Investors poured nearly £880m into UK purpose-built student accommodation (PBSA) in the final quarter of 2025, bringing total investment for the year to £4.3bn. This represents a 10% rise compared with 2024 and sits just below the ten-year average of £4.5bn.
Over the course of the year, 79 deals were completed, marking a 20% increase on the previous year. Single-asset operational stock continued to dominate investor activity, in line with long-term market trends, while 2025 also saw a revival in portfolio-level transactions, including 13 portfolios traded, five of which exceeded £200 million, highlighting a strong appetite for scale.
Developers delivered 19,600 new PBSA beds across 64 schemes in 2025, a 20% increase year-on-year, although still below the pre-pandemic five-year average of around 25,000 beds per year. London led the way in new supply with 4,350 beds, followed by Nottingham with 2,550 and Leeds with 1,900. Across the UK, a further 50,250 beds are currently under construction.
Student demand remains robust. By the January UCAS deadline, UK universities received a record 619,360 applications for the 2026/27 academic year, up 3% on last year. UK students accounted for 494,540 applications, while international applications rose to 124,830, a 5% increase.
The data also indicates a continued flight to quality, with 43% of undergraduate applications directed to higher-tariff universities, compared with 39% in 2019. On an annual basis, applications increased 6% to higher-tariff institutions, edged up 1% to middle-tariff providers, and fell 1% to lower-tariff universities.
Merelina Sykes, joint head of student property at Knight Frank, which provided the data, said: “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. But with operational opportunities finite, investors have explored alternative deployment routes, with a record number of funding deals and joint ventures taking place.
“The development landscape remains challenging with delays at the Building Safety Regulator due to Gateway 2, alongside planning and viability constraints – though there are signs these roadblocks are slowly easing.”
Katie O’Neill, associate in global living sectors research at Knight Frank, commented: “While the sector continues to attract significant capital and benefit from strong underlying demand, the investment environment remains far from straightforward. Headline activity masks a market where deal timelines have prolonged due to pricing misalignments between vendors and purchasers, alongside challenging leasing conditions in some locations.
“Assets in Russell Group cities – or portfolios offering genuine value‑add opportunities through cap‑ex programmes – remain the first choice for investors. Yet, an attractive 10‑year Gilt environment and share price declines among publicly listed sector participants have put returns into perspective for investors.”
Lisa Attenborough, head of Knight Frank Capital Advisory, added: “Lender appetite remains strong across both development and investment PBSA deals, with margins for operational assets currently around 160 bps. The living sectors continue to attract deep pools of capital, and that competition is translating into highly attractive pricing for borrowers.
“With debt supply at its highest level in more than a decade, now is a good time to borrow. Looking ahead, we expect margins to continue tightening on best‑in‑class opportunities through 2026. In addition, back‑leverage structures could be one to watch – with the cost of capital for debt funds falling, we anticipate the gap between bank and non‑bank lenders to narrow even further.”
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