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Real estate developers are piling into UK student housing despite a decline in international student numbers and worsening financial challenges in the higher education sector.
Private developers signed a record 22 land deals in the purpose-built student accommodation market in 2024, totalling £473mn, according to a report published on Tuesday by real estate group Knight Frank.
The deals included Greystar’s purchase of an old hotel that is now the site of the 1,014-bed One Medlock Street in Manchester, and Dominus and Cheyne Capital’s conversion of an office block at 65 Fleet Street in central London into student flats.
Privately developed student accommodation has reshaped the skyline of Britain’s cities in recent decades as investors rushed to capitalise on rising rents and student numbers.
It has typically commanded higher rental prices than other kinds of housing for students, with the offer of additional amenities.
“The ongoing gap between supply and demand continues to support the sector, while affordability remains a key challenge for students,” said Katie O’Neill, an associate at Knight Frank and author of the report.
International student numbers, a crucial market for student accommodation, have plunged in the past year following a crackdown on visa rules by the previous Conservative government.
However, the sector remains highly profitable for developers thanks both to high rents and the density of flats.
Annual UK private rents rose 9 per cent in the year to December 2024, according to official data, while research by the Higher Education Policy Institute think-tank in 2023 found that rents for private sector student flats in 10 university cities rose at almost double the rate of rents for flats owned by universities.
Separate analysis of student housing costs last year found the average student rent in London of £13,595 in 2024-25 exceeded the maximum loan for students in the capital for the first time.
Saranya Thambirajah, a vice-president at the National Union of Students, said that rents in accommodation run by for-profit companies tended to be more expensive and it was “not a sustainable way to do student housing or accommodation, for either students or institutions”.
But Joe Lister, chief executive of Unite Students — which acquired a 444-bed site at Kings Place in Southwark, central London, last year in one of the 22 deals — said there was a role for the FTSE 100 company in increasing housing supply.
He added that Unite was also exploring the possibility of purchasing existing housing assets from higher education institutions.
“Universities own about £30bn of real estate. We couldn’t do it in one go. But over 10 years there’s an opportunity to provide funding into the sector using our access to private capital,” he said.
In addition to the 22 private land deals, universities have partnered with the private sector to deliver student accommodation in recent years.
Developers typically benefit from these partnerships through cheaper land costs and assurances that universities will find students to take rooms.
Last year Newcastle University and Unite Students struck a £250mn joint venture deal for a redevelopment project that will lead to about 750 new beds for the university.