UK student housing investment soars despite economic headwinds
Investment in UK purpose-built student accommodation (PBSA) has reached £2.45bn in the first half of 2024, according to new research from Knight Frank.
This figure represents a significant increase from the £1.1bn invested during the same period in 2023.
£1.7bn invested in the student housing sector in Q2
The latest UK Student Housing Market Update reveals that Q2 2024 was particularly strong, with £1.7bn invested in the sector.
This surge was largely driven by Mapletree’s acquisition of the Cuscaden Peak Portfolio, which includes 31 PBSA schemes across the UK and Germany, with UK assets valued at approximately £960m.
Regional assets continue to dominate investment, maintaining a trend observed in recent years.
Since 2019, an average of £2.1bn has been invested annually in standalone regional assets, compared to £570m for single assets in London. Knight Frank attributes the lower turnover in the capital to a lack of supply rather than diminishing demand.
Merelina Sykes, Joint Head of Student Property at Knight Frank, commented on the sector’s performance:
“Robust investment in the first half of 2024 demonstrates the resilience and attractiveness of the UK student accommodation sector. Despite economic headwinds and pre-election market caution, investors recognise the compelling long-term value proposition of student accommodation, particularly in a market where demand continues to outstrip supply.”
160,000 student beds to exist across the country
The total pipeline of student beds across the country now stands at approximately 160,000, with 22% currently under construction and an additional 49% having secured full planning permission.
However, the report highlights a constrained development pipeline despite the rise in investment.
For the 2024/25 academic year, less than 17,500 new PBSA beds are expected to be delivered, representing a mere 0.6% growth compared to the previous year. This falls significantly short of pre-pandemic averages and underscores the ongoing supply-demand imbalance in the sector.
Katie O’Neil, Head of Student Property Research at Knight Frank, noted:
“With demand from students for housing high in a number of locations and supply not keeping pace, rental growth for the sector remains elevated, averaging 7.6% across the UK in 2024.”
Aging PBSA stock presents challenges and opportunities
The research also highlights that 65% of existing PBSA supply in the UK was built before 2012, presenting both challenges and opportunities for investors.
While there is a growing focus on prime stock with strong ESG credentials, there are also opportunities to add value by retrofitting secondary PBSA stock, particularly in markets with the strongest supply-demand imbalances.
O’Neil added: “The government’s acknowledgment of the sector's financial challenges and its supportive stance are encouraging signs. The commitment to maintaining current visa structures is a positive outcome for the market.”
If you are interested in letting your property to students, accommodationforstudents.com is the no.1 student accommodation service in the UK.
