Why PBSAs have become the hottest new investment

 

PBSA – or to the average person not in the property or student sector: Purpose-Built Student Accommodation Sector.

With the UK home to some of the best universities in the world, the potential for investment in the sector has grown with student accommodation becoming a mainstream asset class – and a reliable one at that. With education’s resilience to global economic forces, it’s also considered a relatively recession-proof one.

So why invest in student accommodation?

It’s no secret that student numbers are growing and growing – and expected to continue to grow. Following the removal of the cap on student numbers in 2015, the big business of student accommodation started to emerge. In the last five years, global student housing investment volumes have risen 87% (Savills) and according to the British Council, “the pool of global ‘travelling students’ is predicted to double to eight million by 2025.” While in one recent UCAS report, 30% of full-time first year students live in private purpose-built student accommodation (PBSA), up from 22% five years ago.

With no sign on the horizon of depleting student numbers, largely in part to a healthy international student intake, it’s predicted that the demand for student accommodation will increase. And with the government committed to increasing student numbers – UK wants to increase international student numbers by 30% in the next 10 years – there are several factors in place driving market momentum.

Over the last decade, student expectations have also changed to a more luxurious style of living. Universities already struggling to fund themselves simply cannot compete with the high-end, decked out developments that today’s students are looking for. Nor provide the sheer number of rental accommodation that students need – generally speaking, demand far outstrips supply.

What attracts overseas investors to PBSAs in the UK?

With the UK’s higher education reputation worldwide – 18 UK universities are within the world’s top 100 – the UK is prime location for those interested in the PBSA market. Performing well in student surveys all adds to the UK’s credibility as a study destination and investment viability – 91% of international students satisfied with UK university experience taking the top spot in survey with USA, Canada, Australia, Germany, and the Netherlands.

What to consider when investing in PBSA’s?

Location is key when it comes to investing in PBSAs. Big cities like London, Manchester and Liverpool naturally draw students with both their academic reputations, and their famous, iconic city statuses. However, over-saturation is something to bear in mind. With the PBSA investment picking up pace, it’s clear that in some cities there are plenty of PBSAs already on the market and occupancy student rate is beginning to stagnate. Of course, the rental income and therefore occupancy is key to a safe PBSA investment. Choosing to invest in PBSAs in cities with reputable universities where there isn’t already an excess of supply, along with a wider infrastructure in place such as good transport links, tends to make the best investment.

What’s the advantage of investing in PBSAs over HMOs

PBSAs tend to be a more lucrative investment, offer great returns over a long-term period. HMOS (houses for multiple occupancy) have historically been a mainstay for students. But in recent years with new options on the market such as PBSAs offering better living conditions, plush amenities, and simply a better service and value for money, student preferences are now shifting towards PBSAs.

But the big advantage: they’re specifically designed with students in mind. Providing an incredible student experience is key to the PBSA sector market and with student health and wellbeing never more in the limelight than now, it’s the student lifestyle, the community, and the student experience, that is shaping the industry. After all, investment success is dependent on maximising the occupancy rate of the PBSA, and ensuring long-term success through recommendations.

The future of PBSA investment

The future for PBSA investment is looking bright. But as with any investment, there comes risk. For every 100th successful PBSA story, there’s the inevitable cloud hanging over the sector where due diligence, proper risk assessments, student needs and trends and the rapid evolution of the market haven’t been taken into account. Our advice? Know your investment provider, do your own research and get in touch with experts in the field to fully understand the market. This maturing and stable investment looks like a valuable addition to the asset class portfolio.