In the final quarter of 2025, nearly £880 million was invested in UK purpose-built student accommodation (PBSA), contributing to an impressive total investment of £4.3 billion for the year. This marks a notable 10% increase compared to 2024 and is just shy of the ten-year average of £4.5 billion. The increase in investment is indicative of the sector’s resilience and attractiveness to investors looking for stable returns in a competitive market.
Transaction Activity and Market Trends
Throughout 2025, a total of 79 transactions were completed, representing a significant 20% rise from the previous year. Notably, single-asset operational stock continued to dominate the market, adhering to long-standing investor preferences. The year also witnessed a revival in portfolio-level transactions, with 13 portfolios changing hands, five of which exceeded £200 million. This trend underscores a robust appetite among investors for larger, more scalable assets.
New Developments and Supply Dynamics
Developers successfully delivered 19,600 new PBSA beds across 64 schemes in 2025, which is a 20% increase year-on-year. However, this figure remains below the pre-pandemic five-year average of approximately 25,000 beds annually. London emerged as the leader in new supply, adding 4,350 beds, followed by Nottingham with 2,550 and Leeds contributing 1,900. Furthermore, there are currently 50,250 PBSA beds under construction across the UK, reflecting the ongoing commitment of developers to meet student housing demands.
Student Demand and Application Trends
Demand from students remains robust, as evidenced by a record 619,360 applications submitted to UK universities for the 2026/27 academic year by the January UCAS deadline, marking a 3% increase from the previous year. Of these applications, UK students accounted for 494,540, while international applications rose to 124,830, reflecting a 5% increase. The data indicates a continued trend towards higher-quality institutions, with 43% of undergraduate applications directed towards higher-tariff universities, a rise from 39% in 2019. Annually, applications surged 6% at higher-tariff institutions, with middle-tariff providers witnessing a slight increase of 1%, while lower-tariff universities experienced a 1% decline.
Insights from Industry Experts
Merelina Sykes, joint head of student property at Knight Frank, which provided the data, remarked on the sector’s ongoing appeal: “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. However, as operational opportunities become limited, investors are exploring alternative deployment routes, leading to a record number of funding deals and joint ventures.”
Katie O’Neill, associate in global living sectors research at Knight Frank, further commented on the investment environment: “While the sector continues to attract significant capital and benefit from strong underlying demand, the investment climate remains complex. Headline activity may obscure a market where deal timelines have lengthened due to pricing misalignments between vendors and purchasers, alongside challenging leasing conditions in certain areas.”
Lisa Attenborough, head of Knight Frank Capital Advisory, added, “Lender appetite remains robust across both development and investment PBSA transactions, with margins for operational assets currently around 160 basis points. The living sectors continue to attract significant capital, and this competition is resulting in attractive pricing for borrowers. With debt supply at its highest level in more than a decade, now is an opportune moment to borrow. Looking ahead, we anticipate that margins will continue to tighten on premier opportunities through 2026, and back-leverage structures may become noteworthy as the cost of capital for debt funds decreases, potentially narrowing the gap between bank and non-bank lenders.”
This continued investment momentum in the UK PBSA market demonstrates a keen interest in quality student accommodation, highlighting the sector’s resilience and adaptability amidst evolving market dynamics.