The UK’s purpose-built student accommodation (PBSA) sector attracted nearly
£575 million in the final three months of 2024, bringing the yearly total
to £3.87 billion, Knight Frank reveals.
This represents a 14% rise from 2023’s £3.39 billion, and more than half of
the investment is targeted at cities with large student populations.
Despite this growth, the real estate firm says that fourth-quarter
investment fell short of expectations due to extended deal times for
established properties.
The research reveals that deals are taking longer because of building
safety regulations and some transactions were pushed into this year as a
result.
PBSA beds being created
Last year saw almost 16,400 new PBSA beds being created across 63 projects,
a 3% increase compared to 2023.
Nottingham led with 3,639 new beds, followed by London with 2,454 beds and
Leeds with 1,874.
The joint head of student property at Knight Frank, Merelina Sykes, said:
“The private sector continues to play the leading role in providing new
accommodation for students, accounting for 81% of all new beds completed
last year.
“Looking ahead, the largest concentrations of pipeline in terms of the
absolute number of beds are found in cities with large student populations,
such as London, Birmingham, Manchester and Nottingham, which together
account for just under half of 2025’s pipeline.”
She added that PBSA activity is ‘still robust’.
PBSA saw 66 completed deals
The 2024 PBSA market saw 66 completed deals, surpassing the five-year
average of 57 – helped by a ‘particularly liquid land market’, Knight Frank
says.
Research reveals that development sites made up almost half of all
fourth-quarter transactions, culminating in a record year for student
housing land sales.
There was a total of 22 such sales finalised throughout 2024, representing
one-third of all deals.
Holly Lush-Thurston, of Knight Frank research, said: “PBSA developers have
taken advantage of a quieter land market and softer pricing over the last
12 months, with some more traditional market participants having taken a
‘wait and see’ approach given challenges around viability and private sales
demand.
“Currently, the total pipeline for 2025 is just shy of 200,000 beds across
the UK, with 23% of this under construction and a further 48% with full
planning permission granted.”
Market to gain momentum
Investment activity in the PBSA market is expected to gain momentum and Ms
Sykes said: “Our team are tracking £1.3 billion of transactions currently
under offer.
“The majority of deals under offer are for stabilised or portfolio deals,
reflecting the opportunity investors see in
upgrading and repositioning existing stock.”
The
firm’s report
says that last year, joint ventures and funding deals accounted for a fifth
of the sector’s deals by volume.
Lisa Attenborough, the head of debt advisory, said: “Interest rates are on
their way down, and this will continue to have an impact on debt costs.
“Financial markets are betting on two cuts to the Base Rate in 2025.
“This should pave the way more accretive debt finance and enhanced
returns.”
Robust year for the PBSA sector
The managing director of Accommodation for Students, Simon Thompson, said:
“2024 proved to be a robust year for the PBSA sector, with investment
reaching £3.9 billion and a surge in land sales signalling strong developer
confidence.
“Looking ahead, the pipeline for new beds is substantial, concentrated in
major student hubs.”
He added: “The deals also reflect the opportunity investors see in
upgrading and repositioning existing stock to remain competitive.
“The continued demand for high-quality student housing offers promising
prospects for landlords who can adapt and innovate.”
