2025: A year for innovation in UK PBSA
Fundamentals remain strong – but the sector can’t get complacent
Words: Paddy Allen
The purpose-built student accommodation sector has always been defined by its ability to adapt, evolve, and emerge stronger from whatever challenges the market presents. The COVID pandemic of 2020/21 was seen as the biggest test the sector had faced, but maybe the economic woes of the last few years have been the real test?
The normalisation of super rental growth and the rise of student choice in many markets saw the 24/25 academic year act as a reset for many, and left owners and operators scratching their heads as to what 25/26 would have in store. I can imagine some summer holidays were probably somewhat riddled with anxiety, wondering what the outturn would be for the year ahead, as many students left choosing their accommodation to much later than we’ve seen in recent times. Initial signs are cautiously positive for many top-tier markets, but there are some that have seen real structural change in demand and will face challenges in the years to come.
Investment sentiment cautiously improving
The investment community’s confidence in UK PBSA has gained positive momentum as the year has gone on, with £1.6 billion invested in the first half of 2025 (Knight Frank) after a slow start to the year. Our industry intelligence suggests there is nearly £2 billion worth of schemes currently on the market or under offer, with further deals to be launched in the coming months, which will add to potential transactional activity.
There are two key observations I would make in the current market. Firstly, we’re still seeing fresh capital enter the market, with players like AustralianSuper, CPPIB, and CVC DIF becoming active participants in 2025. This diversification of the investor base speaks to the continued global appeal of UK student accommodation fundamentals and provides additional liquidity depth to support continued transaction activity.
Secondly, the value-add sector in UK PBSA has evolved over the last 1-2 years, with more investors looking at how they can enhance assets and income profiles, where typically only a few market players would attempt such strategies. This is somewhat of a natural evolution in the market as first-generation stock reaches the end of its economic life, but it could also be the market reacting to the weight of capital in real estate, looking for value-add returns.
This particular point is one worth making, as the market is still not at full functionality with the depth of liquidity across all costs of capital. Capital for ground-up development remains patchy, and core capital for prime assets also remains thin.
Frustratingly for many market players, this is not a reflection on the quality of their projects, assets, or abilities; it is driven by macro factors symptomatic of a higher interest environment where prime real estate returns have no premium to liquid investments, and the time factor makes development look very expensive.
On the positive side, we are certainly on the upswing, but whilst the UK economy continues to kick itself back into life, it is certainly a waiting game for the full capital spectrum to be active. As the UK’s case for economic growth strengthens, so will the property markets and PBSA. Growth starts with investment into infrastructure, and housing is a fundamental part of this.
Headwinds remain
The most significant supply-side challenge facing our sector continues to be the Building Safety Regulator’s Gateway processes, which have extended project timelines by more than 12 months on average. These delays, while essential for ensuring resident safety, have created genuine bottlenecks in delivery pipelines.
Nonetheless, the sector is adapting fast, and the reality is that well-prepared vendors now compile comprehensive compliance matrices as standard practice, including FRAEW assessments, internal fire risk assessments, compartmentation surveys, and fire door inspections. This new due diligence landscape, while adding transaction time and cost, ultimately strengthens the sector’s operational standards in the long term.
In a recent conversation with a representative of UK PLC lobbying for inward investment into the country, I explained that we have the projects available, the capital is primed, the developers have met every condition, and the workforce is there (just), but the moving goalposts in local and national government are reasons why capital isn’t being put to work.
The impending Building Safety Levy and the Renters Reform Act are two examples of hasty and ill-thought-through policy, which, whilst the overall aim is one the industry is supportive of, the practical application of these policies has a raft of unintended consequences, which add unquantifiable risk to projects. This landscape is becoming more transparent, especially with regard to the Building Safety Act, but it is all a question of time, and time costs!
Despite all that, the demand is real
The most compelling reason for optimism lies in the underlying demand dynamics. UCAS data shows undergraduate applicant growth of 1.3% for 2025-26, with international applications rising 2.2% including a notable 9.8% surge from Chinese students. The stabilisation we’re seeing in international student numbers, with main applicant study visa issuances up 27% in Q1 2025, suggests that earlier policy concerns are being superseded by the UK’s enduring educational appeal despite the continued noise from certain areas of Government.
What I believe we’ve learnt in the most recent cycle is that whilst demand is robust, it is dynamic and discerning, so as investors and operators, we can’t be complacent and must always innovate.