The purpose-built student accommodation sector is forecast to have fewer than 15,000 new beds added to supply in the 2023/24 academic year, down from 20,695 delivered in 2022/23.
PBSA delivery has slowed by 28% year-on-year, according to Knight Frank’s Student Market Update Q2 2023 report.
Knight Frank said 50 new developments will be completed during the academic year 2023/24, down from 78 in 2022/23.
Knight Frank said the total pipeline was around 132,490 beds across the UK, with 22% under construction and a further 44% with full planning permission granted.
As supply slows, student numbers in the UK continue to rise. Data from the Higher Education Statistics Agency confirms that a record 2.2m undergraduate students were studying at UK universities in 2021/22.
Knight Frank forecasts that student numbers will rise by a further 16% by the end of the decade.
Knight Frank said investment into the sector reached £1.1bn in Q2 2023, compared with £135m transacted in Q1.
According to the report, the private sector continues to play a dominant role in providing new accommodation for students, accounting for 72% of the beds completed.
Investors have shown continued interest in the sector with forward funding for large PBSA developments secured in York, Bristol and Warwick during Q2.
Across the quarter, Leeds saw the largest delivery uptick with 2,328 beds added to the pipeline, followed by Colchester with 1,544 beds delivered and Bristol with 1,346 beds.
Neil Armstrong, joint head of student property at Knight Frank, said: “The PBSA sector continues to be a promising investment opportunity, with robust demand driven by rising student numbers. As investors navigate the current market conditions, the sector’s potential for growth and stability remains evident.
“Clearly, supply will need to increase to accommodate the rising demand and projected growth. There is a strong appetite for PBSA, and I only expect it to continue with UCAS forecasting that there could be up to a million new undergraduate applications in a single year by 2030, up from 760,000 currently.
“Of course, the operational market remains challenging with rising costs being an on-going issue, but we are now seeing investors placing a strong emphasis on asset quality and being strategic with location in university towns and cities.”
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