Investors are increasingly targeting purpose-built student accommodation (PBSA) in 2025, with the sector viewed favourably due to the undersupply dynamics, student growth and counter-cyclical features, according to Knight Frank’s latest research.
The firm’s Australia PBSA Update Q2 2025 found investment volumes to date this year have totalled $1.8 billion across four deals, well above the $116 million recorded in 2024, and activity is expected to pick up further.
North American investor Greystar’s acquisition of the GIC-Wee Hur JV portfolio, comprising 5,662 beds across 7 assets, for $1.6 billion makes up the bulk of investment volumes so far this year, but even without the inclusion of this deal, volumes still eclipse the low 2024 total.
Knight Frank Head of Alternatives Tim Holtsbaum said investment volumes in the student accommodation sector were expected to rise further in the second half of 2025.
“Last year the lack of clarity around international student caps, coupled with a challenging macroeconomic backdrop resulted in a slowdown in the volume of transactional activity,” he said.
“Operational schemes remained tightly held in 2024, however, and owners that did bring assets to the market were rewarded with competitive bidding due to a lack of opportunities for buyers, which helped to maintain robust pricing levels.
“This year we have seen a resurgence in investor interest in the sector, with investors viewing it favourably due to its strong fundamentals, including the undersupply dynamics, student growth and counter-cyclical features, with the prospect of good risk-adjusted returns.
“We expect additional anticipated rate cuts and the prospect of greater political certainty in Australia in the second half of 2025 will lead to greater activity as the year progresses.
“Investor sentiment surveys demonstrate student accommodation is in favour with investors this year, particularly North American capital, and we have already seen this translate into the largest deal announcement since Scape’s acquisition of the Urbanest portfolio back in mid-2020.
“Recent transactions have demonstrated that stabilised PBSA assets remain a key target for investors trying to enter or consolidate their position in the Australian market.
“However, given the limited opportunity to acquire standing investments, we expect to see investors exploring alternative transaction structures in order to deploy capital.”
Knight Frank Chief Economist Ben Burston said while activity in PBSA was expected to continue to pick up this year, politics and policy would be key factors in the sector.
“Sentiment among policymakers and stakeholders for the growth of PBSA is strengthening, as it is increasingly recognised for its role in supporting the growing student population while mitigating pressure on rental demand,” he said.
“Against this backdrop, investor confidence remains strong due to buoyant student demand, with international student enrolments well above pre-pandemic levels and near double the levels of a decade ago. This will aid strong occupancy levels this year.
“The student accommodation sector has experienced strong rental performance due to the demand-supply imbalance in the market, and the market is expected to remain undersupplied despite rising development activity.
Knight Frank’s Australia PBSA Update Q2 2025 found that since 2018 there has been average rental growth of 50 per cent across Sydney, 38 per cent in Melbourne, 36 per cent in Adelaide and 28 per cent in Brisbane for studio apartments in PBSA developments.
It found there are currently 6,912 beds under construction with 2,772 beds due for completion in 2025, a 40 per cent increase on last year. In 2026, a further wave of completions is expected resulting in 5,832 new beds.
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