Lucy Waters is managing director of specialist finance dealer Aria Finance
In a property market dogged by uncertainty, one asset class continues to defy the gloom: purpose-built scholar lodging (PBSA).
At the same time as different components of the market wrestle with excessive finance prices and lowered investor urge for food, demand for PBSA stays remarkably robust.
It’s not exhausting to see why.
With a reliable tenant base, structural undersupply and a confirmed skill to generate enticing returns, PBSA has all of the hallmarks of a long-term, all-weather funding.
In line with property agent Knight Frank, buyers pumped £3.9bn [1] into UK PBSA in 2024.
Whereas that’s down from the record-breaking £7.2bn [2] seen in 2022 – when rates of interest had been a lot decrease – final yr’s determine was 14% uplift on the £3.4bn [3] reported in 2023.
What’s extra, in 2023, Knight Frank predicted that the PBSA market can be price an astonishing £104bn [4] by 2028, up from £85.8bn in 2023.
In brief, even in a tougher financial atmosphere, PBSA continues to draw institutional, non-public and worldwide capital.
Stable fundamentals
The enduring attraction of PBSA lies in its fundamentals. The identical Knight Frank knowledge exhibits that returns delivered by PBSA have vastly outperformed retail and workplace house over the previous decade.
Demand for lodging persistently outpaces provide, and the continuing shift in direction of high-quality, professionally managed housing means PBSA is more and more seen because the gold commonplace in scholar residing. For a rising variety of college students – particularly these from abroad [5] – it’s the popular possibility.
Regardless of rising prices and tighter regulation, occupancy ranges stay excessive – 96%[6] final yr, in line with scholar lodging analysis agency Bonard – which means buyers take pleasure in predictable demand.
On high of that, rents in key college cities grew at double-digit charges [7] final yr – one other key attraction to potential buyers.
There are headwinds – however they’re manageable
That’s to not say the market is with out its challenges. Improvement prices stay excessive, with development supplies, labour and borrowing all dearer than they had been pre-pandemic[8] – and even simply a few years in the past, for that matter. This implies buyers are having to be extra selective about the place they make investments.
There’s additionally a rising regulatory burden. The Constructing Security Act has compelled builders to rethink how they design, construct and function PBSA[9] . Gateway 2, launched below the Constructing Security Act, requires builders of higher-risk buildings like taller PBSA schemes to acquire full design approval from the Constructing Security Regulator earlier than development can start [PT10] – including time, price, and complexity to tasks, and doubtlessly delaying supply except deliberate for early.
Affordability pressures are additionally changing into extra acute, particularly in regional cities the place lease development could also be bumping up towards scholar budgets[PT11] . And whereas worldwide scholar numbers have remained sturdy[PT12] , Authorities strikes to tighten visa guidelines [PT13] have launched a level of uncertainty over future development.
But for well-managed inventory in prime areas, the outlook stays sturdy. Occupancy stays at or close to capability in lots of schemes, and investor sentiment – whereas extra selective – remains to be optimistic.
A structurally supported long-term outlook
Regardless of the near-term pressures, the long-term image for PBSA stays extremely enticing. There are three core causes for this.
Firstly, whereas general scholar numbers dipped by 1% in 2024 [PT14] – largely because of adjustments in visa coverage – the scholar inhabitants remains to be a lot greater than pre-COVID ranges. Worldwide and postgraduate college students, who’re extra doubtless to decide on PBSA, proceed to type a rising share of complete demand.
Secondly, universities have restricted skill to develop their very own lodging, which means the non-public sector will proceed to play a essential function in housing college students. In lots of instances, PBSA is not an non-obligatory luxurious – it’s a core a part of the upper training infrastructure.
Lastly, at present’s college students and their mother and father anticipate extra. From high-speed broadband and safe entry methods to devoted examine areas and wellbeing help, PBSA delivers a lifestyle that conventional HMOs usually can not match. That offers it a aggressive edge and helps long-term rental development.
Accessing finance: challenges and alternatives
If there’s one space the place PBSA buyers and builders are feeling the squeeze most acutely, it’s finance.
Financing a PBSA deal is much from simple. It requires deep data of the lending panorama, clear positioning of the scheme and the flexibility to match operational efficiency metrics – comparable to occupancy ranges, rental uplift, and tenancy combine – with lenders’ urge for food for danger.
That’s why you want dealer – one which gained’t simply discover you a lender however will even show you how to form your funding technique.
That’s significantly vital within the present atmosphere, the place many banks stay cautious and solely a handful of lenders are prepared to again the sector confidently. For the correct property and with the correct strategy, offers can nonetheless be accomplished – however experience issues greater than ever.
Resilience and reward
In a market the place many asset lessons are below stress, PBSA has confirmed itself to be some of the resilient performers. Its earnings profile is robust, its void danger is low and its tenant base – whereas transient – renews every year in predictable, excessive volumes.
Whereas headwinds stay, they aren’t distinctive to PBSA. What units this sector aside is its skill to ship long-term rental development and comparatively steady yields, even in unsure instances.
For buyers, that makes it a compelling alternative. However success is dependent upon understanding the nuances and on having the correct companions in place.
Supply:
https://www.knightfrank.com/analysis/article/2025-02-12-pbsa-investment-hits-ps39bn
Supply:
https://content material.knightfrank.com/analysis/169/paperwork/en/uk-student-housing-2023-9846.pdf
Supply:
https://www.knightfrank.co.uk/analysis/article/2025/2/pbsa-investment-hits-ps39bn
Supply:
https://pbsanews.co.uk/2023/11/21/value-of-pbsa-sector-to-grow-to-104bn-by-2028-knight-frank-finds/#:~:textual content=Analysispercent20bypercent20Knightpercent20Frankpercent20haspercent20foundpercent20that,thepercent20UKpercent20stoodpercent20atpercent20percentC2percentA385.8bnpercent20thispercent20year.
Supply:
https://www.savills.com/research_articles/255800/305399-0#:~:textual content=Preferencepercent20forpercent20purposepercent2Dbuilt,inpercent20PBSApercent20vspercent20domesticpercent20students
Supply:
https://studytravel.community/journal/information/0/31188#:~:textual content=Occupancy:%20Thepercent20averagepercent20occupancypercent20rate,topercent20accesspercent20thepercent20fullpercent20report.
Supply:
https://studytravel.community/journal/information/0/31188#:~:textual content=Occupancy:%20Thepercent20averagepercent20occupancypercent20rate,topercent20accesspercent20thepercent20fullpercent20report.
Supply:
https://www.jll.com/en-uk/insights/uk-construction-perspective-2025#:~:textual content=Constructionpercent20materialspercent20havepercent20beenpercent20more,pushedpercent20uppercent20contractorpercent20labourpercent20costs.
Supply:
https://www.forsters.co.uk/news-and-views/pbsa-and-the-building-safety-act
[PT10]Supply:
https://www.gov.uk/authorities/publications/building-safety-bill-factsheets/building-control-regime-for-higher-risk-buildings-gateways-2-and-3-factsheet#:~:textual content=Gatewaypercent20twopercent20willpercent20bepercent20apercent20stop/gopercent20point,thepercent20Buildingpercent20Safetypercent20Regulatorpercent20beforepercent20relevantpercent20building
[PT11]Supply:
https://www.theguardian.com/training/2023/sep/27/uk-university-students-facing-unprecedented-rent-rises#:~:textual content=Manypercent20studentspercent20arepercent20strugglingpercent20topercent20findpercent20affordable,aspercent20muchpercent20aspercent2027percent25percent20inpercent20onepercent20case.
[PT12]Supply:
https://commonslibrary.parliament.uk/research-briefings/cbp-7976/
[PT13]Supply:
https://www.gov.uk/authorities/information/tough-government-action-on-student-visas-comes-into-effect
[PT14]Supply:
https://www.hesa.ac.uk/information/20-03-2025/he-student-statistics-2324-released#:~:textual content=Totalpercent20higherpercent20educationpercent20studentpercent20numbers,thepercent20firstpercent20timepercent20sincepercent202014.&textual content=Accreditedpercent20officialpercent20statisticspercent20releasedpercent20by,thepercent202023/24percent20academicpercent20year.
