The delivery of new purpose built student accommodation (PBSA) slowed 28% year-on-year in Q2 2023, according to the latest data from Knight Frank.
The company estimates fewer than 15,000 new PBSA beds will now be added to supply in the 2023/24 academic year – well below the five-year average of 24,000 beds added per annum pre-pandemic – with just 50 new developments set to complete during the academic year.
Investment activity in Q2 rebounded thanks to sustained investor interest, with £1.1bn worth of deals transacting compared with £135m in Q1.
Neil Armstrong, joint head of student property at Knight Frank, said: “This impressive surge in investment marks a significant recovery from a subdued first quarter, highlighting the resilience and potential of the sector despite the wider global economic uncertainties.
“The PBSA sector continues to be a promising investment opportunity, with robust demand driven by rising student numbers. As investors navigate the current market conditions, the sector’s potential for growth and stability remains evident.”
Katie O’Neill, head of student property research at Knight Frank, said: “Clearly, supply will need to increase to accommodate the rising demand and projected growth. There is a strong appetite for PBSA, and I only expect it to continue with UCAS forecasting that there could be up to a million new undergraduate applications in a single year by 2030, up from 760,000 currently.
“Of course, the operational market remains challenging with rising costs being an on-going issue, but we are now seeing investors placing a strong emphasis on asset quality and being strategic with location in university towns and cities.”
