Top 8 PBSA Student Housing Practices for Success in BTR

The global student housing market has evolved over time with higher investments and increased rental yield opportunities in the real estate industry. With various sectors competing to provide quality accommodation to the primary target audience, the industry has also witnessed maturity and growth over the past few years as the number of higher education (HE) enrollments has skyrocketed.

Purpose-Built Student Accommodation vs. Build to Rent

With various sectors competing to provide quality accommodation to the primary target audience, the industry has also witnessed maturity and growth over the past few years as the number of higher education (HE) enrollments has skyrocketed. With market analysis from Amber’s Student Housing Partners Report 2023, the number of students enrolled in higher education is expected to reach one billion by 2030.

Purpose-built student accommodation (PBSA) has been a lucrative sector for the market owing to its specifically-built housing options for university applicants. According to Amber’s Global Student Housing Report 2023, the global PBSA market valuation currently stands at US$ 138.3159 billion, with the United States at $65 billion, the United Kingdom at $73 billion and Australia at $315.9 million.

‍

Another heavily invested and upcoming sector in this market is the build-to-rent industry. BTR sector developments are privately-owned, high-amenitized community that caters to various tenant groups including students and young professionals. Knight Frank has highlighted that the BTR market sector in the UK has reached a staggering valuation of £56 billion in 2023, up from £35 billion in 2019 which denotes a significant 60% increase in the past 3 years. Not just that, according to Property Investor Today, the BTR pipeline is forecasted to double in size by 2028, reaching an 82% increase to a £102 billion valuation.

Global Student Housing Players Shaping Build to Rent

The question remains: “How is investing in build to rent beneficial for student housing developers?” Multifamily developers and single-family builders have their own restrictions in expanding to BTR due to construction or rental development challenges. However, in recent years, many big players in the student accommodation market have entered this lucrative market to cater to an ever-growing student population in the HE sector. Here are a few prime examples of project expansions and acquisitions:

• Harrison Street, a leading global investment management firm, began its expansion in cottage-style student housing in 2007 to acquire more than 27 new build to rent properties for the expansion of student accommodation communities with a portfolio of 19,000 beds (Source: Student Housing Business).
• PeakMade Real Estate, an Atlanta-based developer has concluded the production of nearly 18,000 beds, including cottage-style units for the student demographic as an expansion in the build-to-rent (BTR) category (Source: Student Housing Business)
• Unite Students, a leading global student housing player, recently acquired its pilot purpose-built BTR property with 178 units in Stratford for £71M, further expanding its portfolio to approximately 3,700 beds (Source: Unite).

As the demand for student accommodation has remained high due to the increasing number of post-secondary education in various hotspots around the world, it is expected that several managers and developers are actively looking to invest in this lucrative market for portfolio expansions and higher rental yields.

Top 8 PBSA Real Estate Success Strategies for Build-to-Rent Projects in Student Housing:

The top PBSA success strategies offer a blueprint for future BTR (Build-to-Rent) projects, emphasizing the importance of increasing overall supply, community building, flexible lease tenures, financial backing, useful amenities, stabilized occupancy rates, and tech integration. Adapting PBSA advantages positions BTR as a lucrative market, ensuring enhanced living conditions and holistic well-being for the primary demographic.

The BTR market sector has shown great promise with its modernized schemes in the renting sector, merging the judicious mix of both luxury living and community building. If PBSAs adapt to the BTR model, it can possibly provide an influx of students with better living conditions and add to their overall well-being. On the other hand, there are several advantages of PBSAs that can help streamline the operations of new build properties to rent in the BTR sector. Let’s take a closer look at these factors:

1. Social Community Building

The PBSA (purpose built student accommodation) sector was initially a lone wolf in the student accommodation market, offering them the basic amenities required while living away from home. However, with time, the market has evolved to provide the student population with an overall living experience through community building - a lesson learned from the build to rent market sector in the past years. However, creating safe spaces and a student-friendly environment for students is the key for BTR property management to attracting the international student population to the BTR sector.

2. Short-Term Lease Tenures

Students enrolled in higher education institutes actively seek accommodation options that align with their academic calendars, providing more stability to their housing, especially amidst a housing crunch. Students prefer booking with a lease agreement for either one term or a maximum of a year. The PBSA sector offers one-term leases at higher prices to ensure the stability of property occupancy rates.

On the other hand, BTRs mostly have tenants who are either employed or staying with their families, hence preferring longer lease terms. The BTR sector will need to adapt according to the preferences of the student population tenant group by tapping with shorter tenancy leases.

3. Debt & Equity Backing

Although the BTR sector is a newer segment, especially for the student accommodation industry, even then the market already has a valuation of more than £56 billion. Due to the growth prospects of this sector, money center banks, debt funds, and equity capital are currently available for financing aspect.

University-affiliated PBSAs are funded in-house but private PBSAs seek funding from partnerships, joint ventures, family wealth offices, challenger banks, etc. However, due to limited rental growth, it becomes tough to seek funding from private investors.

4. High-End Amenities

The BTR market as a whole caters to heterogeneous types of audiences, hence potentially widening the scope of high-end amenities like that of PBSAs. These could include concierge staff, parcel services, fitness centers, swimming pools, coworking spaces, pet-friendly facilities, soundproof rooms for music students, or even well-lit studio spaces for design and art students. As PBSAs continue to provide necessary amenities, the BTR sector can apply this strategy to cater to the student demographic.

5. High Yield, Lower Risk

PBSA has always remained stable and dependable in terms of providing accommodation to students. However, with lowering construction projects and approval delays, the sector is currently facing enormous economic challenges. Moreover, the sector is a fast-growing segment through consistent investments from real estate investment trusts (REITs) and private equity firms. As a result, PBSA adapting to the BTR model can possibly signify lower management risks and higher potential yields.

6. Stability of Occupancy Rates

The BTR sector is expected to provide more affordable and improved student accommodation options, possibly stabilizing occupancy rates in the coming years. With a huge demand to seek improved accommodation, modern renovations can emerge as an important factor in attracting more students to purpose-built student accommodation, if the BTR sector works in unison with the highly reliable PBSA real estate sector.

7. Tech Involvement

PBSAs have matured and streamlined their operations over the years by utilizing technology through automated systems and digital integration. They assist in providing more cost-effective solutions, cater to data protection, and preserve time. The build to rent market category can learn from the PBSA sector to increase managerial efficiency that caters to students more closely including remote check-ins, app-based rent payment portals, and online rent agreements.

Moreover, technology usage is beneficial for student residents, such as apps for daily living, swipe-in cards for added security access, laundry facilities, grocery items, bill payments, and social updates. In PBSAs, these features help to attract more applicants to these properties, hence making it a good learning lesson for the expanding BTR sector.

8. Inclusive Utility Bills

PBSAs are known to offer inclusive utility bills to students which include the bills for various utilities like electricity, water, high-speed internet connection, maintenance, furniture, heating/cooling, and more in the rent itself. This helps to provide a hassle-free living experience to the audience, a lesson BTR can learn from the PBSA sector to cater to this demographic.

With the student housing crisis looming ever since in the market, innovative solutions and alternative methods of accommodating students need to be considered. Repurposing different types of assets into the PBSAs & build to rent sector has the potential to create a larger supply of rental units, ultimately assisting in alleviating the housing shortage.

Can PBSA & BTR Sector Together Solve the Student Housing Crisis?

The evolving landscape of the student accommodation market exhibits a promising trajectory, with the maturation of both PBSA and BTR (build to rent) market sectors. As higher education enrollments surge, BTR can adapt to PBSA strategies for expansion and growth prospects. With notable players investing in build-to-rent market expansions to meet the escalating demand, PBSAs, and BTRs can together potentially assist in alleviating the student housing crisis. Read more about the PBSA& BTR sectors’ successful student housing synergy here.

Amber, a global student housing solutions provider is constantly working alongside reputed universities, PBSA players, HMOs, build to rent developers& partners worldwide. Connect with our experts, and explore the potential of your portfolio for revenue growth with us!

‍