PBSA developments ‘ripe for modernisation’

  • 21st January 2025

There is ‘significant opportunity’ for investors and universities to upgrade and reposition older stock, delivering value and meeting the evolving needs of students.

This is according to a new report released this week by global property consultancy, Knight Frank, based on insights from 56 institutional investors managing £60bn in UK Purpose Built Student Accommodation (PBSA) assets.

And the findings of the NextGen Living 2025 paper, reveal collaboration between universities and private-sector providers will be critical moving forward.

Across the UK, 65% of existing purpose-built student homes were built before 2012, creating a two-tier market in terms of quality, Knight Frank says.

An imbalance between new supply and demand is exacerbating this trend, with just 260,000 new student beds having been added to supply since 2012, compared with growth in full-time university students over that same time of almost 470,000 – intensifying the demand for modern, high-quality accommodation.

By working together, universities, and investors can create a pipeline of modern, sustainable accommodation that meets the needs of a growing and diverse student population

Speaking to Education Property, Matthew Bowen, global head of living sectors research at Knight Frank, said: “At a time when university finances are increasingly stretched, partnerships between universities and the private sector can help address these challenges.

“Ultimately, insufficient or unsuitable accommodation constitutes a risk to university reputations and student recruitment.”

The research found that accommodation availability is a crucial factor in students’ university choices, with nearly two thirds of applicants saying it influenced their decision on where to apply to study.

Furthermore, student satisfaction with accommodation options remains a concern, as less than 70% of students believed there were enough options in their chosen city.

Merelina Sykes, joint head of student property at Knight Frank, said: “Accommodation forms a key part of a university’s offer to incoming students, both domestic and international.

“Our Student Accommodation Survey undertaken in partnership with UCAS, revealed that nearly half of applicants start researching their housing options before formally applying to university.

“This underscores the importance of getting it right – not just to drive lease-up and occupancy, but to support sustainable rental growth.

“In today’s competitive market, upgrading and maintaining existing stock is more important than ever.

By 2029, nearly a quarter of investors surveyed plan to double their current exposure across all living sectors assets, with close to half targeting at least 80% increases in allocation

“As we look ahead to 2025, more opportunities for collaboration will emerge.

“By working together, universities, and investors can create a pipeline of modern, sustainable accommodation that meets the needs of a growing and diverse student population.”

Robust investment in 2024

According to Knight Frank, investment volumes across the broader living sectors, including PBSA, build-to-rent (BTR), and seniors housing, exceeded £10bn last year, with volumes expected to continue to grow.

The firm has revealed that institutional investors surveyed in this year’s report, plan to deploy a remarkable £45bn over the next five years, marking a significant shift in investment patterns towards residential assets.

By 2029, nearly a quarter of investors surveyed plan to double their current exposure across all living sectors assets, with close to half targeting at least 80% increases in allocation.

Investors ranked student housing as the second-most-appealing real estate asset class over the next five years, just behind BTR, but ahead of other high-growth sectors, including seniors housing, logistics, and data centres.

Knight Frank estimates the value of the UK’s PBSA sector to be £89bn.

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