"Assets in Russell Group cities – or portfolios offering genuine value-add opportunities through cap-ex programmes – remain the first choice for investors. Yet an attractive 10-year Gilt environment and share price declines among publicly listed sector participants have put returns into perspective for investors"
- Katie O'Neil - Knight Frank
Investment in UK purpose-built student accommodation (PBSA) reached £4.3 billion in 2025, marking a 10% increase year on year, according to the latest Student Market Update from Knight Frank. Investors allocated nearly £880 million in the final quarter alone, slightly below the long-term 10-year average of £4.5 billion.
Over the year, 79 deals completed, a 20% rise on 2024. Single-asset operational stock represented the largest share of activity, consistent with long-term trends, while portfolio-level transactions and launches returned to the market. Thirteen portfolios traded, including five transactions exceeding £200 million, reflecting strong investor appetite for scale.
Developers added 19,600 new PBSA beds across 64 schemes, up 20% from 2024, though still below the five-year pre-pandemic annual average of around 25,000 beds. London led delivery with 4,350 beds, followed by Nottingham with 2,550 and Leeds with 1,900. A further 50,250 beds are under construction across the UK.
Student demand also remained strong. By the January UCAS deadline, UK universities received 619,360 applications for the 2026/27 academic year, a 3% increase on last year. UK students accounted for 494,540 applications (+3% YoY), while international applications rose to 124,830 (+5% YoY).
The data points to a clear flight to quality, with 43% of undergraduate applications going to higher-tariff universities, compared with 39% in 2019. Applications increased 6% to higher-tariff institutions, rose 1% to middle-tariff universities, and fell 1% to lower-tariff providers.
Merelina Sykes, joint head of student property at Knight Frank, said, “The PBSA sector continues to be an attractive asset class, and investment volumes in 2025 were supported by the return of portfolio-level transactions, with core-plus and value-add investors increasingly focused on scale. But with operational opportunities finite, investors have explored alternative deployment routes, with a record number of funding deals and joint ventures taking place."
“The development landscape remains challenging with delays at the Building Safety Regulator due to Gateway 2, alongside planning and viability constraints, though there are signs these roadblocks are slowly easing.”
Katie O’Neill, associate in global living sectors research at Knight Frank, added, “While the sector continues to attract significant capital and benefit from strong underlying demand, the investment environment remains far from straightforward. Headline activity masks a market where deal timelines have prolonged due to pricing misalignments between vendors and purchasers, alongside challenging leasing conditions in some locations.
“Assets in Russell Group cities – or portfolios offering genuine value-add opportunities through cap-ex programmes – remain the first choice for investors. Yet an attractive 10-year Gilt environment and share price declines among publicly listed sector participants have put returns into perspective for investors.”
Lisa Attenborough, head of Knight Frank Capital Advisory at Knight Frank, noted, “Lender appetite remains strong across both development and investment PBSA deals, with margins for operational assets currently around 160 bps. The living sectors continue to attract deep pools of capital, and that competition is translating into highly attractive pricing for borrowers.
“With debt supply at its highest level in more than a decade, now is a good time to borrow. Looking ahead, we expect margins to continue tightening on best-in-class opportunities through 2026. In addition, back-leverage structures could be one to watch – with the cost of capital for debt funds falling, we anticipate the gap between bank and non-bank lenders to narrow even further.”
