_Knight Frank's Student Property Report reveals record £7.2bn PBSA investment
Record investment
Our annual Student Property Reportt has revealed that just under £3.1 billion was invested into the UK's PBSA market in the first nine months of 2022. More than £4 billion was invested in the final quarter of last year – largely accounted for by Greystar’s purchase of the Student Roost portfolio for £3.3 billion. This brought 2022's full-year investment to a record £7.2 billion.
Merelina Sykes, Joint Head of Student Property at Knight Frank, says: “Whilst high inflation, rising interest and higher financing costs have brought caution to the market, investor appetite remains undeterred. In recessionary periods, we often see student numbers rise as people look to upskill. This, coupled with the shortfall of student property across the UK, bolsters the case for investment, and as a result, deal volumes should rise.”
Rising demand & rental growth
We predict that 95,000 new student bed spaces will be added to supply by 2025. Our research shows that there are 25,700 bed spaces currently under construction for the 2023-24 academic cycle, with full planning permission granted for a further 69,500 beds.
Despite a healthy pipeline for unit delivery, escalating build costs, inflationary concerns, skill/labour shortages, financing costs, and planning policy all mean that growing student numbers are outpacing future PBSA supply. This structural supply and demand imbalance, which is widespread in most UK university cities, is underpinning rental growth. We predict that rental growth could exceed 5% for 2022/23.
Lewisham Exchange, Vita Student's 35-storey student development in South East London.
According to UCAS data, more than 560,000 new undergraduate students have been placed into UK universities or colleges for the 2022-23 academic cycle, while ONS population projections suggest there will be a 16% increase in full-time undergraduate numbers between now and 2030. The number of full-time undergraduates in UK higher education is expected to grow by more than 250,000 between 2023 and 2030.
Neil Armstrong, Joint Head of Student Property at Knight Frank, says: “New supply is not keeping pace with the rapid increase in student numbers. Rising student numbers have been supported by high levels of participation among UK 18-year-olds – 37.5% of all UK 18-year-olds are attending university this year – whilst the overall size of the cohort is up, too. Undergraduate numbers from outside the EU have also spiked in recent years, and now account for a record 1 in 10 of all placed applicants.”
Cost-of-living crisis
Katie O’Neill, Head of Student Property Research at Knight Frank, says: “Against the backdrop of a cost-of-living crisis – something students are not immune to – there has been a changing sentiment towards PBSA. Once seen as a more expensive alternative to renting in a student HMO, rent and utility inflation means that more students are now opting for the fixed cost model of PBSA which offers relative value for money.”
Our research revealed that, in some markets, students in the UK are currently paying as much as £16,500 per year in living costs; a figure set to increase in the coming months as a result of the ongoing cost-of-living crisis. We mapped popular university towns and cities across the UK and found that in 80% of the markets examined, the average cost for a student in PBSA was lower than the cost of accommodation in the wider rental market.
Of the 15 towns and cities analysed, London offered the greatest difference in price. In the capital, students living in PBSA pay 33% less than those living in the wider rental market once bills are included – offering a saving of approx. £108 per week, or £5,527 over a 51-week tenancy.
Other popular university cities including Liverpool, Sheffield, Glasgow and Leicester offered students savings of approx. 25%, 15%, 14% and 11% respectively. Want to know more? Contact Knight Frank's Student Property team or view the report below.