Student housing investors stay active amid affordability and delivery pressures

Investec Bank plc, a leading international bank and wealth manager, today announces the publication of its latest research report, Future Living 4, Volume 3: PBSA - Conviction through the reset, which explores how investors are assessing the UK purpose-built student accommodation (PBSA) sector after a period of strong rental growth and heightened investor appetite.

The research finds that investor conviction has moderated, but capital has not retreated. Half of investors (50%) currently view student accommodation as appealing, compared with 60% in Investec’s 2023 survey. At the same time, 42% of surveyed investors are currently invested in PBSA and intend to maintain their exposure over the next five years, while 30% are considering investment.

The report shows that demand remains resilient, but more selective. Investors continue to be attracted by the UK’s global higher education reputation, long-term supply constraints and the need for professionally managed student housing. However, policy risk, university quality, affordability, local competition and operator strength are now playing a greater role in underwriting and investment decisions.

Delivery is also becoming a more important differentiator. Construction cost inflation was cited by 74% of investors as the biggest obstacle to growth in non-owner-occupier residential real estate, followed by the higher interest rate environment at 70% and planning issues at 56%. The report also highlights the impact of the Building Safety Act, with 92% of investors saying it has had a negative effect on real estate strategies and operations.

Jonathan Long, Head of Corporate Real Estate Finance at Investec, said:

“PBSA remains one of the most closely watched parts of the UK Living sector. Our research shows that capital remains active, but investors are placing greater focus on location, affordability, university quality and delivery risk.

“For clients, the opportunity is no longer simply about exposure to student accommodation. It is about identifying the markets where sustainable rents, deep student demand and deliverable schemes can support resilient long-term income. That requires disciplined asset selection, experienced operators and funding partners who understand how to support projects through different market conditions.

“This research is part of how we are deepening expertise and further building our Living sector platform, so we can continue to support clients with insight, relationship management and tailored funding solutions across the cycle.”

Investec Real Estate continues to be an active lender across the Living sector*, providing development, stabilisation and investment finance to private, institutional and corporate clients. In FY2025/26, the business completed £922m of real estate activity, including £226m across student accommodation and co-living.

Within PBSA, Investec has provided c.£1.2bn of funding since 2011. Recent transactions include a £19.25m senior development loan to Barwood for a 233-bed scheme in Edgbaston, Birmingham, a £46.95m senior investment loan to refinance YourTRIBE’s newly completed 226-bed scheme in Elephant & Castle, London, and a £26m development loan to Moorfield Group for a 204-bed scheme in Bristol.

*Definition of Living Sector: The Living sector in UK real estate refers to residential assets designed for rental and long-term occupation, typically operated at scale. It includes build-to-rent, student housing, co-living, single-family rental, and later living. The sector focuses on income generation, professional management, and meeting diverse housing needs across different demographics.