Over the past few years, the purpose-built student accommodation (PBSA) sector in the UK has grown massively. 2020 saw record investment in the sector, at £5.77 billion. In 2021, according to Knight Frank,
“Despite the pandemic having restricted international travel and disrupted study for a large proportion of students, investor appetite for purpose-built student accommodation (PBSA) remains undimmed.”
Cumulative deal volumes in H1 2021 were 47% higher than in 2020 and 4% higher than in 2019. In short, if you don’t know about PBSA investment opportunities yet, it’s time to catch up.
What is PBSA?
Purpose-built student accommodation provides homes for those studying at UK universities. It provides accommodation as either studios with their own kitchenettes and bathrooms or clusters of private rooms that share bathroom and kitchen facilities. Developments usually offer communal facilities as well, from study rooms and lounges to pool rooms, gyms and other leisure spaces.
Is PBSA a good investment?
PBSA is popular with investors looking for regular, reliable returns. This type of accommodation is particularly favoured by international students, of whom there are currently well over 500,000 in the UK, meaning that demand is strong.
With PBSA rents rising every year (they increased by 1.6% gross in the year to September 2020), this type of accommodation is an excellent long-term asset for investors looking to build up a UK property portfolio including assets primarily valued on income.
Demand for PBSA in the UK
PBSA now accounts for 34% of total student bedspaces in the UK. Bed numbers grew by 2.6% in 2020. This high-quality style of student accommodation has changed the face of student renting dramatically over the past decade and is enjoying solid, sustained demand.
This is underpinned by the fact that the fundamentals of student demand for higher education in the UK have proven recession-proof over multiple decades.
Even the impact of the pandemic on the PBSA sector was less than that felt by other sectors, with Savills commenting in April 2021 that more stringent rent guarantee structuring was keeping yields stable.
“This yield stability reinforces how investors are attracted to PBSA for the long-term income streams it generates, demonstrating the maturity of the asset class.”
Savills Spotlight: UK Purpose-Built Student Accommodation
As with any type of property investment, demand varies from one location to the next. As such, careful research is an important part of finding the ideal UK PBSA investment.
“Extensive due diligence is a must with any type of property investment. For PBSA schemes, it’s a question not only of identifying the right city but the right area within that city. Homes should ideally be within a 10-15 minute walk of the university campus, at most.”
Dale Anderson, Managing Director, Fabrik Invest
2021 and 2022 look set to be busy years for PBSA investment, with Knight Frank pointing out that investor demand in many university cities is being driven by both rising student numbers and persistent low supply ratios. If you would like to know more, please contact the Fabrik Invest team on 020 8175 9891, enquiries@staging.fabrikpropertygroup.com or www.fabrikinvest.com.
