Global commercial real estate service provider CBRE’s latest UK purpose-built student accommodation (PBSA) Index has reported total returns of 9.8% for the sector in the year to September 2024.
According to the CBRE UK Monthly Index, total returns for all commercial property were 3.5% over the same period, indicating PBSA has now outperformed all commercial property for three consecutive years.
PBSA capital values increased by 4% over the last 12 months, rising at a higher rate in comparison to 2023 (2.4%). Assets between £25m and £50m reported the strongest capital value increase at 8.8%, translating to the highest total returns at 14.8% in the 12 months to September.
Assets under £10m posted the second-highest capital growth, with a 4.8% increase, whilst assets in Super Prime markets recorded a capital value increase of 14.7% over the year to September 2024. Super Prime markets also had the highest net income growth.
“Historically, investors have been drawn to PBSA owing to the strength of the UK university sector and the supply-demand imbalance for PBSA in many university locations.
“These factors have led to strong rental growth, relatively stable yields and healthy total returns.
“The continuation of these trends in the latest set of results should provide confidence to investors in this sector and the weight of capital that is looking to enter the market.”
Jennet Siebrits, UK Head of Research, CBRE
Capital value increases were smaller for London and Prime Regional markets, while capital values for assets located in Secondary markets fell by 3.5%.
Overall, yields increased by 15bps over the last 12 months and the net initial yield across all PBSA properties rose to 5.1% in the year to 2024.
The 2024 PBSA Index results are based on 111 UK assets, totalling 23,000 beds. Assets subject to nomination/lease agreements with local universities are excluded from the analysis.
In September, CBRE also released student accommodation data on the South of England. University affordability in the South worsened as maintenance loans fail to cover student accommodation rents.
