The Purpose-Built Student Accommodation (PBSA) sector has long been a cornerstone of the student housing market, but with strong head winds in 2024 it was a tough year for investors, asset managers and operators in the sector. Now with re-booking numbers down for 2025 it’s left many in the sector asking: Will 2025 be another tough year for the bottom line?
The sector is facing a concerning trend: fewer residents are re-booking their accommodation. This shift is a result of multiple factors, from economic pressures to changing immigration rules for international students. But with ripple effects across financial stability and future development plans, what opportunities are out there and how can Utopi support this resilient asset class? Because where there is adversity, there is always opportunity.
Let’s start by understanding the decline in re-bookings.
While socioeconomic factors like shifting student priorities on affordability, Gen Z residents desiring accommodation with strong sustainability offerings, and negative experiences or word of mouth can have an impact on re-booking, those elements have already been in play over the past 5 years. Especially post-pandemic. But one of the key factors driving this recent decline in re-bookings is:
Changing Immigration Rules for International Students:
“Some new restrictions on student visa conditions came into effect in January 2024. People coming to do taught postgraduate courses lost the right to bring dependant family members to the UK, and new students have been prevented from switching into a work visa before the end of their course.”UK Parliament: House of Commons Library
One of the most significant factors impacting re-bookings in 2025 is the tightening of immigration rules for international students. Governments in key markets, including the UK, have introduced measures to reduce the number of dependants international students can bring, increase visa restrictions, or limit post-study work opportunities.
These changes directly affect the PBSA sector, as international students are a crucial demographic for many operators. They are more likely to choose PBSAs over private rentals due to their proximity to campuses, on-site support, and inclusive nature. However, with fewer international students arriving – and some opting for shorter stays due to uncertain post-study prospects – the PBSA sector is experiencing a noticeable drop in demand.
The PBSA sector’s reliance on international students cannot be overstated. In the UK, for example, international students account for a significant proportion of PBSA residents, particularly in cities with large university populations. The tightening of immigration rules has immediate and far-reaching consequences:
- Fewer Long-Term Tenants: With some international students now restricted in bringing dependants or extending their stays post-graduation, fewer students are likely to re-book for second or third years.
- Shorter Booking Periods: Students on limited visas may opt for shorter stays, impacting long-term occupancy rates and financial stability.
- Competition with Other Markets: Restrictive immigration policies may push international students to choose other countries with more favourable rules, such as Canada or Australia, reducing the pool of potential residents for UK PBSA accommodation.
So, what does the financial fallout for the PBSA sector look like.
The decline in re-booking rates poses significant financial challenges for the PBSA industry:
- Decreased Occupancy Levels: The impact of reduced international student numbers and fewer domestic re-bookings leads directly to lower occupancy rates. Empty units mean lost revenue, which can undermine profitability and damage investor confidence.
- Higher Acquisition Costs: With fewer returning students, operators must invest more heavily in marketing and student acquisition efforts. From digital campaigns to partnerships with universities, these additional costs reduce overall margins.
- Impact on Development Pipelines: If occupancy rates continue to drop, it could discourage further PBSA development. Investors may hesitate to back new projects if existing ones fail to maintain profitability, potentially slowing the growth of the sector.
How can PBSA adapt.
To counter the challenges of declining re-bookings and reduced international student numbers, the PBSA sector needs to take proactive measures. Some avenues could be:
- Address Affordability: Introducing tiered pricing or flexible packages can make PBSA living more accessible. Offering incentives like early-bird discounts or loyalty rewards for returning residents can also encourage re-bookings.
- (And we think it’s the key here) Enhance ESG Offering & The Marketing of it: When a sector is facing adversity like this, it’s key to listen to the audience and tailor offerings to their preferences. This Gen Z audience are known for caring about sustainability and ESG, so don’t forget the power of the S – Social.
Build inclusive initiatives, prioritise resident wellbeing, and incentivise residents to engage with your accommodation. This approach will build loyalty through community, and allow for re-booking campaigns in the short term, while the government are pushed for more favourable changes on immigration in the long term. This should also include investing in sustainable infrastructure, such as smart proptech, renewable energy sources, and social initiatives, can help attract eco-conscious students. Clear communication about these efforts can also build trust and loyalty.
This proptech powered, social approach in the context of Utopi could include:
- Enhance resident safekeeping: Real-time data from the Utopi multisensor can allow operators and site teams to monitor residents who haven’t left their room in a few days and could be worth a mental health visit. Based off PIR data, this can be set as a daily or weekly report, to ensure you can efficiently check the welfare of residents who might be experiencing isolation, loneliness and/or mental health troubles.
- Monitor resident wellbeing: Real-time data from the multisensor will also allow you to monitor and measure things like air quality, humidity, noise and light in a room. The corresponding comfort scores in The Utopi Platform will then allow operators and site teams to flag rooms that are unhealthy for a resident, so safety interventions can be made. Such as, visiting the resident and encouraging them to open their window or unplug additional heating sources.
- Flag unsafe living environments: Real-time data from the multisensor has even helped Utopi flag potential drug operations and sweat shops operating from PBSA rooms, the removal of which having a positive impact on the health of fellow residents.
Ultimately, the PBSA sector faces a challenging landscape in 2025, but with challenge comes great opportunity. By adapting to the evolving needs of students – focusing on affordability, sustainability, and inclusivity – PBSA investors, asset managers and operators can remain competitive and resilient.
The sector’s ability to innovate and respond to these pressures will determine its success in the years ahead, and if we know anything about this asset class, we can safely say; it’ll make it through the other side stronger than ever.