The doomsday prophet Jeremiah’s famous lamentation over the destruction of Jerusalem came to mind: “How deserted lies the city, once so full of people!”. Was this the end of university education as we once knew it? Were online lectures and tutorials now the new normal for students entering higher education?

For all the nervousness in those socially-distanced times, at Puma Property Finance, it was our view that the sector would be one of the first to rebound once the pandemic was under control.

There were a number of factors influencing our thinking, but the primary one was best articulated by one of the most recent graduates in our team. “Of course, we go to university to get a good degree”, she said with a wry smile, “but the main reason we go is to have a bloody good time!”. And there it was in a nutshell: you may be able to host lectures online, but you can’t go down to the student union bar and drink on a Zoom call.

•   Property investors face 'huge risk' of stranded assets if they fail to decarbonise
•   An interview with Paragon's Neal Moy: Developers need to be 'cautious' of new lenders competing on price alone
•   PBSA investment reaches £2bn in H1

Cushman & Wakefield’s most recent ‘UK Student Accommodation Report’ puts old Jeremiah firmly back in his box. There has been an 8% year-on-year increase in student numbers compared to 2019/20 (the last academic year pre-Covid); this means there are 1.63 million students currently needing a bed space. In addition, average rental growth is set to bounce back to 3.1% — over double the rate seen last year — and a staggering £7bn of investment in academic facilities is expected by 2025. The resilience of the PBSA sector is rightly piquing the interest of investors.

There is a word of caution in the report, unsurprisingly around prices. As the Bank of England is defending its decision to increase rates, developers continue to wrestle with unprecedented volatility in construction costs, while operators face ever increasing utilities and staff bills.

Energy represents close to one-third of operating costs for the average PBSA property, and probably a much higher percentage for those first generation PBSA schemes that are less energy efficient and, by definition, will command lower rents. The drive towards sustainability will play a major role in new developments, both to keep costs down and to attract students for whom ESG credentials are a key determining factor in choice of accommodation.

With student numbers at record highs, we believe there are real opportunities for developers to bring new projects to market, capitalising on strong investor sentiment. Thankfully for those of us in the business of developing and operating PBSA, online lectures are largely a thing of the past.