Rising investor interest in AP private education sector

Property & Real Estate

Rising investor interest in AP private education sector

The private education market in Asia Pacific is a rising investment spot, driven by the region’s demand for high-quality international schools with a focus on English curricula. That’s according to a new report from property consultancy JLL.

According to the research, Asia Pacific’s private education market is estimated to be worth US$370 billion. The industry has seen a surge in demand from the region’s shifting macro-economic and favourable demographic trends, such as rising household wealth and rapid population growth.

“With a burgeoning local middle class, shrinking family sizes and more double-income households, parents are now seeking first-rate academic options taught in English to give their children a leg-up in an increasingly globalised society,” said Noeleen Goh, Director of Alternatives, Capital Markets at JLL Asia Pacific.

In Hong Kong, the number of English-medium international schools increased from 92 in 2000 to 177 in 2017 and the number of students more than doubled during this period. Countries without an adequate national English curriculum such as Vietnam, Thailand, Japan and China have also seen a spike in popularity among parents for English-language teaching institutions.

“The proliferation of international schools in the region means that competition for students is fierce, so the quality of education is now higher than before. When choosing where to spend tuition fees for their children, parents place a lot of emphasis on an institution’s overall academic reputation, curriculum, teaching quality and even university acceptance,” added Noeleen Goh.

JLL’s report also states that international schools in general have shifted their focus to affluent local markets in the face of declining expatriate families on company packages. Countries such as Malaysia and Thailand do not have any restrictions on international school enrolment. Vietnam has also relaxed restrictions in the recent-

Noeleen Goh, Director of Alternatives, Capital Markets, Asia Pacific JLL

ly issued Decree 86, allowing an intake of up to 50 per cent of local students.

Rising investor interest

Investment has been rising among companies that run international schools, which have backing from institutional investors, private equity firms and pension funds.

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The education market in Asia Pacific is a bright spot for investment supported by favourable demographics and macroeconomic trends. This sector offers great opportunity whatever your investment strategy: from different market segments and geographies to OpCo / PropCo investment structures.

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“In the private education sector it’s common for operators to separate the real estate from the operating company. This gives investors the option to sink their capital either into the education operations or the real estate assets,” said Noeleen.

She explained that the former can channel their funds to invest in the core business of educational services. Real estate investors, on the other hand, can maximise the asset value by leasing the school facility back to an established long-term education operator or building a bespoke campus with rents to hedge against inflation.

“With yields set to be at a premium above traditional asset class, many are keen to delve into this sector as it offers high-growth and is fairly recession-resistant due to its long-dated leases, making it less prone to market volatility compared to the more traditional property assets,” added Noeleen Goh.

However, the report points out that market entry may pose a challenge in some countries with stringent teaching licences, or where basic national education for locals is compulsory and foreign ownership is restricted.

“Typically, foreign investors enter the market by forming joint ventures or partnerships with local players as they offer a good understanding of the local competitive and regulatory landscape. Despite some hurdles, this sector is still very attractive for investors and poised for exponential growth in future,” concluded Noeleen

Download full report here: ‘Private education gets top marks from investors’

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