MIPIM 2023: Rolling up our sleeves and realising the potential of PBSA

PBSA’s long-term future and that of the UK’s higher education sector are promising, says Shoosmiths Real Estate Partner and PBSA specialist.

Daniel Halstead, Real Estate Partner and PBSA specialist, Shoosmiths | PBSA News
Daniel Halstead, Real Estate Partner and PBSA specialist, Shoosmiths.

The last piece I wrote for PBSA News was in October 2022. It was nearly a month on from the mini-budget, and published the same day as the Chancellor, Jeremy Hunt, attempted to calm markets with an emergency fiscal statement – cancelling most of Truss’s tax cut plans.

By Daniel Halstead, Real Estate Partner and PBSA specialist, Shoosmiths

The mini budget brought with it a wave of volatility that had a profound impact on the economy, real estate sector, and more specifically the borrowing market. Speaking to funders at the time, interest rate quotes were changing rapidly, often on an hourly basis.

While the purpose-built student accommodation (PBSA) sector is no stranger to disruption, nobody operating during this time was immune to the uncertainty, as escalating interest rates saw deals paused or shelved.

As the calendar turned over to 2023, the markets recovered and the PBSA sector demonstrated its ability to be pragmatic, with investors and developers rolling up their sleeves and progressing the job in hand.

MIPIM 2023 is an opportunity to highlight this resiliency and show the way forward is bright.

Fundamental strength

PBSA remains one of the real estate industry’s most liquid sectors.

Despite the disruption of Q4 2022, data from Knight Frank reveals that investment into the UK’s PBSA sector reached a record £7.2bn in 2022. That represents an increase of 69% year-on-year, while far surpassing the long-term five-year average of £4.1bn.

Already in 2023, abrdn has launched a new PBSA platform – MYS Student Living – to deliver student space and bringing one of Europe’s largest residential fund managers to the sector.

The launch followed Greystar also confirming its acquisition of Student Roost in December. The joint venture with GIC was one of the biggest real estate deals to complete during 2022.

These moves show that there is still a wall of capital trying to enter the student market. The long-term appeal to investors is based on PBSA’s ability to deliver institutional-grade returns.

One factor underpinning the market’s robustness is the systemic undersupply of PBSA in the UK.

While the latest research shows that there are 25,700 bed spaces currently under construction and another 69,500 in the pipeline with full planning permission granted, there is still not enough stock coming to market to meet the growing demand from students.

Applicants to UK universities reached record highs in 2020, 2021 and 2022. This was matched by overseas students, with applications also hitting consecutive record levels and a growing number of students coming to the UK from countries including India and Nigeria.

Brexit, Covid-19 and the prospect of higher fees for overseas students isn’t impacting the numbers of those wanting to study at UK universities or colleges, with UCAS reporting that 560,000 undergraduate students are set to take places for the 2022-23 academic cycle.

It’s clear that the demand fundamentals for PBSA remain strong. According to Savills, the annual average occupancy rates for PBSA in Europe is ranging from 95% to 98%.

Unite Group’s recent trading update showed a 99% occupancy rate and 3.5% rental growth for the 2022/23 academic year, with its chief executive, Richard Smith, commenting, “PBSA supply cannot keep pace with growing student demand.”

The focus, therefore, has to be on bringing forward more quality, versatile and varied PBSA to the market – no doubt a subject that is dominating conversations on Cannes’ La Croisette.


Looking ahead, it’s never going to be plain sailing for the PBSA sector.

The funding landscape, in particular, remains tricky to navigate, with high rates making funding and building developments difficult.

However, we are now seeing projects move forward, with potential deals being put in front of credit committees and a level of optimism filtering through the market as it enters Q2 2023.

Developers and operators are also responding to upcoming legislative changes. This includes on biodiversity net gain, with the government recently publishing its consultation response and new guidance on the requirements coming into force in November 2023.

The Building Safety Act 2022 continues to be implemented in stages, with the government stating its intention for student accommodation to be subject to the new regulatory regime set out in Part three of the Act, impacting how schemes are designed and constructed.

It is critical that developers continue to monitor the legislation, with the government currently holding a consultation on amendments to Approved Document B – proposing that all new residential buildings more than 30 metres in height will need to provide a second staircase.

The finalised detail, and potential impact on PBSA, will not be forthcoming until the consultation closes in mid-March and the government considers the responses.

Taking a pro-active approach and adapting to these changes is key to enabling those in the PBSA sector to minimise risk, avoid legal implications and help maintain scheme viability.

Ultimately, the funding landscape, legislation and current economic headwinds all represent short to medium term hurdles for PBSA. Its long-term future and that of the UK’s higher education sector are promising – a message that I will be championing at MIPIM this year.