"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"
- Merelina Sykes - Knight Frank
Investment in the UK purpose-built student accommodation (PBSA) sector hit approximately £830 million in the second quarter of 2025, according to new research from global property consultancy Knight Frank. This brings the total for the first half of the year to around £1.6 billion, exceeding the long-term average of £1.1 billion and indicating a strong start to the year.
Looking ahead, the second half of 2025 is expected to outperform the first, with around £2 billion in student housing schemes and portfolios currently either on the market or under offer.
More than 1,600 student beds have been delivered so far in 2025, with a further 17,802 expected by the start of the 2025/26 academic year. The largest increases in supply are projected in London, Nottingham and Leeds.
“Latest June deadline data from UCAS points to a healthy intake of undergraduate students for the 2025/26 academic year,” said Alistair Walters, senior research analyst for student property at Knight Frank. “Green shoots for the market in growth of international applicants, driven by Chinese applicants, 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.”
Despite positive turnover, ongoing challenges are affecting new development activity. These include delays at the Building Safety Regulator due to Gateway 2, planning hurdles and continued high construction costs, all of which are limiting land sales and forward funding deals.
“Despite the healthy turnover achieved in Q2, the market has not been without its challenges,” explained Merelina Sykes, joint head of student property at Knight Frank. “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 funding."
"Appetite from investors has shifted to standing stock as a first preference. 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.”
Interest in operational assets remains robust, especially in core university markets, but current market conditions are adding caution around development risk.
“While the outlook remains far from certain given recent weaker economic data, further falls in the cost of debt have the potential to shift the investment and funding landscape,” commented Lisa Attenborough, head of debt advisory at Knight Frank. “Financial markets are pricing in two further rate cuts in H2 2025, which will ensure that the all-in cost of debt for both operational assets and development finance becomes more competitive.”
