By Marek Handzel with quotes from Charles Ferguson-Davie
Is the United Kingdom’s purpose-built student accommodation market in trouble?
In its latest UK Student Accommodation report, released in October 2025, Cushman & Wakefield has suggested falling international postgraduate demand and affordability issues are putting pressure on purpose-built student accommodation (PBSA) assets to fill beds in many parts of the United Kingdom.
The firm has put the spotlight on Sheffield as a perfect example of the market pressures some PBSA operators are now dealing with. Between the 2022–2023 and 2024–2025 academic years, demand for modern student housing in the “Steel City” fell by 17.3 percent. This has resulted in an unprecedented student-to-bed ratio for a major European market of 1.21:1, down from 1.46:1. It has also led to the largest decrease in PBSA rents in the United Kingdom this year, at –5.5 percent. Other cities have gone through a similar slump. Nottingham and Leeds, says Oliver Cummings, head of PBSA Europe at Cain, have passed through a challenging year, with large cashbacks being offered to entice students into properties in both markets. Offers range from £500 to £1,000 (€570 to €1,140) in the main, although in August 2025 Cummings heard of one operator offering well in excess of this range in Leeds.
“There are certainly cities that are seeing challenges and have had a lot of supply coming through in the last 12 to 18 months,” says Cummings. This oversupply has been amplified in places such as Leeds, where there is a large build-to-rent (BTR) residential market that offers similar rents. “What it’s meant is that there’s been a more competitive pricing environment with operators slashing rents to get the bookings up. Nevertheless, the universities are still strong, and with added regulatory pressure on HMOs and BTR imminent, good quality PBSA product will become more attractive to both domestic and international students.”
On the release of the Cushman & Wakefield report, David Feeney, a partner in the organisation’s UK student accommodation team, said unfilled beds were a concern. He said the firm had estimated postgraduate numbers had fallen by more than 17 percent during the past two years, while there had been a clear rise in students commuting longer distances to campuses, or living at home as the cost of accommodation was beyond many students’ budgets.
“Meanwhile, stock at the same quality levels is competing for the PBSA student body, where en-suite cluster accommodation will lose out if the price point hits above affordability limits,” said Feeney. “Overall, in the post-COVID world, many students are balancing lifestyle and value-for-money when considering accommodation location.”
The issue of oversupply is particularly acute at the luxury end of PBSA. As Alex Taylor, senior vice president and head of Telford Living says, there have been “large volumes of premium product targeting the top end of the market” all coming online at a similar time recently, making high-spec PBSA much more fragile.
“There was some heavy delivery of [luxury PBSA] that all came in 2023 and 2024 in cities such as Nottingham and Leeds,” he says. “It all hit the market at the same time, with the same type of product and amenities — and all targeting similar price points.”
Caution
With the pressure of oversupply hurting PBSA markets in the United Kingdom, it is unsurprising that those wishing to allocate capital into student housing have become wary.
“We remain cautious on the United Kingdom and are extremely considered as to what we select to invest in and on what profile,” says Alicia Edgar, director, living investments Europe, at Invesco Real Estate.
The manager’s approach to UK PBSA boils down to seeking out modern assets that offer discounted entry pricing, explains Edgar. These have to be in well-located university cities — home to at least three high-quality, globally-ranked universities — that have an “affordable rental tone”. “Essentially, our strategy is to ensure future proofing against longer-term demographic trends and making sure assets retain appeal from international students,” says Edgar.
Targeted allocations
This targeted plan has now become standard practice for many investing in UK PBSA.
“While it would be a stretch to say the UK is ‘saturated’ across the board, it is undeniable that we’re seeing bifurcation,” says Joanna Tano, head of research for European real estate at Columbia Threadneedle Investments. “Prime university towns with globally recognised institutions such as London, Manchester, and Edinburgh continue to see robust demand, and the best-located assets still outperform.”
The Cushman & Wakefield report reflects this stance, pointing out that parts of the country are actually struggling with growing student demand for PBSA. So much so, in fact, that the rental drop experienced by some cities does not reflect the overall situation in the United Kingdom. The advisory firm says university rental growth has outpaced the private sector for the first time in seven years during the current academic year, growing by 4.44 percent. In contrast, the private sector’s rental growth is at 1.16 percent. And for only the third time in 12 years, the lowest-quality PBSA delivered rental increases above those of the highest quality beds.
Harrison Street’s head of transactions for Europe, Josh Miller, highlights statistics from the United Kingdom’s Universities and Colleges Admissions Service (UCAS), which show a clear flight-to-quality towards higher-ranked universities for the 2025–2026 academic year.
According to UCAS, lower- and medium- tariff providers (who accept lower qualification standards for entries) used to dominate admission levels, but both have been in recent decline. Higher-tariff provider acceptances, meanwhile, are up significantly with international students year-over-year at +7.7 percent. And these are the ones with the greatest propensity to use PBSA. Markets such as London and Oxbridge, therefore, alongside other strong Russell Group university cities and towns, remain Harrison Street’s focus in the near-to-medium term, reveals Miller.
At the same time, challenges related to development have been reducing new delivery levels in top markets. With limited new supply, developers have a chance to create best-in-class, appropriately priced assets that will be highly prized by both investors and consumers — and offer long-term scarcity value. Charles Ferguson Davie, CEO and CIO at Moorfield Group, says the manager has been partnering carefully with developers to mitigate against cost and timing risk, while pursuing ground-up developments in highly prized locations.
ActivumSG’s UK managing director, James de Lusignan, says investors can be creative with their capital and take advantage of some market challenges such as building regulations, a more difficult financing environment, and student demand dynamics. Ultimately, he says, there is still a massive undersupply of good-quality beds relative to demand, especially in the more attractive locations with strong universities and limited future supply. Mathew Crowther, a senior portfolio manager in the European high-yield debt fund series for PGIM’s real estate business, agrees, pointing out how there are at least three times the number of students per dedicated PBSA beds in London..
Nevertheless, ground-up development is certainly more difficult from a viability perspective, says de Lusignan.
“We are therefore focused on repurposing existing stock in the United Kingdom, a significant majority of which was delivered pre-2012 and requires bringing up to a modern-day standard,” he reveals.
Considering the wider resi market
Moorfield Group has also looked to go beyond traditional PBSA projects and is now aggregating and modernising houses in multiple occupation (HMOs). Moorfield Group believes these are well-placed to cater to domestic demand due to more affordable rents. HMOs targeting domestic students are also less vulnerable to geopolitical shocks.
Ben Pile, head of residential investment and asset management for Europe at Barings, says students now have more choice and are better informed about the type of accommodation they can access when studying away from home. This, he says, extends from PBSA and HMOs through to co-living and BTR, and means investors and developers have to thoroughly understand their markets, think out of the box, and create something that is genuinely wanted and needed at the right price point.
“The perception that if you build it they will come — particularly if you build it with the highest level of amenities — feels outdated,” says Pile. “Students are more cost conscious and not necessarily going for the most expensive stock, even if their budget might allow it. Instead, they’re being more discerning for the right locations and the right amenities for their specific needs.”
An in-depth understanding of the local market and price elasticity is essential to ensuring a successful performance in any location. In Taylor’s view, when armed with a good knowledge of student needs, there is still an opportunity to deliver PBSA in strong locations that may have struggled due to the recent oversupply of studio-heavy schemes. Cluster-led schemes — five or so en-suite bedrooms built around communal cooking, dining, study and lounge areas — tend to attract a wider audience, says Taylor. “If you have an 80 percent cluster-led mix and you’re a little bit more sensitive on pricing, you can open up to a wider customer demographic,” he argues.
It is important to be mindful of taking a longer-term view and not immediately buying into negative views about UK locations that used to be the “darlings” of PBSA, but are now struggling, he adds. “You need to take the negative outlooks with a pinch of salt and focus on market fundamentals, growth projections and supply/demand dynamics.”
Affordability
The clear prioritisation of “value for money” does still require a certain standard of accommodation, says Miller.
Although domestic students, in particular, are not willing to pay for amenities they do not intend to use, there is now a much greater appetite for communal space and amenities that are not hugely expensive to operate, says Miller, echoing Taylor’s point about cluster-to-studio ratios. “Study rooms and group meeting spaces are great examples of this trend, and we have found that these spaces are often the most requested and utilised spaces in our buildings,” says Miller. “From our perspective, understanding how students use these spaces, particularly through the use of technology, has better helped us design the latest generation of student accommodation in Europe.”
Affordability, says Vincent Mezard, global head of living and hospitality at AXA IM Alts, is now a defining factor in student accommodation choice. “This should incentivise investors and local authorities to adapt product, services and planning to develop more mid-range PBSA options,” he says.
However, with construction costs remaining elevated, it is very difficult to develop new-build schemes at a mid-range cost, warns Daniel Harris, CIO of Fusion Group. “The economics just don’t work,” he says.
This requires future PBSA schemes to almost all include a mixture of studios and en-suite rooms. This will allow developments to remain affordable and ensure long-term sustainability of assets, argues Harris. Thankfully, there is sufficient demand at both the more affordable and the higher ends of the spectrum to justify such an approach.
Looking into Europe
Despite its strength as a home to high-quality institutions that attract students from all over the globe, there are some investors who are not prepared to venture into the UK market at present. The strong competition for assets and sites, high construction costs, regulation, and planning challenges are all deemed too risky.
In their case, mainland Europe may prove to be more fruitful ground. Some cities, such as Milan and Barcelona, have seen more PBSA development, says Pile, but provision rates are much lower, meaning there is greater opportunity for growth. Barings has a scheme in Rome, which when complete, will be one of the few private student schemes in a city where there are tens of thousands of international students. “That’s the scale of the opportunity,” he says.
Most European countries have increased their English-taught courses, with Germany and the Netherlands leading the way, says head of living investment management at PATRIZIA, Antonio Marin-Bataller. Many other countries are not far behind either, he says — but there are clear opposite ends of the spectrum to be found on the continent. Italy and Germany reflect these large differences perfectly.
Germany, says Marin-Bataller, has just under 3 million domestic students, a number that has remained flat during the past four years or so. The international student cohort has, however, been growing at some 15 percent during the past three years, mainly due to a favourable study visa regime and free or very low tuition costs. This attracts a more cost-sensitive group of international students from countries such as India and Turkey. At present, student accommodation in Germany works almost as if it is quasi-regulated housing and is very cheap, but of very low quality. International students are, however, looking for better, ready-made PBSA buildings that meet their budgets. “These need to be modern environments, with certain amenities,” he says, “that are located near the top universities, which is what the international segment is most attracted to.”
And given the poor state of current student accommodation across the country, there is also scope for domestic students to be attracted to better PBSA.
Italy, in contrast, is starved of bespoke provision. The country has very high levels of student concentration in the north of the country, as many young Italians travel from the rest of the country to the north in order to take degrees in science and maths, which are only taught in Politecnicos. Italy is also a top destination for international students. This means a city such as Milan has some 100,000 students that it needs to house. “This has clashed with the housing crisis we have in general across Europe,” says Marin-Bataller. “So what you have is very strong demand.”
PATRIZIA opened a project in Turin three years ago, which achieved a 40 percent retention rate in this academic year and an overall rental increase of more than 7 percent, made up of a 10 percent rise for new leases and a 3 percent or 3.5 percent rise in rent for re-bookers. The asset is some 800 metres away from the Polytechnic University of Turin’s campus, which has some 15,000 students enrolled onto courses. “And there is no other [comparable] offer around,” he says.
“In our view, the European market is the most attractive PBSA market in the world,” says Zubaer Mahboob, head of Heitman European investment research.
“With over 90 universities in the global top 200 — far surpassing the United States — Europe offers high-quality education at low cost, from free tuition in Germany to modest fees in France, the Netherlands, Spain, and the Nordics. These markets benefit from robust domestic demand, and going forward, they are also expected to rank among the top choices for a globally mobile foreign student cohort that is expected to reach 10 million by 2030.”
Coupled with this are the provision rates in mainland Europe. The United Kingdom has a provision rate of around 30 percent, the Netherlands and Ireland sit at 20 percent, while France and the Nordics are at under 20 percent and southern Europe is well below 10 percent. Heitman, therefore, believes that Europe offers a “very large dartboard of opportunities” for PBSA investors.
Not all a bed of roses
Notwithstanding its potential, Europe still has its challenges.
Marin-Bataller warns that tuition fees in Germany, to take but one case in point, are not immune to fiscal pressures. Areas such as Bavaria have already been given the green light to explore charging international students additional fees to study at university. Legislative changes are always a possibility, he says, meaning investors must stay on top of political manoeuvring to anticipate what effect it may have on local PBSA markets.
Cummings identifies how Iberia can be more of a “slow burn” as well. “There’s a lot more transactional evidence in Iberia, which gets investors comfortable with the underwriting,” he says. “But now what we’re seeing is that the price point is not necessarily where it has been underwritten in certain location. The rent stabilisation ramp up can be slower. And students don’t necessarily understand the product. So there’s more risk in the lease up phase. Especially in more tertiary locations.”
Added to that are licensing issues. Cummings once had to wait for six months in Lisbon for an occupancy licence, while delays can also happen due to building code regulations. “[Investors] may think — perhaps a little naively — that it’s much easier in [mainland Europe] than the United Kingdom, especially given the challenges of construction cost inflation and the new building safety regulation, but my advice would be to partner up well with a good developer with not just a track record, but also local expertise and local connections,” says Cummings.
By taking a careful approach, he says, investors can sit a little more comfortably, knowing they have taken as many precautions as possible to offset the extra risk they take in Europe’s more nascent PBSA environments.
Marek Handzel is the editor of Institutional Real Estate Europe.
For reprint and licensing requests for this article, Click Here.