0:01 AM, 4th August 2025, About 6 months ago
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The UK’s purpose-built student accommodation (PBSA) market experienced a robust second quarter with £830 million of investment, Knight Frank reports.
This surge contributes to a first-half total of £1.6 billion, surpassing the long-term average of £1.1 billion and signalling a strong start to the year.
Despite challenges such as regulatory delays, post-pandemic recovery and high construction costs, investor confidence remains high.
However, investor focus has shifted towards operational PBSA stock, particularly in prime locations like Russell Group cities, where strong academic reputations drive demand.
Other locations are facing issues with a delayed leasing cycle, but top-tier assets continue to draw competitive interest.
The firm’s senior research analyst for student property, Alistair Walters, said: “Latest June deadline data from UCAS points to a healthy intake of undergraduate students for the 2025/26 academic year (+1.3% applicant growth).
“Green shoots for the market in growth of international applicants (+2.2%), driven by Chinese applicants (+9.8%), but with less than 60,000 beds presently under construction across the UK, the misalignment between demand and supply remains the crux of the market.”
Merelina Sykes, the joint head of student property, added: “Despite the healthy turnover achieved in Q2, the market has not been without its challenges.
“Significant delays at the Building Safety Regulator as a result of Gateway 2, planning challenges and high build costs are all having an impact on land sales and forward fundings.
“Appetite from investors has shifted to standing stock as a first preference.”
She continued: “For these deals, fire safety is elongating deal times, while a later leasing cycle this year is contributing to a more cautious market particularly for stock in secondary locations.
“Prime assets in Russell Group cities, or assets and portfolios where investors can see a genuine value add opportunity, continue to attract high levels of interest and strong bidding activity.”
Knight Frank says that the second half of 2025 is expected to outpace the first half, with schemes and portfolios valued at £2 billion currently on the market or under offer.
This, the firm says, reflects strong market momentum which is helped by easing financial conditions are supporting this growth.
The prediction of two more Bank of England interest rate cuts this year will help attract both domestic and international investors.
However, PBSA supply constraints pose a big challenge.
Only 1,600 new student beds have been added in 2025 so far, with 17,802 more projected for the 2025/26 academic cycle.
London, Nottingham and Leeds are set to see the largest increases, yet demand continues to outstrip availability, driven by rising student numbers.
The report highlights a 1.3% increase in UK university applications and notable growth in international applications, particularly from China (10%), the US (13%) and Turkey (23%).
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