Investment in the UK’s purpose-built student accommodation (PBSA) sector reached a record £7.2bn in 2022, according to the latest Knight Frank Student Property Report. This represents an increase of 69% year-on-year – well above the long-term five-year average of £4.1bn.
The 2022-23 Student Property Report revealed that just under £3.1bn was invested into the sector in the first three quarters 2022. Q4 2022 saw investment of over £4bn, which is largely accounted for by Greystar’s acquisition of Student Roost for £3.3bn. This brought 2022’s full-year investment to its record £7.2bn.
“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.”Merelina Sykes, Joint Head of Student Property, Knight Frank
By 2025, Knight Frank predicts that 95,000 new student bed spaces will be added to supply. The company’s research shows that there are 25,700 beds 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 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, with predictions from Knight Frank that rental growth could exceed 5% for 2022/23.
Between 2023 and 2030, the number of full-time UK undergraduates is expected to increase by over 250,000. UCAS data shows that over 560,000 new undergraduate students have been placed into UK universities or colleges for the 2022-23 academic year, with ONS population projections suggesting a 16% increase in full-time undergraduate numbers between now and 2030.
“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 one in ten of all placed applicants.”Neil Armstrong, Joint Head of Student Property, Knight Frank