Knight Frank report that investment in UK’s purpose-built student accommodation (PBSA) sector has increased to £2.45 billion in the first half of 2024.

This marks a substantial rise from the £1.1 billion invested during the same timeframe in 2023.

The UK Student Housing Market Update, from Knight Frank, highlights a particularly strong second quarter in 2024, with investments totalling £1.7 billion. A major contributor to this surge was Mapletree’s acquisition of the Cuscaden Peak Portfolio, which comprises 31 PBSA properties across the UK and Germany, with UK assets valued at around £960 million.

The trend of regional assets attracting the majority of investments continues, as has been the case in recent years. Since 2019, an average of £2.1 billion has been invested annually in regional assets, compared to £570 million in assets located in London. Knight Frank attributes the lower investment volume in London to limited availability rather than reduced demand.

Merelina Sykes, Joint Head of Student Property at Knight Frank, remarked on the sector’s performance: “The strong investment in the first half of 2024 underscores the resilience and appeal of the UK student accommodation sector. Despite economic challenges and market caution ahead of the elections, investors see the long-term value in student housing, especially in a market where demand consistently outpaces supply.”

The pipeline for student accommodation now includes around 160,000 beds across the country, with 22% currently under construction and another 49% having received full planning approval. However, despite the uptick in investment, the development pipeline remains limited.

For the 2024/25 academic year, fewer than 17,500 new PBSA beds are expected to be delivered, representing just a 0.6% increase over the previous year. This growth rate is significantly below pre-pandemic levels, highlighting the ongoing mismatch between supply and demand in the sector.

Katie O’Neil, Head of Student Property Research at Knight Frank, commented, “With high demand for student housing in several locations and supply struggling to keep up, rental growth in the sector has remained robust, averaging 7.6% across the UK in 2024.”

The report also notes that 65% of the current PBSA stock in the UK was built before 2012, presenting both challenges and opportunities for investors. While there is an increasing focus on high-quality assets with strong environmental, social, and governance (ESG) credentials, there are also significant opportunities to enhance value through the retrofitting of older properties, especially in areas where supply-demand imbalances are most pronounced.