Institutional capital allocated to the UK’s living sectors surpassed investment in offices for the first time in 2024, according to Jon Critchley, director at HVS HWE. “Beds are no longer the future. They are the now,” he commented.
£10 billion of institutional investment went into UK Purpose-Built Student Accommodation (PBSA), Build-to-Rent (BTR), senior living and co-living, compared to £9.5 billion into offices.
In 2014, investment in the UK living sectors accounted for six per cent of commercial property investment. Last year, it was 21 per cent.
“This is a long-term growth trend rather than a short-term anomaly, said Critchley: “The desire to live in nicer places, affordability issues, digital nomadism and an ageing population are all fuelling a monumental change in ownership dynamics. There is a trend towards large purpose-built - and quite expensive - rental property.”
PBSA
The UK PBSA is a well-established sub sector that accounted for £4 billion of institutional investment in 2024 and has averaged growth of 23,000 new units a year compared to 11,000 for hotels, Critchley said, noting that the average length of stay in PBSA is ten and a half months.
Lauren Young, managing director at Brookfield Asset Management underlined the increase in the asset values of UK PBSA in recent years. Having made a big investment in 2016 and exited a few years ago, she said: “We saw a 200-basis point compression of yields.”
She added: “We’ve been trying to replicate this strategy across continental Europe and we have three student accommodation brands in Spain, France and Germany with a total of 30,000 beds under management.”
While in the UK, PBSA is a mature and well-understood real estate asset class, in Europe it has been harder to implement.
“Because there were not active portfolios, to be an active investor, we had to develop out and expand companies ourselves, growing the operating company,” Young said.
Development
One of the challenges has been getting planning consent and local authorities and stakeholders to understand that PBSA and co-living are not the same as traditional residential and so should not face the same regulatory framework, Young stressed.
“In any growing business, it’s always all about finding the right people and finding the right pace of growth and often you haven’t done it before, and we have seen a lot of people from hospitality moving into student and co-living,” she said.
Other real estate sectors often emulate hospitality, Young noted. For instance, office buildings monetising their lobbies with coffee shops and retail. Another example is the introduction of dynamic pricing into student accommodation.
“Five years ago, dynamic pricing in PBSA was unheard of because people were worried about its perceived fairness,” she said. “Students have now accepted it as well.”
Build-to-rent
Moving on to look at the build-to-rent (BTR) sector, Critchley said UK BTR attracted more than £5 billion in annual institutional investment for the first time in 2024.
The large-scale BTR conversion of the athletes’ village in Stratford, east London after the 2012 Olympic Games was a major showcase of BTR’s potential, and there are now a total of 123,000 BTR units in the UK, with 20,000 new units added in 2024, with the average length of tenancy in BTR at one to two years.
Co-living
At only around 9,000 active bedrooms/units, co-living is still a relatively small sub sector of BTR, but it is growing. Often described as student accommodation for young professionals and graduates, according to a recent Savills research paper there are 5,500 co-living units currently under construction in the UK.
UK co-living schemes have attracted interest from investors such as Cain International, Blackrock, Real Star, Crosstree, DTZIM, APG and CDL, says Savills, but transactional evidence remains sparse due to co-living still being in the development cycle of the market.
Young highlighted that the newness of co-living also presented issues in continental Europe: “Oftentimes we’re dealing with challenges to the lease length or the way we’re able to sell to our tenants because, if it’s seen too close to residential products then there’s a completely different set of regulatory requirements.”
Big picture
Looking at the bigger picture, Young said: “The shortage of housing across the world means that alternative living concepts, like PBSA, co-living, senior living and BTR, can all form part of the solution, and disruptive concepts will do well to learn from each other.”
Critchley predicted investment in the UK’s living sectors would grow to more than a third of total commercial property by the end of the decade, subject to affordability and political will.
All quotes taken from Alternative Concepts panel sessions at IHIF EMEA 2025.