Investment in the UK PBSA sector reached £3.5bn in 2024, marking a 13% increase from 2023, according to national real estate advisor Savills.
Over the past five years, the sector’s annual investment volumes have averaged £4.9bn, demonstrating its resilience despite ongoing market challenges.
Savills believes that this – alongside improving investor sentiment – signals that the sector has the ability to see greater liquidity volumes in 2025.
Despite challenges including visa delays, rising capital costs and a tough fundraising climate, the research also highlights the sector’s strength in 2024.
“Despite a challenging year, the PBSA market remains resilient and a crucial component of the operational living investment market.
“2025 is set to be an exciting year, with notable portfolio transactions and an increase in development funding and joint ventures expected.”
Lizzie Beagley, Head of UK PBSA & Co-Living Transactions, Savills Operational Capital Markets
In 2024, large scale land transactions demonstrated strong demand fundamentals. These included the sale of One Medlock in Manchester, a 1,014-bedroom scheme where Savills advised Dominus on its deal with Greystar, and Greystar’s acquisition of the 836-bedroom Triangle site in Selly Oak from Apsley Capital and Galliard.
The central London land market also performed strongly, highlighted by the sale of Kings Place, the 444-bedroom scheme acquired by Unite Students, and iQ/Blackstone’s acquisition of Blackfriars Crown Court, driven by sustained student demand and the appeal of London PBSA.
Regionally, resilience was evident in deals such as Savills advising Corebridge on the sale of two PBSA assets in Bournemouth and Cardiff to Generation, supported by new capital partner, Goldman Sachs, for £110m.
In 2024, traditional forward funding deals were limited, according to Savills. The company did however advise on Hines’ acquisition of the Gas Lane scheme in Bristol from Watkin Jones.
2024 also saw a shift toward creative deal structuring, with a focus on joint ventures and preferred equity arrangements.
An example was Housing Growth Partnership and Watkin Jones’ joint venture to deliver the Grove Crescent PBSA scheme in Stratford, which secured a development loan from Investec. Several other transactions of this nature are also in the pipeline.
“We continue to see strong demand from lenders to deploy capital into the PBSA sector, with both bank and non-bank capital actively seeking high-quality opportunities.
“Although underlying interest rates remain elevated, competition is exerting downward pressure on margins, and even mainstream bank lenders are becoming more flexible on leverage and covenant packages to secure prime financing opportunities.”
Charlie Bottomley, Director, Savills Capital Advisors, Debt Advisory
Savills also highlights that the availability of operational stock was limited, but demand remained strong, with notable interest in portfolios such as Savills Project Sandpiper (Curlew).
