PBSA investment hits £2 billion in H1
PBSA deal volumes rise as investors look beyond short-term disruption
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Despite the pandemic having restricted international travel and disrupted study for a large proportion of students, investor appetite for purpose-built student accommodation (PBSA) remains undimmed.
Investors spent £656 million in the sector in the second quarter of this year, taking total spend for 2021 to nearly £2 billion. Investment for the comparable period of 2020 was £5 billion, though £4.66 billion of that was for a single deal, namely Blackstone’s acquisition of the IQ portfolio.
But while total spend may be down year-on-year, analysis of deal numbers points to a more active market.
Cumulative deal volumes so far this year (to June) are 47% higher than last and 4% higher than in 2019.
A pick-up in investment transactions is a positive sign for the market. It suggests investors are happy to look beyond the short-term disruption, and that they have confidence in the sector’s ability to deliver long-term, stable income streams. It also reflects a wider pivot which has taken place over the last 18 months from institutional investors towards residential assets across all age groups.
Rising student numbers and ongoing low supply ratios in many university cities are also driving investor demand for PBSA.
Student mobility
PBSA occupancy was lower than expected in 2020 as learning temporarily shifted online and restrictions on movement throughout the year hampered students’ ability to travel. However, the sector is in a strong position to bounce back as in-person teaching returns and a desire for the university experience motivates students to return.
Future demand
Meanwhile, the latest UCAS data has increased optimism for the scale of demand for this coming September, something we explored in a recent research note.
Overall, June deadline data points to a 4.5% increase in applications year-on-year. The rise was driven both by an increase in UK applicants, who are up 7.3% compared with the same point last year, and an increase in non-EU applications, which are up by 14.4%.
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