Investment in UK purpose-built student accommodation (PBSA) totalled around £1.6bn in H1 2025, well ahead of the £1.1bn six-month average and reflecting healthy market conditions, Knight Frank has reported.

The firm said £830m of the H1 total was invested in Q2. Knight Frank expects second-half PBSA performance to be even stronger, with £2bn worth of PBSA schemes and portfolios either on the market or under offer.

So far this year, more than 1,600 student beds have been added to PBSA supply, with 17,802 beds expected to be ready in time for the 2025-26 academic year.

The report expects London, Nottingham and Leeds will have the largest increases in supply in the second half of the year.

However, Alistair Walters, senior research analyst for student property at Knight Frank, warned that the 60,000 beds set to be added to the UK PBSA sector in schemes under construction was inadequate and the “misalignment between demand and supply remains the crux of the market”.

Merelina Sykes, joint head of student property at Knight Frank, also warned that despite the “healthy turnover achieved in Q2, the market has not been without its challenges”, citing delays in developments getting gateway 2 approval from the Building Safety Regulator and overall planning challenges.

“Appetite from investors has shifted to standing stock as a first preference,” she added. “Fire safety is elongating deal times, while a later leasing cycle this year is contributing to a more cautious market, particularly for stock in secondary locations.

But she said that prime assets in Russell Group cities, “or assets and portfolios where investors can see a genuine value add opportunity, continue to attract high levels of interest and strong bidding activity”.

Lisa Attenborough, head of debt advisory at Knight Frank, said: “While the outlook remains far from certain given recent weaker economic data, further falls in the cost of debt have the potential to shift the investment and funding landscape.

“Financial markets are pricing in two further rate cuts in H2 2025 which will ensure that the all-in cost of debt for both operational assets and development finance become more competitive.”

Meanwhile, QuadReal today (31 July) announced the completion of its acquisition of a UK PBSA portfolio with 3,460 beds from Apollo for more than £500m.