNITIES IN DOHA EDUCATION
Doha’s rapidly growing expat population is creating a significant demand for new schools in the coming years – Cityscape investigates.
Education as an alternative real estate asset class is gaining increasing importance for investors in the Middle East as the region continues to grow in terms of its population, particularly in some of the expat driven countries of the GCC such as the UAE and Qatar.
The education sector in Qatar’s capital Doha for example is set for rapid transformation in the coming years with a significant number of new schools expected to be required each year by 2022. This is according to Colliers International’s latest Doha Education Overview which states that school developers and operators are increasingly recognising these opportunities as Qatar continues to develop.
Colliers reveal that in order for Doha to sustain its burgeoning population, between 8 – 12 new schools, with a capacity of 1,500 to 2,000 students per school, are required to enter the market each year by 2022.
According to Colliers, a high population growth rate remains the key factor for the growing school demand in Doha. The population of Qatar reached 2.21 million in 2014 from 1.45 million in 2008, with current projections anticipating a further increase to 3.09 million at a 4% growth rate and 3.53 million at a 6% growth rate by 2022.
“Qatar’s rapid economic development is translating positively into a larger population and expanding education sector. Given that a well-run school can achieve profit margins of around 20% once stabilisation years are complete, private investors and operators are increasingly looking at the Qatar market as a major opportunity,” says Mansoor Ahmed, Director of Healthcare, Education and PPP at Colliers International.
Qatar’s population primarily constitutes of expatriates falling within Generation X, Y and Z, which translates into a wide base of young parents and school attendees, Colliers says. Furthermore, “the transient nature of Doha’s population leads to a preference for international curriculums, typically American or English, due to their transferable nature, and for private education choices,” the report says. It also points out that many Qatari Nationals prefer to send their children to private rather than government schools.
Laying the groundwork for a good investment opportunity is Qatar’s competitive economy. The country’s economy has placed it in first position in the MENA region and 13th globally. In addition, Qatar’s success rests on high-quality institutional framework, a stable macroeconomic environment and an efficient goods market.
“Strong GDP growth forecasts will help to strengthen the market and provide impetus for the sustainable growth of the population in Qatar, resulting in a continuous increase in demand for education facilities. The increase in demand is expected to encourage private sector investment in the education sector, resulting in the establishment of new schools,” says the Colliers report.
According to Colliers, at the moment the supply of education facilities is struggling to keep pace with the population. It’s a situation that has been recognised by the government and as a result a number of initiatives have been introduced to encourage the private sector to match the shortfall and benefit from this potentially lucrative sector.
To achieve international standards in the education sector, the government of Qatar is continuously initiating reforms for the sector. The most significant initiative was the implementation of Independent Schools/Decentralised System in 2002 which has resulted in growth in the education sector. As a result of this and other measures, Qatar now ranks 4th in the world in the quality of its education systems, 8th in the quality of management of schools and 5th in the extent of staff training, according to the Global Competitiveness Report 2013/14.
Speaking on education as an investment opportunity, Ahmed says that since Doha already has an oversupply of commercial and residential stock a move into education could potentially be a lucrative move.
“Due to current and expected shortage of schools, education is one of the safest sectors to invest. This is a sector that can provide a stable income stream to investors unlike other sectors. Moreover, the education sector is expected to remain undersupplied in the short-to-medium term and so it is a less risky sector compared to others in the country,” he explains.
According to Ahmed, Qatar will require approximately 131,000 new school seats. “Between 2007/08 and 2013/14 approximately 71,000 new seats were added, an average of 16,000 per year. If the Qatar education sector maintains the current supply, another 112,000 new seats will be added compared to the demand of 131,000 new seats, reflecting a shortage of approximately 19,000 seats by year 2022,” he says.
THINGS TO CONSIDER
For Colliers, the key to ensuring success when entering the education sector in Doha is to have a proactive relationship with the Supreme Education Council (SEC). The SEC is responsible for approving any expansion plans and for considering any requests for increased tuition fees and therefore – according to Colliers – the importance of this relationship cannot be understated.
Another critical factor to consider is the quality of teaching staff in relation to the long-term success of a school, however Colliers adds that similar to other countries in the GCC attracting and retaining quality staff is a major challenge in Qatar.
Existing and new schools can also benefit if a link between leading universities and the schools is established, suggest Colliers, which could possibly lead to students continuing into further education cycles. If located in close proximity there is also the possibility of shared facilities.
“As new schools are opened, competition will increase and certain areas will require extra focus to ensure the long-term success of an establishment, for example the provision of facilities for after school clubs or sports activities. These facilities add considerable costs to a school both to build and operate, but can often be linked to the school brand or ethos,” Ahmed says.
Other challenges faced by the education sector in Qatar are similar to those faced by the rest of the GCC, which, in addition to the shortage of skilled teachers, include the capital required to set up private schools and provide private education with the high associated tuition fees. According to Colliers, the initial development cost to set up a private school in Doha can lie anywhere between USD 50 million and USD 100 million, limiting the opportunities to those investors with relatively capital at their disposal.
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