Why PBSA is London’s hottest asset class for investors

Introduction

Student accommodation is under more pressure than ever. Demand is outpacing supply, expectations are evolving. And yet, much of the PBSA sector still plans with data that’s retrospective, patchy or simply doesn’t reflect what students actually want. 

London is the UK’s most dynamic student housing market, presenting both a challenge and a significant opportunity. In this blog, we explore how demand is shifting, how supply is matching up and what providers and investors need to know to deliver value, maintain occupancy and stay ahead of the competition.

Why London’s PBSA market matters

Home to around 467,000 full-time learners, London is one of the world’s biggest student cities. Its global reputation drives consistent demand for accommodation, especially from overseas applicants, many of whom favour the quality, convenience and community of purpose built options - and are often prepared to invest more to secure them.

As a result, PBSA rents in London have steadily increased, often outpacing the private rental sector. While this is good news for investors, there are growing concerns around affordability, highlighting the need for products that meet student expectations and deliver sustainable returns.

[Boxed out?] Top cities by student population:

London, UK – Over 450,000 students across multiple world-renowned universities like UCL, Imperial, and King’s College.

Beijing, China – Home to Peking University and Tsinghua University, with around 300,000+ students.

Shanghai, China – Hosts Fudan University and Shanghai Jiao Tong University, with a student population exceeding 250,000.

Paris, France – A major hub with Sorbonne University and École Polytechnique, accommodating 200,000+ students.

New York City, USA – Home to Columbia University, NYU, and CUNY, with around 600,000 students across all institutions. —> not measured as readily and more transitory students just doing single semester or similar.

Accommodation supply vs demand in London

London currently has around 117,000 beds, far short of the estimated 242,000 students who require accommodation. About half are university-owned, but with universities facing financial pressures and limited capital, private operators are increasingly stepping in to fill the gap. 

Even so, there remains a shortfall. Only 30% of full-time students in the capital currently live in PBSA, the rest rely on a mix of HMOs, the wider private rented sector or commuting from home. This last group presents a key opportunity: research shows that commuter students report less satisfaction,  weaker progression, and poorer academic outcomes. That creates space for new products designed to meet the needs of students who might otherwise live at home, such as creative room layouts, shared living models, or university-private partnerships that deliver quality communal amenities at affordable price points. 

More than 32,000 beds are in the pipeline, but planning constraints and land competition continue to restrict delivery. The London Plan has added further complexity, and although there have been discussions around a potential easing of planning policy, details remain unclear. That said, PBSA is expected to be well placed to adapt quickly when the Renters Reform Bill comes into force.

The challenge for investors now is clear: where can value be unlocked in under-supplied areas, and how can affordability be balanced with sustainable rental growth?

Rent and availability trends

This supply-demand imbalance is clearly reflected in pricing and availability data: 

• Availability dropped sharply from April to June 2024, with some boroughs seeing less than 10% of beds still on the market months ahead of the academic year starting.
• PBSA rents in London continued to climb, rising by an average of 14% year-on-year compared to around 10% in the broader private rental sector. Weekly rates typically range from £285 to £625, including bills, while HMOs fall between £150–£400 (excluding utilities) and other PRS options between £150 - £700, often with utilities excluded.

But the trends are not uniformly experienced. Micro-location plays a significant role, with some boroughs seeing growth in the mid-teens and others closer to 3 - 4%.  This has pushed more students to consider well-connected outer zones, creating opportunities for accessible, high-spec PBSA outside of central London. 

For investors, this underscores the importance of a hyper-local approach, with pricing strategies that reflect both demand and affordability. 

What students want (and where PBSA is falling short)

As rents rise, students are becoming more demanding. They're not just looking for a room, they’re comparison shopping, assessing value for money, and prioritising convenience and community.

Our data shows around 60% of students are searching for PBSA under £240/week, yet only 36% of beds in London for 2025/26 fall within that range. This mismatch is shaping student expectations and behaviour.

From thousands of verified reviews, four consistent themes emerge:

• Community and convenience: The overall experience is primarily shaped by the people in the building, but beyond this, well-used social spaces and good transport links are seen as essential for London living. Mentions of transport proximity are nearly 50% higher than the UK average.
• Responsive service: Front desk and support staff play a vital role. In London, they’re referenced 30% more often and with higher sentiment.
• Maintenance and safety: Maintenance is a key driver of satisfaction. London students mention laundry problems twice as often as elsewhere in the UK, with sentiment 23% lower than the UK average. Problems with heating, water and hygiene issues, such as rodents, also appear more frequently. Safety concerns are 30% more common and sentiment is 10% lower.
• Shifting preferences: Co-living, BTR and flexible rental terms are growing in popularity, especially with international students. This is changing expectations around community, affordability and lifestyle and illustrates the need to deliver a well-rounded PBSA experience focused on more than location and room size. 

The changing investment landscape

Despite wider economic pressures, PBSA continues to outperform many other real estate sectors. According to CBRE, in 2024, £3.8 billion was invested in UK PBSA, with 25% of deals focused on London and another 25% tied to mixed portfolios including assets in the capital. 

Investor appetite is particularly high in the £50 - £100 million range. Demand for clean, green, well-located stock remains high, though supply is limited, and there’s also growing interest in satellite locations like Stratford. Yields have held steady, and while regional PBSA edged ahead in the past year, London leads on five-year capital growth and total returns. Yields for PBSA and build-to-rent in central London are beginning to converge, reinforcing the sector’s resilience. 

However, delivery is not without its challenges. The London Plan has added complexity with inconsistent application across boroughs leading to a fragmented and often unpredictable planning landscape. This, combined with development costs and affordability pressures, has slowed the pace of new supply.

Meanwhile, international demand remains strong. Study visa applications rose 29% year-on-year, and London remains an attractive destination, despite shifting policy. For investors, this means opportunities still exist, but understanding microlocational dynamics is more critical than ever for unlocking them.

Challenges and opportunities in PBSA

London remains one of the most resilient PBSA markets globally, but unlocking value requires navigating various complexities. 

The challenges:

• Planning hurdles and lengthy processes continue to delay delivery.
• The London Plan remains difficult to navigate, with inconsistent application across boroughs.
• Affordability concerns are rising, potentially limiting rental growth.
• Development costs and economic uncertainty are pressuring viability.
• Brexit has impacted EU student numbers.

Yet the opportunities are significant:

• Repositioning and refurbishing older stock offers strong potential returns.
• Student demand for flexible, community-focused accommodation is growing.
• Non-EU international numbers are still growing rapidly in London, especially from India, China, and the Middle East.
• Proposed policy changes could see domestic fees for EU students reintroduced, opening the door to new EU demand. 

In this shifting landscape, the strongest returns will come from those who can align their strategy with these evolving market conditions. 

The key to future success

London remains one of the most attractive PBSA markets globally, and future success depends on affordability, planning and operational efficiency.

The fundamentals are solid: student numbers are rising, international appetite remains high, and supply is constrained. But affordability is under pressure, expectations around service, flexibility, and experience are evolving, and the planning environment is more complex than ever.

Micro-location dynamics are key: investors should focus on high-demand areas, affordability and sustainable assets to deliver the kind of experience today’s students expect.

To learn more about StudentCrowd, visit our business website today.