Exploring the Dynamics of Purpose-Built Student Accommodation (PBSA)

In the realm of pursuing higher education, the concept of student housing has undergone a remarkable transformation with the rise of the purpose-built student accommodation (PBSA) sector. This premium real estate asset class is redefining how students live and interact during their academic journey as they seek an enriching and comprehensive university experience. Since PBSAs are part of the real estate market, there are many opportunities in this sector:

PBSA: Beyond Campus Accommodation

Purpose-built student accommodations offer a new perspective on university life with the evolution of the industry. The PBSA market size is constantly growing. In 2022/23, when Greystar and GIC acquired Student Roost, the value accounted by Knight and Frank was 3.5B asset class stands distinct from traditional campus accommodations, providing a range of advantages that cater to the modern student's diverse needs:

• Flexible Lease Options & Amenities: PBSAs offer flexible lease durations, allowing students to choose terms that align with their academic calendars. Moreover, these accommodations have state-of-the-art amenities such as fitness centres, communal study areas, and high-speed internet, fostering a conducive learning and living environment.
• Community & Networking: Unlike conventional campus accommodations, PBSAs are designed to promote a sense of community. Events, workshops, and shared spaces encourage students to interact and network, creating lasting friendships and connections.
• Modern Infrastructure: PBSAs often boast modern architecture and infrastructure, providing students with a contemporary living experience. This modernity extends to safety features, with advanced security systems ensuring a secure environment for residents.

PBSA Market Size, Growth and Competition

The introduction of purpose-built student accommodation has ignited a spark of innovation and competition in the market size. Key players like Unite Group, have driven market growth and enhanced the options available to students:

• Unite Group's Legacy: Unite Group's establishment of the first PBSA marked a turning point in student housing. Its legacy of providing well-designed, student-centric accommodations has set a high standard for others to follow.
• New Entrants like PMG: The emergence of newcomers highlights the growing demand and potential of the purpose-built student accommodation market has crossed $20 billion+ in 2022 sales volume in US and as per Knight Frank the UK PBSA market is valued at £85.8 billion. The new emerging developers and operators are bringing fresher perspectives, providing to diverse accommodation choices for students and creating a competitive market.

1. Socio-Economic Impact of PBSA: Enriching Communities

Beyond providing comfortable living spaces, PBSA is one of the most profitable real estate asset classes and has a broader impact on the communities they are established, contributing to both local economies and sustainability efforts.

• Local Job Creation: The construction, operation, and management of PBSAs contribute to job creation within local communities. This economic stimulation supports businesses and individuals in the area, creating a positive ripple effect.
• Environmental Responsibility: Many purpose-built student accommodation providers are integrating sustainable practices into their accommodations. From energy-efficient designs to waste reduction initiatives, these efforts not only benefit the environment but also raise students' awareness of their ecological footprint.
• Community Integration: Purpose-built student accommodation in the UK often engages with local communities through events and partnerships. This integration fosters a sense of belonging for students while enhancing the relationship between the academic institution and its surrounding neighbourhood.

2. International Student Mobility

International students often seek purpose-built accommodations due to their convenience and amenities, creating a niche for investors targeting this demographic.

• The number of Indian students globally is projected to reach 1.8 million by 2024, fueling demand for specialized housing.
• As per Jonathan Chew, Head of Insights and Analytics for Navitas, the international student enrollments are expected to grow up to 9.1 million by 2030.

The United Kingdom (UK), the United States (US), and Australia (Aus) have significant higher education markets, especially in the context of PBSA. Let's discuss each of these countries and their PBSA markets:

1. United Kingdom (UK):

• The UK has one of the largest and most developed PBSA markets in the world. PBSA refers to accommodation specifically designed for university students, offering them various amenities and services.
• The UK is home to numerous world-renowned universities, attracting students from around the globe. Cities like London, Manchester, and Edinburgh have a high demand for PBSA due to their concentration on universities.
• The market includes both university-operated and private PBSA providers, offering a range of options for students, including on-campus and off-campus accommodations.
• The UK PBSA sector has seen substantial investment and growth in recent years, with new developments aiming to provide modern, high-quality living spaces for students.

2. United States (US):

• The US also has a robust higher education system and a substantial PBSA market, catering to the needs of domestic and international students.
• Major cities like New York, Los Angeles, and Boston have a significant demand for student housing, and there is a growing trend of private companies investing in PBSA to accommodate this demand.
• In the US, PBSA can take various forms, including purpose-built apartment complexes, dormitories, and shared housing, with a focus on providing comfortable and convenient living spaces for students.
• The market in the US is dynamic, with different models and amenities depending on the specific needs and preferences of the student population.

3. Australia (Aus):

• Australia, while not mentioned in your initial question, is worth noting in the context of the PBSA market because it also has a substantial higher education sector.
• Australian cities like Sydney, Melbourne, and Brisbane host numerous international students, and the demand for purpose-built student accommodation is on the rise.
• Similar to the UK and the US, Australia has seen increased investment in purpose-built student accommodations. These accommodations often offer amenities like Wi-Fi, study areas, and social spaces to cater to the needs of modern students.
• Both university-affiliated and private providers operate in the Australian PBSA market.

3. Focus on Amenities and Technology

Modern students have high expectations for their living spaces, making it an opportune time to invest in PBSA with cutting-edge amenities and technology.

• Purpose-built student accommodation with strong Wi-Fi connectivity and smart home features has shown to have a 15-20% increase in occupancy rates compared to traditional accommodations.
• Integrating sustainable technologies such as energy-efficient lighting and water-saving systems attracts environmentally conscious students and reduces operational costs for property owners. By understanding and strategically leveraging these market opportunities, investors and developers can position themselves to thrive in the rapidly evolving PBSA market size.

Challenges for New Entrants in the PBSA Market

The PBSA market size has emerged as a dynamic and lucrative sector within the broader real estate landscape. With the global student population on the rise and a growing emphasis on modern and convenient living spaces, this premium real estate asset class presents a compelling investment opportunity. However, like any market, entering the PBSA industry is not without its challenges. Aspiring investors and developers need to navigate a series of entry barriers that can significantly impact their success and market presence.

1. Regulatory and Zoning Barriers

Local regulations and zoning laws play a pivotal role in shaping the development of PBSA. These regulations can either facilitate or hinder the establishment of student housing projects, impacting market entry.

Zoning and Land Use

• UK: Land must be appropriately zoned for student accommodation or mixed-use development.
• USA: Developers must ensure that land is zoned for residential or mixed-use purposes, with specific zoning requirements influencing development type and scale.
• Australia: Zoning regulations dictate where PBSA developments can be located, requiring appropriate zoning for residential or mixed-use purposes.

Building Codes and Regulations

• ‍UK: Compliance with building regulations, covering structural integrity, fire safety, and accessibility, is mandatory.‍
• USA: PBSA must adhere to local building codes governing structural integrity, fire safety, electrical systems, plumbing, and accessibility.‍
• Australia: PBSA developments must comply with local building codes, ensuring structural integrity, fire safety, accessibility, and energy efficiency.

Accessibility

• ‍UK: PBSA buildings should provide accessibility for students with disabilities, including ramps, elevators, and other accommodations.‍
• USA: Compliance with the Americans with Disabilities Act (ADA) guidelines is crucial for ensuring accessibility.‍
• Australia: Developers must adhere to guidelines outlined in the Disability Discrimination Act (DDA) and the Building Code of Australia (BCA) to ensure accessibility.

Licensing and Permits

• ‍UK: Some areas may require licenses for PBSA operation, with additional requirements set by local authorities.‍
• USA: PBSA units may require licenses and permits, varying by location and including considerations for safety, occupancy, and other factors.‍
• Australia: Licensing and permits for PBSA operation may be required, encompassing safety, occupancy, and other considerations.

Fire Safety

• ‍UK: Fire safety regulations include the installation of alarms, sprinkler systems, and safe escape routes.‍
• USA: Compliance with local fire safety regulations, including alarms, sprinkler systems, fire-rated materials, and safe egress routes, is essential.‍
• Australia: Adherence to fire safety requirements, such as alarms, sprinkler systems, fire-rated materials, and safe egress routes, is a significant concern.

Health and Safety

• Common considerations include room size, natural light, ventilation, and sanitation facilities to meet specific health and safety standards.

Environmental Impact

• ‍UK: Developers may need to consider energy efficiency and environmental sustainability standards.‍
• Australia: Environmental impact assessments may be required in areas with strict regulations, encouraging or mandating sustainable building practices and energy efficiency.

2. Capital Requirements

The development and operation of housing require substantial financial investment. Capital requirements encompass construction costs, land acquisition, and ongoing maintenance expenses, influencing the ability of new entrants to penetrate the market size.

• In the UK, the average investment required to develop purpose-built student accommodations ranges from £30,000 to £40,000 per bed, depending on the location and quality of amenities. (Source: Knight Frank, "Student Accommodation - What to Consider When Investing")
• In the US, the cost of developing student housing can vary widely, with estimates ranging from $75,000 to $150,000 per bed, depending on factors such as location, property size, and included amenities. (Source: Student Housing Business, "A Student Housing Surge: Developers Respond to Strong Demand")
• In Australia, the development cost of PBSA can range from AU $150,000 to $300,000 per bed, with the higher end reflecting more luxurious offerings in prime locations. (Source: The Urban Developer, "How Much Does It Cost to Develop Purpose-Built Student Accommodation in Australia?")

3. Competition and Market Saturation

The PBSA market can be highly competitive, with a few established players often dominating the landscape. Market saturation and the presence of major providers can pose challenges for new entrants.

• In the UK, the top 10 PBSA providers collectively own over 70% of the market share, limiting market opportunities for newcomers to establish a significant presence. (Source: Property Week, "Top 50 UK PBSA Providers by Beds Owned 2020")
• In the US, the student housing market is predominantly controlled by a handful of major players, who collectively manage a substantial portion of the available beds, making it harder for smaller entrants to gain traction.
• In Canada, the student housing market size has experienced a surge of interest from institutional investors, resulting in heightened competition and making it challenging for new entrants to acquire prime properties.

Conclusion

In a world where innovation and progress are constant, Purpose-built student accommodation stands as a testament to the evolution of student housing. As Unite Group's legacy collides with the entry of dynamic new providers like PMG, the PBSA landscape is evolving to cater to a generation that seeks more than just accommodation – it seeks a transformative living experience. The economic, social, and sustainability-driven benefits of the student housing asset class underscore its potential to shape the future of education, community-building, and environmental responsibility. In embracing PBSA, students embark on a journey that prepares them not only for academic success but also for a future as responsible global citizens. List your property with amber and expand your PBSA portfolio through international students from major source countries.