According to an analysis from Knight Frank earlier this year, the value of the sector is on course to reach £104bn by 2028, while the first quarter of 2024 was particularly busy, with investment volumes hitting £750m.

To put that into perspective, in the same period of 2023, just £148m was spent on PBSA transactions, demonstrating that PBSA is returning to the sort of activity levels seen in 2021 and 2022 and providing real optimism for the future of the market.

Given the direction of travel, it’s likely that mortgage brokers will see greater interest in such investments from their developer clients, and so need to identify lenders with the experience necessary to support a successful development.

Graduating from stereotypical student housing

First, it’s worth reflecting on why the PBSA sector is becoming such a significant aspect of the development landscape.

The cliche of students living together in rundown properties, based in inconvenient areas, is becoming increasingly outdated. While there was once a time when students would put up with these properties, and the difficult commute to lectures, in order to keep costs low, students - and their families - have higher expectations today.

After all, if you know you’ll be spending thousands of pounds to get your degree, you’ll want more than a roof over your head. PBSA also does what it says on the tin; its purpose built and specifically designed for students.

It usually comprises en-suite cluster flats or studios, cooking, dining and living facilities and ancillary services such as cafeterias and gyms. Most importantly, PBSA will almost always incorporate high-speed internet access.

What’s more, demand for student places is far higher. Applicants for university spaces hit new records in 2020, 2021 and 2022, and while there was a slight dip in 2023, the total still represents a significant increase on pre-pandemic levels.

Would-be students are chomping at the bit but need somewhere to live during their studies.

That’s where PBSA has become so important. Clearly, there is the question of addressing undersupply, with PBSA proving a key tool in addressing the demand for places.

But PBSA developments are also proving a boon to the universities themselves, and by extension, the local area.

Students are naturally attracted to universities where they will have a greater level of choice of quality accommodation that meets their needs and helps them get the most out of their time in higher education.

There are benefits to local communities too. Having a substantial number of students located within a relatively small area - and not just heading there for lectures - can stimulate local businesses, creating jobs and revitalising the area.

And, where the universities themselves have not been able to deliver those properties, developers have stepped into the breach and produced PBSA of the highest quality.

Learning from a flexible approach

HTB has worked closely with a host of developers on PBSA projects, and so has seen first-hand just what they require from a lender.

For example, we recently completed a deal with Urbanite Living, a PBSA developer, to fund the construction of an 81-unit PBSA development in York.

York is a prime area for these sorts of developments, with quality universities attracting substantial numbers of students, but a chronic undersupply of suitable accommodation.

Yet even if these projects are badly needed, they are rarely straightforward. In this case, for example, the borrower changed their strategy partway through the project, meaning they needed to raise further funds.

There were issues with road closures and rising costs off the back of the pandemic too, challenges which could have put the project as a whole at risk.

What’s crucial here is flexibility. While developers of all kinds, whether they are working on a PBSA or another project, will have a plan at the outset, the reality is that somewhere along the line they will have to adapt to change. It’s crucial therefore to work with a flexible lender, who not only understands the need to adapt but can do so wherever possible to help reach a successful outcome.

Getting the assignment in on time

A further challenge that comes with working with PBSA developers is timing. While all developers will have deadlines that they want to hit when it comes to finishing the project, the reality is that this is often a moveable feast - if it gets put back by a month or so, it’s not ideal but equally not a disaster.

This isn’t the case with PBSA. Those units need to be ready, come what may, in time for the new academic year. Developers simply cannot afford not to have them in place for when students are sorting out their arrangements for the coming year.

As a result, lenders who are able to meet those deadlines, who recognise how crucial timing is for PBSA projects, are the ideal funding partners.

Scoring top marks for developers

Universities across the UK continue to attract enormous numbers of students, so the demand for quality PBSA is only likely to increase from here.

Developers have ambitious plans for delivering world-class accommodation, but they will only be able to bring those plans to life if they work with lenders who understand the unique demands of the sector, and who can deliver the flexibility and service required when circumstances change.