PBSA sector investment hits £2bn in H1

Data from Knight Frank reveals a rise in purpose-built student accommodation deals, with investment at £2bn in H1.

Cambridge University. Cities were student accommodation investment is needed - Knight Frank | PBSA News
Cambridge University.

Purpose-built student accommodation (PBSA) deal volumes rise as investors look beyond the short-term disruption caused by the Covid-19 pandemic. Knight Frank reports that investor appetite remains undimmed – despite the restrictions on international travel and disrupted study for many students.

In Q2 2021, Knight Frank’s data showed that investors spent £656m in the PBSA sector – with the total spend at almost £2bn for 2021. Compared to the same period in 2020, total investment was £5bn, although £4.66bn of that was spent in a single deal – Blackstone’s acquisition of the IQ portfolio.

Although total spend is down year-on-year, analysis of deal numbers points to a more active market. Cumulative deal volumes to June 2021 are 47% higher than last year and 4% higher than in 2019.

A pick-up in investment transactions shows a positive sign for the market, suggesting investors are happy to look beyond the short-term disruption caused by the Covid-19 pandemic. It also shows investor confidence in the PBSA market’s ability to deliver long-term, stable income streams. Knight Frank reports 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. Investor demand in PBSA is also driven by the rising student numbers and ongoing low supply ratios for student housing in many university cities.

The Covid-19 pandemic – which forced students to study from home with the temporary shift to online learning – understandably had an impact on PBSA occupancy levels in 2020. The sector is, however, in a strong position to bounce back as restrictions have been lifted and on campus learning returns – as well as students’ desire to return to university, motivated by having the university experience.

The latest figures from UCAS has also contributed to an increased optimism for the scale of demand from students for this academic year. June’s data shows an increase in applications of 4.5% year-on-year. This rise is driven by an increase in both non-EU and UK applications – which are up 14.4%. Figures also show an increase in both Chinese and Indian applications compared to the previous few years.