Despite market uncertainty resulting in many real estate lenders hitting the pause button, it is welcome news to hear that the lending market still views the purpose built student accommodation (PBSA) sector as an attractive, defensive asset class.

Many lenders, including Investec, are of the view that any immediate response from students to return home and operators to refund rents for the 3rd semester is only a short term stumble for the operating performance of assets. PBSA continues to be viewed by many debt providers as a robust asset class amidst the Covid-19 uncertainty. 

This perception is well-founded. Whilst an economic downturn is inevitable, previous recessions have shown a clear correlation between economic performance and the desire to study, with student numbers often increasing when the job market gets tougher as people instead seek to up-skill. Not least, gap year planning is off the agenda!

Domestic demand for PBSA is expected to rise through an increase in the number of 18 years old in the UK, with UCAS’ recently released data showing a 1.2% increase in applicants for the 2020/21 academic intake, helped in part by a record-breaking 39% of all 18 year olds in the UK applying to study at UK universities.  

International demand for higher education is also forecast to increase in the coming years, with international student numbers expected to rise from 5m to 8m by 2025.

As such, we believe the PBSA sector continues to benefit from strong underlying fundamentals, with a structural imbalance between supply and demand, strong demographic drivers and a track record of out performance in testing economic conditions that should see it through this crisis.

The resilience of the PBSA market has been further examined in a piece written by my colleague Will Hyslop last week.