PBSA sector achieves healthy returns in 2021

CBRE reports healthy returns of 7.7% in the purpose-built student accommodation sector in the year to September 2021.

London, where the PBSA performance gap narrows between the regions - CBRE | PBSA News
Image credit : Pierre Blaché from Paris, France CC0, via Wikimedia Commons.

The purpose-built student accommodation (PBSA) Index – produced by global real estate advisor CBRE – has reported total returns of 7.7% in the year to September 2021.

PBSA was outperformed by the all-property average for the first time since 2017, which saw returns of 12.5% in the year to September 2021, as the commercial property market rebounded from negative returns in the wake of Covid-19.

The performance gap between London and Regional narrowed, with assets in London achieving total returns of 7.9% – which is 0.3% higher than those in the regions, a fall from the 2% to 4% outperformance seen over the last four years. This was due to falling net income return on London assets.

London and regional data. Source CBRE | PBSA News
Source: CBRE.

“From the start of the Covid-19 pandemic, returns and capital growth for PBSA have outperformed Office and Retail, coming second only to Industrial. We anticipate that demand will remain strong in 2022 as increasing participation rates are coupled with an increase in the UK student age demographic. Since September we have already seen very strong yield compression in most PBSA markets.

“Supply can’t keep up, with the delivery of new PBSA supply, hindered by increasing build costs and land availability. These dynamics have contributed to strong investor sentiment and we expect that the appetite for good quality PBSA assets will continue into next year.”

Tim Pankhurst, Executive Director, CBRE Student Accommodation Valuation & Advisory