Investors are piling into UK student accommodation like never before, with a record-breaking £2.45 billion pumped in during the first half of 2024. This is double the amount invested in the same period last year!

So, what’s driving this frenzy? Let’s break it down.

A Student Housing Gold Rush

The first half of 2024 saw a massive £2.45 billion invested in purpose-built student accommodation (PBSA). This is a huge leap from the £1.1 billion invested in the same period last year.

The second quarter alone saw over £1.7 billion poured into the sector, making it the strongest quarter since 2022. A single deal, Mapletree’s acquisition of the Cuscaden Peak Portfolio, worth around £960 million, heavily influenced this rise.

Regional Dominance

Investment in regional PBSA continues to outpace London. Since 2019, an average of £2.1 billion has been invested annually in regional properties, compared to just £570 million for London properties.

Why? Well, London’s PBSA market is facing a lack of available properties, not a lack of demand. This is a classic supply and demand situation – with more people wanting to live in London, but less places to live, prices are likely to go up.

Building a Bed-Space Empire – A Tight Market

Despite this strong investment, the pipeline of new PBSA development is actually pretty thin. This year, only 17,500 new student beds are expected to be added. That’s a tiny increase of just 0.6% compared to last year, far less than the pre-pandemic average.

Across the UK, there are around 160,000 student beds in the pipeline, with 22% currently under construction. Another 49% have planning permission, meaning they could be built soon.

The Future is Bright (But Overcrowded)

The experts at Knight Frank are bullish about the future of PBSA. They say investors are drawn to the sector’s “compelling long-term value proposition”, especially with demand continuing to outstrip supply.

Rental growth is also strong, averaging 7.6% across the UK in 2024. With more students than ever looking for places to live, and fewer beds being built, it’s no wonder rental prices are rising.

Is There Still Room for You?

This boom presents both challenges and opportunities for investors.

There’s a “flight to quality” happening with investors seeking out top-tier PBSA properties with strong environmental credentials. This makes the market more competitive, but also creates an opportunity for savvy investors.

Those who are willing to invest in upgrading older PBSA properties, particularly in areas where demand is highest, could see big returns.

Government Backing

The government is also providing support for the PBSA sector, which is a good sign for investors. They have acknowledged the sector’s financial challenges and have committed to maintaining current visa structures.

So, what’s the bottom line? The UK student accommodation sector is in a growth phase, with demand outpacing supply. For investors with an eye for opportunity, there’s potential for significant returns, but competition will be fierce.