PBSA: top five drivers behind the rise of the $65 billion global student accommodation sector

The global purpose-built student accommodation (PBSA) sector has topped $65 billion (£50bn) in size, with rapid growth marked by global structural undersupply which has supported substantial capital flows from a diverse range of investors.

Knight Frank, in its just-published report entitled Global Student Property 2019, outlines the five major global drivers of this sector’s exponential growth:

  1. Student property is an increasingly global asset class. Cross-border capital into student property markets around the world accounted for 40% of investment into student accommodation over the last three years. The level of globally active capital is expected to increase as existing operators in mature markets look to expand and build scale, brand and reputation in emerging markets. The next decade will see the emergence of large-scale, truly global owner-operators.
  2. Global demographics will exert a greater impact on local markets. The astounding growth of the middle classes globally is fuelling the demand for all goods and services, including education. Consequently, the number of students studying outside of their home country has increased by 23% over the last five years. The OECD forecasts that the globally mobile student population will increase to 8 million by 2025, from 5 million in 2019.
  3. Universities in new markets assert their position and threaten the established hierarchy. In China, university enrolment has increased by 35% in the last five years. Other countries such as India and Malaysia have also achieved double-digit growth over the same period. Universities in these regions are building a critical mass of students, quality and confidence. The number of Asian institutions in the top 200 ranked universities globally, for example, has increased by 47% in the past three years challenging the status quo.
  4. Students will demand more from their university experience. As students have ever greater expectations of their time at university, the demands placed on student accommodation will intensify. Students from around the world want to be in the right place, in good quality accommodation with facilities and communities that add value to that experience. A Knight Frank survey, in partnership with UCAS in the UK, demonstrates that accommodation is a key factor in supporting student wellbeing. Existing and new operators need to respond accordingly.
  5. Collaboration and partnerships will drive success. From the US to India, our research reveals a development landscape characterised by higher construction costs, scarcer development land and mounting affordability pressures in markets which remain structurally undersupplied. Our expert commentators all point to the need for collaboration and partnership between universities and the private sector to overcome these challenges.

James Pullan, Global Head of Student Property at Knight Frank, explains:

“Here at Knight Frank, our global network of student property professionals enables us to provide a holistic view of both the challenges and opportunities facing the sector. One thing is clear: the case for investment in student property remains compelling.”

“This paper identifies the key global trends from across the student property sector, including the structural undersupply present across markets at all stages of development. It charts the growth in capital flows into student assets, and it shows that delivering an exceptional student experience is critical for higher education providers across the world.”

In tomorrow’s edition, we take a closer look at global capital chasing the PBSA sector.

james.wallace@realassetmedia.com