London, July 4, 2024 – BNP Paribas Real Estate's analysis of preliminary data reveals a remarkable surge in investment within the UK purpose-built student accommodation (PBSA) sector during the first half of this year. The sector has attracted a total investment of £1.7 billion, reflecting its robust performance and attractiveness to investors.

Quarterly Breakdown

  1. Q2 2024: The second quarter alone recorded an impressive £1.3 billion in investment, marking a staggering 256% year-on-year increase compared to Q2 2023 (£358 million).
  2. H1 2024: The cumulative investment for the first half of 2024 stands at £1.7 billion, reflecting a substantial 245% surge from H1 2023 (£493 million).

Why Student Accommodation Shines
Rebecca Shafran, Alternative Markets Research at BNP Paribas Real Estate, emphasises that student accommodation is currently the darling of the alternatives sector. Here's why:

  1. Long-Income Play: PBSA offers a long-term income stream, making it an attractive investment choice.
  2. Operational Performance: The sector demonstrates strong operational performance, appealing to investors.
  3. Robust Track Record: Investors value the proven track record of student accommodation assets.
  4. Supply Shortfalls: Key university cities face shortages in available stock, creating opportunities for investors.
  5. Attractive Pricing: Favourable pricing conditions make PBSA an appealing investment avenue.

Market Resilience
Despite a decline in student applicants, the UK student market maintains significant headroom. Applications consistently exceed university capacity over the past nine years, indicating that falling applications do not necessarily impact student enrollment. This resilience bodes well for the sector's continued strength.

Capital Influx and Targeting Strategies
Andrew Screen, Head of Residential Capital Markets at BNP Paribas Real Estate, highlights the influx of capital into the UK living sector, with student accommodation as the primary focus. Key points include:

  1. Increased Funding Allocations: Investor funding allocations for PBSA have surged by approximately £5 billion in the last six months.
  2. Preferred Investment Types: Demand is high for Build-to-Core and Value Add strategies.
  3. Target Locations: London, prime regional cities, Russell Group universities, and STEM-focused institutions attract significant interest.
  4. Refurbishment Opportunities: Investors seek 1st Gen refurbishment projects.
  5. Anticipated Transactions: Core portfolio transactions are expected to commence later this year.
  6. Large-Scale Ventures: Investors with allocations exceeding £250 million explore multiple-development joint ventures.

Lindsey Lock, Senior Director at BNP Paribas Real Estate commented in the company’s official press release, “The second half of this year should bring clarity on occupancy, and with the general election, improved political stability. In the meantime, investors are waiting in the wings as we approach the start of a new academic year to sustain their confidence in the sector.

“With a flow of transactions coming through, we should see an increase in the volume of secured lending valuation required by funders and lenders. We are fully geared up to support our clients on transactions which will inform debt finance decisions.”

BNP Paribas Real Estate remains committed to supporting clients throughout these dynamic market shifts.