UK PBSA Real Estate Surges 5X In 2024 Q1: Knight Frank Report

Key Points

1. Investment in the UK's PBSA real estate market increased five-fold in Q1 of 2024, reaching £750m.

2. Despite the increase, transaction volumes were still lower in 2021 and 2022 compared to previous years.

3. Yields from PBSAs have been more resilient than other traditional real estate sectors, and the market is expected to grow, with London alone having 26,000 student beds in the pipeline.

According to the latest figures by Knight Frank, the investment in the UK’s PBSA real estate market has grown five-fold in Q1 of 2024. The recent report by the property consultancy Knight Frank revealed that transactions worth £750m already took place in the PBSA real estate market in 2024’s quarter 1. This number is a stark rise from the £148m the PBSA market reported last year.

A total of 21 PBSA deals took place in the student accommodation market. However, despite the improvement, volumes of the deals were still down in 2021 and 2022.

Merelina Skyes, joint head of student property at Knight Frank, says,

“While total deal volumes are down compared to recent years' peaks, the sector's strong performance reflects investors' confidence in its long-term prospects.” 

Analysing the report, the recent student housing news suggests that yields generated from PBSAs have been more resilient than other traditional real estate sectors. The analysis pointed to deal structures shifting to account for the ongoing challenges in the funding market.

Knight Frank’s analysis for future developments in the PBSA real estate sector suggests that the city of London has around 26,000 student beds in the pipeline and are either under construction or with planning granted.

“With money markets betting on two interest rate cuts in 2024, any improvements on the debt environment will boost transactional activity, but the focal point this year for the PBSA market will be on politics and policy.” said Katie O’Neill, head of student property research at Knight Frank.

Other major PBSA markets include Manchester (10,500 beds), Bristol (8,700 beds), and Nottingham (7,600 beds). The growth in the student housing market remains steadfast despite some roadblocks. In January earlier this year, the UK government announced tough measures on UK student visas where international students could no longer bring family members to the country as dependants to “curb abuse of the immigration system.”

Katie added, “It is important that policymakers do not to conflate student visas with actual student numbers, with many students securing visas for multiple countries,”

“Without a greater understanding of this and the economic benefits international students bring, there is a real risk of an over-correction, which ultimately has knock-on effects for the financial health of the UK’s higher education sector.”

TL;DR

Investment in the UK's PBSA market surged to £750m in Q1 of 2024, a five-fold increase from the previous year. Despite lower transaction volumes in 2021 and 2022, the market remains resilient, with yields outperforming traditional real estate sectors. The growth is expected to continue, particularly in London, where 26,000 student beds are in the pipeline.

The PBSA market in the UK has seen a significant surge in investment in the first quarter of 2024, indicating growing confidence among investors. Despite challenges such as lower transaction volumes and recent changes in student visa regulations, the market remains robust. The resilience of PBSA yields compared to traditional real estate sectors suggests a shift in investor preferences. With substantial developments underway, particularly in London, the future looks promising for the UK's student housing market.

‍