Despite macroeconomic challenges, demand for UK Purpose-Built Student Accommodation (PBSA) is surging due to a projected 16% increase in student numbers by 2030. How can we leverage technology and ESG-driven strategies to optimise environmental performance, future-proof assets, and boost returns?
Despite a challenging macroeconomic climate, demand for high-quality student housing continues to surge, leaving no shortage of opportunity on the horizon. Alice Harman, Originator at Investec Real Estate, highlights, “The investment case for UK PBSA remains highly compelling, driven by structural and demographic trends that will continue to support the sector.”
But why does it remain so in demand?
One of the key drivers is the projected 16% growth in the UK’s student population by 2030, exacerbating the already acute undersupply in student housing. And this is certainly not being overlooked. In the first half of 2024 alone, investment in UK PBSA surged to £2.45 billion—more than double the £1.1 billion invested during the same period in 2023 (Knight Frank).
We break down some of the other reasons for PBSA being such an in demand asset class below:
A Path Paved with Technology
While the sector faces some hurdles, including rising construction costs and economic uncertainty, the opportunities outweigh the risks. Our very own Jonathan Burridge, CEO and Co-Founder of Utopi, noted on our recent panel at Bisnows Student Accomodation summit, “Data and technology is a differentiating opportunity – the market has head winds across the UK and Europe, and one opportunity available in the context of ESG, sustainability, decarbonisation, is to drive the data conversation forward.”
Integrating ESG (Environmental, Social, and Governance) principles into PBSA developments can yield clear returns, both financially and ethically. Utopi’s platform, for instance, has demonstrated a 9x ROI by helping investors optimise the environmental performance of their assets, aligning with regulatory expectations and tenant demands.
Supply-Demand Imbalance: A Persistent Opportunity
The supply-demand imbalance in PBSA is glaring. Only 35% of the current stock was built in the last decade, leaving the majority of assets outdated and ill-equipped to meet modern expectations. With an increasing number of students entering the market, this presents a clear opportunity for investors to deliver the high-quality accommodation that is in short supply.
Differentiating in this market can go beyond new build appeal, sustainability presents a strong opportunity to stand out as a residential brand, and backed up with accurate data and strong strategic engagement principles, provides value beyond a reduction in energy cost.
Our CEO, Jonathan, on data and technology adoption, at our recent appearance on Bisnows Student Accommodation Panel:
“Not just to enhance operational performance benefit, which is obviously critical from an NOI perspective, but to also differentiate brands and encourage people to engage their residents on this environmental journey too. When we see residents in the context of sustainable communities, it’s really important to be educating young people and helping them understand why this shift in living is important – and that’s the social aspect of ESG – but one where data plays a key role.”
While it may feel like stating the obvious as we become increasingly digitally connected, the additional value opportunity present by creating a digital picture of assets can often go unnoticed.
The ESG Imperative: More than a Trend
As the PBSA market evolves, sustainability is becoming a non-negotiable element of any successful investment strategy. Utopi’s real-time data and analytics tools empower investors to not only measure their carbon footprint and energy consumption but also to make impactful improvements. These ESG-driven insights are more than just compliance measures—they are key to future-proofing investments and driving profitability in a market that increasingly values environmental stewardship.
By integrating technology like Utopi’s, investors can not only meet the rising demand for eco-friendly properties but also position themselves as leaders in sustainable real estate.
“This is a market built on profitability, but in the context of ESG there is so much benefit to the people and planet too, and with clear ROI models in place now when using data and technology, it’s no longer a risk to invest in these areas. I’m excited to see where the next 12 months take the PBSA market!”Jonathan Burridge, CEO and Co-Founder at Utopi
A Resilient Market Poised for Growth
Despite facing macroeconomic challenges, the UK’s PBSA market remains an enticing opportunity for investors. With demand outstripping supply and student numbers set to grow, the market is primed for those willing to capitalise on the sector’s resilience. By leveraging technology, embracing sustainability, and focusing on long-term value, investors can navigate the headwinds and seize the opportunities that lie ahead.