The Kingdom of Saudi Arabia’s K-12 education sector is currently in the midst of a significant transformation, driven by a burgeoning population and the steadfast commitment of the government to deliver top-quality education opportunities. According to our latest report, ‘K-12 Education in the Kingdom of Saudi Arabia’, the Kingdom’s school-going population surpasses the GCC school-aged population by almost threefold representing significant demand for education infrastructure.
In KSA, the K-12 education sector is witnessing an upsurge in demand due to the rapid population growth and the government’s initiatives to attract global talent to the Kingdom. Moreover, the Early Years segment is experiencing a surge in popularity, fuelled by the increasing participation of females in the workforce and government-driven enhancements in early childhood education to boost outreach and enrolment. Additionally, the Special Education Needs (SEN) segment presents a unique opportunity, as there exists a gap in providing structured and comprehensive solutions for SEN students, creating space for international providers to make a meaningful impact.
Addressing the market gap and segments, Shehzad Jamal, Partner and Head of Strategy & Consultancy, MEA, says: “Across the education sector, there exists a demand spanning all segments. The mid to upper-mid-tier schools providing quality education will benefit from sustainable demand from a wider target population segment, which results in sustainable long-term growth. The rising demand for quality private education has been escalated by increasing awareness, disposable incomes, and an influx of top-tier talent to the country.
“With KSA’s government’s unwavering commitment to education, as evident through substantial budget allocations and the National Transformation Program, we are witnessing a pivotal moment. In 2022, the fiscal budget earmarked a staggering $52 billion for education, consistently ranking among the top three areas of public sector expenditure. As part of the National Transformation Program, an additional $7 billion has been allocated for schools and education facilities, with completion expected by 2030.”
Highlighting the dynamics of supply and demand, Knight Frank’s research underscores a substantial demand for K-12 education in Saudi Arabia. The private school sector in the country is estimated to require an additional 214,000 student seats, with Riyadh alone in need of over 63,500 more seats and Jeddah requiring an additional 42,600. Notably, private schools offering international curricula have experienced remarkable growth, with a significant 24.4% increase observed from 2018 to 2022.
In a recent survey conducted by Knight Frank amongst Saudi households, 54% of respondents expressed a strong preference for private schools, particularly among younger Saudis and individuals with higher incomes.
Examining the factors of supply and demand, Salman Khan, Senior Manager, StratCon – Education says: “While the education sector in the Kingdom has consistently grown in the past, we now witness unprecedented demand due to several factors including Saudi Arabia’s transformation into a regional commercial hub backed by ambitious development projects that are attracting top talent to the Kingdom, necessitating high-quality educational facilities.
Government initiatives aim to elevate standards and transition from direct providers to regulators. Considering expected population growth and an increasing preference towards private schools, it is estimated that over 200,000 additional private school seats would be required in KSA leading up to 2035, with more than half of these seats required in key cities of Riyadh and Jeddah only. These estimates are based on organic population growth. If we consider the government’s ambitious growth plan for Riyadh that entails a minimum population target of 15 million by 2030, estimates of incremental demand soar to nearly 5 times the base case estimate for the Capital.”
Focusing on curriculum preferences, 25% of respondents favored a dual curriculum (MoE and American), followed by the American curriculum at 18%, followed closely by the British and local (MoE) curriculum at 16%.
Moreover, in the business arena, there lies an opportunity for investors to leverage the expertise of international education service providers to establish International Branch Campuses in the Kingdom. Alternatively, collaborating with regional operators in the form of joint ventures and management agreements also serves as a viable avenue for expansion. Additionally, there are promising Real Estate prospects for land acquisition and the development of purpose-built properties for long-term leasing and generating steady returns.
However, investors and operators are observed to face several challenges, including limited access to land and rising land prices. Development costs are increasing, driven by rising construction costs and supplier bargaining power amid the boom in construction activity across the Kingdom.
Commenting on specific challenges, Khan explains: “As we examine the challenges, it’s important to acknowledge that the perceived high tuition fees at private schools can indeed pose a hurdle when it comes to ensuring accessibility and attracting demand within the private education sector. Attracting and retaining skilled staff can also be challenging, which may intensify further with increasing competition as more schools enter the market. Additionally, the burden of the rising cost of living, especially in tier-one cities, exerts adverse pressure on staff expenditures.
Future Outlook
The government’s growth plans have spurred substantial demand, particularly in Riyadh and Jeddah, aligning with government population targets. While Knight Frank’s demand estimates are based on organic population growth forecasts, if the government’s ambitious plans of growing Riyadh’s population to at least 15 million by 2030 materialize, the incremental demand would accelerate to over 254,000 seats, which is nearly five times the base case demand estimate for the capital city.
With the rapid influx of expatriate workers attracted by visionary Giga projects, there is an increasing need for high-quality and relevant educational institutions. Notably, the number of white-collar expatriates in the Kingdom surged six-fold, reaching nearly 1.2 million between March and September 2022.
Echoing the above parent preferences, Jamal concludes: “In our recent survey conducted by Knight Frank, which involved over a thousand households in the Kingdom, 54% of the respondents demonstrated a distinct preference for enrolling their children in private schools. “What’s particularly intriguing is the pronounced inclination of younger Saudis, many of whom likely hold degrees from international universities, towards private education for their children. Among those under 25 years of age, a significant 58% favor private schooling over public institutions, while the preference slightly decreases to 49% among individuals aged over 45.
“We have also observed that respondents with higher incomes tend to gravitate towards private schools. A notable 66% of those earning over SAR 20,000 monthly express a clear preference for private education for their children, in contrast to less than half (49%) among those earning below SAR 20,000 per month.”
Government-led initiatives, the evolving market dynamics, and the Ministry of Education’s (MoE) desire to shift from being more of a provider to a regulator are poised to amplify the demand for private schools, especially in key urban centers like Riyadh and Jeddah, extending across the entirety of the Kingdom, presenting a significant wealth of opportunities to investors and operators, across various verticals and market segments within the education sector.