UK PBSA investment hits £1.7bn in H1 2024

BNP Paribas Real Estate releases its analysis of preliminary data showing that PBSA investment in the UK hit £1.7bn in H1 2024.

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BNP Paribas Real Estate’s analysis of preliminary data has revealed that investment into the UK purpose-built student accommodation (PBSA) sector has climbed to £1.7bn in the first half of this year.

It seems that the UK PBSA investment market is going from strength to strength.

“Student accommodation really is the darling of the alternatives sector at the moment and is set to outweigh other living asset classes over the next 12 months. It offers a long-income play with strong operational performance and a track record which investors in the beds sector really value. We’re seeing shortfalls in stock across some key university cities alongside attractive pricing which can be tapped into.

“Recent analysis has shown that despite falling applicants, the level of headroom in the UK student market is wide with applications exceeding university capacity consistently over the past nine years, suggesting applications can fall without impacting student numbers. This is a positive signal for the continued strength of the market.”

Rebecca Shafran, alternative markets research at BNP Paribas Real Estate

BNP Paribas Real Estate’s review of provisional RCA figures indicate that of the £1.7bn total, Q2 2024 recorded £1.3bn of investment. This represents a 256% year-on-year change in quarterly volume from Q2 2023 at £358m.

In the first half of 2024, the figure marks a 245% increase against half-year 2023 levels at £493m.

“There’s an unprecedented amount of capital targeting the UK living sector at the moment and student is the primary target. Investor funding allocations for PBSA have increased by c£5bn in the last 6 months, with high demand for Build-to-Core and Value Add, mainly targeting London, prime regional cities, Russell Group and STEM university locations.

“We have also seen an increase in demand for 1st Gen refurbishment opportunities and expect to see Core portfolio transactions commencing towards the end of the year. Investors with allocations over £250m are focussed on multiple-development, programmatic joint ventures or larger development opportunities.”

Andrew Screen, head of residential capital markets at BNP Paribas Real Estate

It appears that an extraordinary amount of capital is flooding into the UK PBSA investment market.

The outcome of the general election will also give the UK some much-needed stability to the economy. This should see an increase in investors entering the market.

“The second half of this year should bring clarity on occupancy, and with the general election, improved political stability. In the meantime, investors are waiting in the wings as we approach the start of a new academic year to sustain their confidence in the sector. 

“With a flow of transactions coming through, we should see an increase in the volume of secured lending valuation required by funders and lenders. We are fully geared up to support our clients on transactions which will inform debt finance decisions.”

Lindsey Lock, student accommodation valuations at BNP Paribas Real Estate