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The Business Magazine November 2023
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Purpose built student accommodation, the next big thing

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Avamore Capital's Phil Gould
Avamore Capital's Phil Gould

The latest data available from the Higher Education Statistics Agency (HESA) highlights the continued appeal of UK Higher Education (UKHE). In 2020-21 there were 2.1m full-time students, of whom more than 407k were international.

Since 2010, student numbers have ballooned by 25.4% with acceptances from Chinese students jumping by 22.7% year-on-year. In 2022, acceptances from UK students dropped by 1.5%, however, there was a record participation rate among UK 18-year-olds, with 37.5% of all 18-year-olds being accepted onto courses in 2022. 

Population projections from Savills highlight an increase in the number of UK 18-year-olds over the next decade. This coupled with the continued attraction of UKHE to international students leads to forecasters expecting further growth in overall student numbers over the long term. Data from Knight Frank also suggests there will be an increase in the total full-time undergraduate numbers between now and 2030. 

Even though the availability of PBSA has increased significantly in recent years, looking ahead, its growth may not keep pace with rising demand. The current student-to-bed ratio in the UK is 2.3:1 reflecting a chronic supply and demand imbalance.

Since 2016-17, there’s been a slowing of the number of beds submitted for planning alongside declining site availability which means that future supply growth is likely to remain low by historical standards, leaving room for opportunity with developers and investors.

This is all underpinned by the affordability of accommodation being a major factor for most students, particularly for domestic applicants, the majority of whom utilise a maintenance loan to cover the cost. There are several cities in which the PBSA market is entirely out of reach for the average domestic student, and without additional income or financial support from family, there is a limited pool of housing available.

The issues around affordability make it clear there is a growing requirement for small-scale, low-amenity student housing targeted at domestic and price-sensitive international students. It’s our view at Avamore Capital that this requirement can be serviced by the refurbishment of existing 1st generation PBSA stock and the repurposing and retrofitting of existing office/commercial stock. 

Given our extensive experience in heavy residential refurbishments and office-to-resi PD conversions, we’re using our creativity to pivot into this underserved part of the market. Our solution-driven approach to lending means that we’re now in a position to move into this space, offering the right support to developers in and continuing to do what we’ve always done. Just better. 

If you wish to discuss PBSA with us please do get in touch.

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