Investment into the UK purpose-built student accommodation (PBSA) sector soared to £1.7bn in H1 2024 – a 245% increase on the £493m recorded in H1 2023, according to the latest data from BNP Paribas Real Estate.
The bulk of investment activity took place in Q2 2024, with £1.3bn of deals recorded – a 256% increase on the £358m recorded in Q2 2023.
Rebecca Shafran, director, alternative markets research at BNP Paribas Real Estate, said: “Student accommodation really is the darling of the alternatives sector at the moment and is set to outweigh other living asset classes over the next 12 months. It offers a long-income play with strong operational performance and a track record which investors in the beds sector really value. We’re seeing shortfalls in stock across some key university cities alongside attractive pricing which can be tapped into.
“Recent analysis has shown that despite falling applicants, the level of headroom in the UK student market is wide with applications exceeding university capacity consistently over the past nine years, suggesting applications can fall without impacting student numbers. This is a positive signal for the continued strength of the market.”
Andrew Screen, head of residential capital markets at BNP Paribas Real Estate, added: “There’s an unprecedented amount of capital targeting the UK living sector at the moment and student is the primary target. Investor funding allocations for PBSA have increased by circa £5bn in the last six months, with high demand for build-to-core and value add, mainly targeting London, prime regional cities, Russell Group and STEM university locations.
“We have also seen an increase in demand for first gen refurbishment opportunities and expect to see core portfolio transactions commencing towards the end of the year. Investors with allocations over £250m are focussed on multiple-development, programmatic joint ventures or larger development opportunities.
Lindsey Lock, student accommodation valuations at BNP Paribas Real Estate, said: “The second half of this year should bring clarity on occupancy, and with the general election, improved political stability. In the meantime, investors are waiting in the wings as we approach the start of a new academic year to sustain their confidence in the sector.
“With a flow of transactions coming through, we should see an increase in the volume of secured lending valuation required by funders and lenders. We are fully geared up to support our clients on transactions which will inform debt finance decisions.