The Purpose-Built Student Accommodation (PBSA) sector in the UK continues to navigate a landscape defined by a striking imbalance between supply and demand. As companies strive to adapt to evolving governmental regulations, CBRE Group's recent release of their UK Real Estate Market Outlook for 2024 sheds light on key trends shaping the sector's trajectory. The PBSA sector remains under pressure due to soaring student numbers outpacing accommodation availability.

“Companies eager to renew their policies and comply with stringent government regulations will continue to thrive within the PBSA sector.”

Record Student Numbers Drive Demand

A crucial driver of demand within the PBSA sector is the unprecedented surge in student population. With UK universities witnessing a record-high student influx, the demand for accommodation remains robust. This surge in demand is further buoyed by broader demographic trends, as indicated by forecasts projecting a 5% increase in the population of 18-year-olds in England for 2024. A notable shift is observed from higher to medium and lower tariff universities, propelled by factors such as falling A-level grades and tighter entry requirements.

“This shift underscores the need for additional PBSA beds in areas where these universities are located, further fuelling demand within the sector,” the report notes.

Investment Opportunities Amid Challenges

Despite challenges such as stringent planning requirements and limited supply, investment activity within the PBSA sector remains robust. High occupancy rates and a promising return outlook continue to attract investors. The report predicts further improvement in investment activity in 2024, underpinned by vital operational metrics and income growth prospects. The PBSA sector faces critical regulatory challenges in 2024, particularly concerning building safety and energy efficiency standards.

“With a significant portion of PBSA stock predating 2015, compliance with modern regulations poses a considerable challenge.”

Moreover, investors and lenders increasingly prioritise energy-efficient assets, redirecting investment towards new developments that meet modern standards. As the PBSA sector grapples with supply-demand dynamics and regulatory hurdles, CBRE's insights provide valuable guidance for stakeholders navigating this evolving landscape. With a focus on adapting to regulatory changes, addressing supply constraints, and seizing investment opportunities, the sector is poised to navigate the challenges and thrive in 2024.