The purpose-built student accommodation sector has underperformed the all-property average for the first time in four years, according to CBRE’s PBSA Index.

The sector delivered total returns of 7.7% in the year to September 2021, compared with 12.5% for the all-property average.

Tim Pankhurst, executive director in CBRE’s student accommodation valuation & advisory team, said: “From the start of the Covid-19 pandemic, returns and capital growth for PBSA have outperformed office and retail, coming second only to industrial.

“We anticipate that demand will remain strong in 2022 as increasing participation rates are coupled with an increase in the UK student age demographic. Since September we have seen already seen very strong yield compression in most PBSA markets.

“Supply can’t keep up, with the delivery of new PBSA supply hindered by increasing build costs and land availability. These dynamics have contributed to strong investor sentiment and we expect that the appetite for good-quality PBSA assets will continue into next year.”

CBRE said the performance gap between London PSBA and regional student accommodation had narrowed, with assets in the capital achieving total returns that were 0.3% higher than those in the regions, a fall from the 2-4% outperformance seen over the last four years. This was due to falling net income return on London assets.