PBSA sector thrives with £744m investment
The UK's purpose-built student accommodation (PBSA) sector has kicked off 2025 with a whopping £744 million invested in the first quarter, data reveals.
Knight Frank's latest Student Market Update shows this performance matches last year’s figures and points to confidence in the market despite economic headwinds.
A striking 56% of the 18 deals sealed in the first quarter targeted operational assets, the highest share since 2023.
International students continue to fuel PBSA demand, making up 30% of the full-time UK higher education population.
Although new international arrivals dipped by 7% year-on-year, their numbers remain 36% above pre-Covid levels.
Knight Frank says this resilience underpins the sector's appeal, with a pipeline of nearly 200,000 PBSA beds, 23% of which are under construction.
PBSA investment is robust
The firm's joint head of student property, Merelina Sykes, said: "Investment in UK PBSA remained robust during the first quarter of 2025 and in line with last year's volumes, reflecting continued positive investor sentiment toward the sector.
"There is a notable shift in investment strategy from last year, with a new preference towards joint ventures or conditional land sales with payment structures in place.
"We are also witnessing stronger investor sentiment towards income-producing operational assets."
She adds: "While prime sites continue to attract high levels of interest, we're seeing an ongoing divergence in liquidity, pricing and investor interest at both city and asset levels.
"This flight to the middle is driven by investors seeking mid-market and value-add assets that appeal to the deepest pool of student demand."
Student rents forecast to rise
The land market for the PBSA sector also held firm, comprising 28% of transactions, while financing challenges saw a muted funding market due to elevated debt costs.
Investors are increasingly selective, gravitating towards mid-market and value-add assets.
The major operators are projecting 97-98% occupancy for the 2025/26 academic year, though bookings are trending later.
Rental growth is forecast at 4-5% nationally, though this is expected to ease to 2-3% annually in line with pre-Covid norms.
However, developments face hurdles, with the Building Safety Act and Gateway 2 regulations slowing pipelines.
Strong demand for student accommodation
Oliver Knight, the firm's head of residential development research, said: "One of the biggest challenges facing the sector in recent years has been a slowdown in supply, with a combination of higher build and financing costs and additional regulatory hurdles negatively impacting the delivery of new stock.
"From a development perspective, the Building Safety Act and the introduction of Gateway 2 has created new challenges which have impacted timing and slowed development pipelines at a time when the need for more student accommodation in many markets remains high."
He added: "Investor appetite is there, evidenced by robust spend in the first quarter though deal structures have shifted to reflect the additional risk."
Private student landlords
Simon Thompson, the managing director of Accommodation for Students, said: "The Knight Frank report paints an encouraging picture of the PBSA sector.
"The sector's resilience, driven by strong international demand and a focus on mid-market properties, offers a stable investment landscape.
"Despite regulatory and cost challenges, the robust occupancy forecasts and steady rental growth point to a market ripe with opportunity."
He added: "There's a lot to like from the figures for private student landlords with strong demand and rising rent growth in the sector, particularly."
