The UK purpose-built student accommodation market was robust in the first quarter of 2024, with a total of 21 transactions completed with a combined value of nearly £750m.
Investment was up 407% on Q1 2023, when £148m changed hands, according to Knight Frank’s latest UK Student Housing Market Update.
Transactional evidence suggests PBSA yields have been more resilient than many other real estate sectors, shifting by only 50-75 basis points from peak pricing.
Knight Frank said investors continue to view the PBSA sector favourably owing to its strong fundamentals, counter-cyclical features and the prospect of attractive risk-adjusted returns.
The firm’s quarterly report highlights that deal structures are shifting to account for the ongoing challenges in the funding market.
While funding is available for prime assets in leading university towns and cities, for others – particularly those in more secondary locations – joint venture structures are proving more favourable.
Knight Frank’s latest assessment of future PBSA product suggests London has the largest pipeline, with around 26,000 student beds either under construction or with planning granted. Other large markets include Manchester with 10,500 beds, Bristol with 8,700, and Nottingham with 7,600.
Merelina Sykes, joint head of student property at Knight Frank, said: “The UK student accommodation sector demonstrated its resilience in the first quarter, attracting significant investment despite the broader economic headwinds. While total deal volumes are down compared to recent years’ peaks, the sector’s strong performance reflects investors’ confidence in its long-term prospects.”
Katie O’Neill, head of student property research at Knight Frank said: “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.
“Heightened by the lead up to a general election, Q1 saw restrictions to the student visa route come into effect. However, 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.”
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