Similar to the challenges faced in the real estate investment market in 2023, the PBSA sector encountered disruptions due to increasing interest rates and ongoing geopolitical uncertainties. However, amidst these challenges, the European PBSA market demonstrated resilience, showing promising signs of recovery and growth.
In 2023, despite initial setbacks caused by the pandemic, the PBSA sector witnessed a steady recovery, with occupancy rates gradually returning to pre-pandemic levels across Europe with the student-to-bed ratio surpassing 2.1:1 in the UK. The increasing demand for higher education coupled with the resumption of in-person learning activities contributed to the sector’s resilience.
As the European economy stabilizes and international travel restrictions are no longer an issue the PBSA market is expected to witness further growth in 2024. Similar to the correlation between international travel and urban hotel demand, the influx of international students plays a significant role in driving occupancy rates and investment opportunities in the PBSA sector, particularly in major European education hubs. Indeed, within the UK the reduction in students from the EU post-Brexit has been more than off-set by an increase of 116,000 students outside of the EU. The industry is however keeping a close eye on the number and trajectory of international students against the potential policies to prioritise domestic students. The upcoming UK election should provide some clarity on the long-term approach to the growing international student population.
Furthermore, factors such as the implementation of sustainability and ESG (Environmental, Social, and Governance) practices are becoming increasingly important in the PBSA sector. A recent Savills ELI Survey indicated that 77% of investors rated energy and resource efficiency as very relevant to their investment strategies. Students, similar to travellers, are showing a preference for accommodation options that align with their values, including sustainability and wellness initiatives. Therefore, PBSA properties that prioritize sustainability and offer amenities promoting student well-being will likely attract higher demand and achieve higher asset values.
In line with the trends observed in the hotel sector, branding and marketing strategies also play a crucial role in the success of PBSA investments. Properties that effectively communicate their commitment to student-centric experiences, community-building and sustainability are poised to outperform competitors in the market.
Looking ahead, adaptability remains a key factor for success in the PBSA market. With evolving student preferences and lifestyle trends, properties that offer flexible living spaces, communal areas for studying and socializing, and amenities that cater to the changing needs of students will maintain a competitive edge.
In conclusion, Avignon Capital maintains confidence in the PBSA market for 2024, anticipating further growth and investment opportunities. By staying attuned to consumer preferences, embracing sustainability, and prioritizing flexibility, PBSA investments are positioned for success in the evolving landscape of student accommodation.
