My 24 hours in PBSA: why investors should monitor the premium market

Across the UK developers and operators are looking at how to differentiate their offerings in a new ‘race to the top’ for the premium market.

Josh Rosenberg, Associate Partner, Harris Associates | PBSA News
Josh Rosenberg, Associate Partner, Harris Associates.

The evolving nature of the purpose-built student accommodation (PBSA) sector is a direct result of the changing requirements of today’s students. The premium market is where the transformation is most prominent.

By Josh Rosenberg, Associate Partner, Harris Associates

Gone are the days when student digs had basic common rooms, a secure entrance and less secure lockers. Nowadays, PBSA buildings are a buzzing ecosystem of activity, friendly concierge services and elevated amenities. They usually include dedicated areas for studying, socialising, exercising and living.

This evolution has arisen from students who demand, and will pay for, premium quality living spaces. It is also being driven by market forces and technological innovation.  

The video

What does premium mean?

But what does premium really mean? And why are students prepared to pay top dollar to experience it?

And aside from the year’s ‘rent roll’, are there other, longer-term investment benefits to buying premium?

To find out, I rolled back the years and stayed at true Student’s scheme in Glasgow for 24 hours to experience exactly how a high-end building operates.

My key takeaway? PBSA has become so sophisticated, it is now difficult not to draw comparisons with the hotel sector.

Using true Glasgow as an example, students have access to arguably some of the best PBSA in the residential market. From a panoramic twelfth-floor kitchen-lounge-diner (known as the Sky Lounge), to a cinema and gaming rooms, 24-hour concierge and purpose-built study spaces, it’s got everything the modern student could possibly need. It’s even got a commercial-grade gym; so no need for that monthly Pure Gym membership!

This increased, ‘all-in’ standard of premium living has fast-tracked the sector’s evolution, as developers have been pushed to build market-leading products and work with the best operators to deliver a high-end experience within them. This, in turn, has attracted a new demographic of students who are happy to pay £263 to £425 per week (at true Glasgow) in exchange for the PBSA high-life; especially in cities where demand outstrips supply. 

Sure, this premium standard of living comes at a price. These higher rents may look eye-watering on paper, but such is the scarcity of high-quality stock that ‘affordability’ cannot be discussed before ‘accessibility’.

This, combined with underlying demographic data, an increasing influx of international students, the inflated cost of construction, challenging planning frameworks and wider macro-economic forces, have all contributed to the fundamentals of PBSA remaining one of the most attractive and resilient investment asset classes within UK real estate.

Ten years ago, PBSA was viewed as an ‘alternative’ asset class. Now total direct investment into the living sectors (including PBSA) accounts for over 30% of all UK real estate.

With such unprecedented occupational and investment demand, driving the quality of facilities and service is now more important than ever. Across the country, developers and operators are looking at how to differentiate their offerings in a new ‘race to the top’.

Inevitably, new PBSA will be delivered year-on-year, but it is those providing a truly memorable experience that will ensure re-booking, strong Google reviews and, in turn, future-proofing their investment performance in the marketplace.

Community interaction

When discussing a premium PBSA experience, one cannot neglect an important facet: the sense of community. With students arriving from overseas or different parts of the UK, mental and physical wellbeing, pastoral care, psychological support, and community interaction are key elements of curating the premium experience which drives student satisfaction and retention.

Students need somewhere that feels like a home away from home, allowing them the freedom of adulthood but with a support network. This is why the role of the operator is so important. Amenities and comfort are great, but if they are not activated and complimented by community and support, they are almost redundant. A best-in-class operational team should supercharge a PBSA building, guaranteeing student happiness and investment longevity.