News release

Strong occupier demand forecast set to attract continued investor interest in UK PBSA

Challenges remain as fall in construction levels and rent affordability are impacting development activity

December 10, 2019

London, 10 December 2019 – With rising demand for higher education, JLL forecasts full-time student numbers to grow by a further half a million by 2030. Purpose Built Student Accommodation (PBSA) has become a lucrative ticket for real estate investment, and according to JLL’s Student Housing Report, investor appetite remains robust due to its defensive, income-producing characteristics. Looking forward there will be a number of challenges including a fall in development pipelines and growing rent affordability concerns

Within the wider real estate sector, PBSA now represents one of the standout markets, with 31% to be invested in the sector of the £8.8billion of additional investment into Living sectors expected over the next two years. With growth in supply having been accelerated significantly over the past five years this is set to slow and forecast demand growth will widen the gap between available beds and total numbers.

JLL forecasts a 27% rise in full-time students in the next decade which is the equivalent of an additional 40,000 students per year. However, the number of developments reaching completion are slowing and current development pipelines for 2019/20 report just 26,610 new beds. This challenge is exacerbated by rising construction costs, which have in part contributed to a 25% fall in construction levels over the last three years.

Huw Forrest, Director – Living Capital Markets, Student Housing, JLL said:

“Student Housing has become one of the most standout performers for investors in the commercial and Living sectors and the overall outlook in the UK remains positive. JLL forecast an increase of 500,000 full time students by 2030 supported by a government targets for 35% increase in international numbers. Home to 18 of the world’s top 100 universities, the sector has a bright future ahead, but investors need to focus on the right investment and development decisions.”

The private sector has an important role to play in helping to address this problem, and private investment in the PBSA market is at an all-time high. For the first time, university owned beds now account for less than 50% of the PBSA market supply in the UK – and have grown by just 6% since the 2014/15 academic year. Of the 331,000 privately owned beds, just under 91,000 are leased to universities or have a nomination agreement in place, whilst 241,000 are direct let.

Whilst the UK’s higher education market faces a few challenges, such as the potential impact of post-Brexit research funding and rising student tuition fees, the growing pool of domestic demand and potential participants globally means the UK is well placed to succeed.

James Kingdom, Associate, Living Research, JLL: “In our current economic and political climate, investors are looking for stable, long-term income providing assets that are under-pinned by strong demographic trends. PBSA and the broader student living economy remains one of the most attractive prospects in the Living sector and we hope to see universities continue to work in partnership with private developers and investors to deliver new student accommodation across the UK.” 

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of more than 93,000 as of September 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.