The Class Foundation in collaboration with Savills
Delivering investors’ aspirations against regulatory uncertainty
The European Purpose Built Student Accommodation (PBSA) Investment Barometer unveils the current landscape of the PBSA industry and provides a forward-looking perspective, arming decision-makers with the knowledge they need to navigate this dynamic market successfully. By harnessing the data, trends and analysis in the report, investors and other stakeholders can make well-informed decisions, capitalising on opportunities in this thriving sector.
Introduction
The PBSA sector continues to grow across Europe. Rising student numbers, increased international student mobility, and a greater focus on the quality of the living experience are all driving increased investment activity in the sector. But more is needed to meet the 3.1-million bed supply gap that exists across Europe. Progress is being made in many markets, but regulatory uncertainty in parts of Northern Europe and the Nordics is holding back investment.
Investors and operators play a critical role in shaping the future of the sector, driving innovation and responding to the evolving needs of tomorrow’s students. Now in its third year, The Class Foundation and Savills have undertaken a comprehensive survey and conducted interviews with key market participants to assess current market conditions and identify the factors likely to influence change over the next two to five years.
Our respondents included institutional investors, fund managers and operators, with the majority being equity investors, with some having vertically aligned operating businesses as well.
- 97,800 additional beds – Respondents expect to grow their portfolios by 97,800 beds over the next two to five years. This equates to a 72% increase in the size of their holdings and would see an additional €20 billion invested in the sector. If all the private PBSA increased at a similar rate over the period, then this would increase supply by over 1.5 million beds. Yet, this would only increase the European provision rate to 18%, up from 14% today.
- 100% of respondents are concerned about the effect of regulations on their business, making it the highest-ranked issue. Investors also highlighted rising construction costs, housing affordability, and increasing operating costs as key areas of concern.
- 50% of investors are concerned about how the availability of equity for new development will change over the next two to five years, remaining the biggest concern. However, this is down from 73% in 2023. Investors are less concerned about the availability of debt and equity for refinancing.
- 26% – The average proportion of respondents' existing portfolios that still need to be brought up to ESG standards. Nearly two-thirds expect to refurbish assets to meet requirements, while only 19% expect to sell stock.
- 39% of respondents report challenges acquiring brownfield land, with a further 33% reporting challenges on either brown or green. Construction and site costs have become the most important factor when looking to bring forward development, with site connectivity remaining a factor.
- 72% of investors agree that regulations on affordability could decrease investor and developer interest in PBSA. This points to the need for the sector to work with governments to prevent over-restrictive measures and ensure sustainable growth.
Existing investor landscape
The past year has seen continued growth in the number of operational PBSA beds across Europe. According to Savills latest estimate, there are c.£2.2 million PBSA beds in total across Europe, with around two-fifths owned by private operators.
Despite this, the level of private provision is lower in many markets, and there remains a significant opportunity for continued growth of the sector, including in more mature and established markets.
Respondents to the 2025 survey included 18 investors and operators with over 136,000 beds across the continent, equal to c.15% of all private PBSA beds in Europe, with an asset value of more than €18.8 billion. The most common markets that the respondents have exposure to are the UK & Ireland (23%), South Europe (23%) and Western Europe (20%).
Continued strong growth
The PBSA sector is likely to see continued strong growth over the coming years. Savills third annual European Living Investor Survey, earlier this year, found that PBSA rose to the top of the list of most sought-after Living sector for investors, surpassing multifamily for the first time. When investors were asked about their future allocations within the Living sectors, 62% of investors said they were targeting the sector.
The latest Investment Barometer survey mirrors this picture. Respondents expect to increase the number of beds they have over the next two to five years by 72% to over 234,000 beds, thereby increasing the size of their portfolios by c.97,800 beds, deploying a further €20 billion.
Despite this ambition and the increased focus on the sector from investors, there remains a substantial undersupply of beds. If all these planned beds were delivered, the average European provision rate would only increase to 18% from 14% today, assuming student numbers remain the same.
Southern Europe has risen to the top of the agenda for investors, with Italy (19%) and Spain (11%) ranking as the most sought-after locations, with a further 10% considering Portugal. These are markets that have some of the lowest PBSA provision rates across Europe and have seen strong growth in international student numbers in recent years, pointing to a significant opportunity for investors. The increase in investor attention is reflected in the strong investment activity witnessed so far this year in these markets, with over €1.7 billion deployed by investors over the first nine months, compared with only €570 million over the same period of 2024.
The top five locations are rounded out by France (12%) and Germany (12%), both of which have risen up investors' priority list compared with 2024. Similarly to Southern Europe, there has been an uptick in investment activity across these markets with c.€1.25 billion invested to the end of September 2025, over double the level seen over the same period last year. These are Europe’s two largest student markets, and while they have higher provision rates than Southern Europe, there is a significant proportion of older stock in need of modernisation. This is creating an opportunity for investors to bring forward new schemes that are better aligned with the needs of the modern student.
The UK has slipped down the priority list for investors; having ranked joint top in 2024, it managed only joint sixth this year. This likely reflects respondents looking to expand their portfolios across new markets, as most already have exposure to the UK.
The Netherlands has similarly dropped down the priority list for investors. In 2024, 11% of respondents were looking to expand in the country, but this has dropped to 3% in 2025. This likely reflects the market uncertainty caused by the previous government’s plans to cut the level of international students and reduce the number of English-taught programmes.
Primary cities within these markets remain the focus for investors, continuing the trend seen over the past two years. But there were a handful of respondents who said their focus was on secondary cities, the other major cities in each country that still have large student populations. This is a positive for the sector and further indication of it maturing, with investors and operators growing confidence in the opportunity presented beyond gateway cities.
Factors impacting investors
Regulations top investors’ concerns
When asked about factors that could impact their business, investors put regulation at the top of their list of concerns. This year, all respondents said that they were ‘somewhat’ or ‘very concerned’ about these, an increase from 81% in 2024 and 73% in 2023.
This is perhaps to be expected given the greater political attention that the sector is receiving in many countries. The past few years have seen concern in some markets around the number of international students and their perceived impact on driving up housing costs, that have led to proposals to limit their numbers in Denmark and the Netherlands. We have also seen continued tinkering with regulations around rents in Ireland and proposals being floated for rent controls in Scotland.
The uncertainty that this brings and the potential to significantly impact investors' business plans pose a threat to future growth and could lead to missed opportunities for the sector.
Construction costs remain an issue
While the rate of construction cost inflation has eased from the levels seen in 2022, it remains at an elevated level and there aren’t signs of cost deflation coming through. This has led to close to nine in ten respondents saying they were concerned about their impact on their business, up from three-quarters in 2024.
The high costs put pressure on the viability and deliverability of some schemes and could crimp investors' ambitions to grow their portfolios. This also plays into investors’ concerns around the availability of suitable assets, which 31% of respondents said they were ‘very concerned’ about.
Investor concern around environmental sustainability and refinancing continues to fall
This year was the third in a row where investors' concerns about refinancing fell, with only a quarter of respondents concerned about it, down from nearly two-thirds in 2023. This points to the continued improvement in the debt markets and lower interest rates that we have seen over this period. Supported by lenders' increased appetite to gain exposure to the sector.
Similarly, concerns around environmental sustainability have eased significantly. This year, only around two-fifths of respondents were concerned about this, down from nearly three-quarters in 2023. It is likely that this, in part, reflects many respondents owning and operating relatively new assets, which have already been developed to incorporate sustainable features. Although in some more mature markets, there remains a broader challenge of improving older legacy stock; typically, the ones owned and operated by the public sector.
Capital availability
The improving economic backdrop, compared with two years ago, has led to a lower interest rate environment. This has fed through to an increasingly positive outlook around capital availability, which has improved for the third year in a row. Two years ago, the majority of respondents were ‘somewhat or very concerned’ about the availability of debt and equity for PBSA, especially for development.
Respondents in 2025 are more sanguine, especially when it comes to refinancing. Only around 20% of respondents were concerned about the availability of debt and equity for refinancing and debt for new investments.
There remains more concern around the availability of equity for development, with half of the respondents raising concerns. This reflects the challenges facing bringing new schemes forward and the higher risk associated with doing so. Especially when coupled with the more challenging fundraising market we currently find ourselves in.
Rising global capital in the sector
Respondents continue to expect to see an influx of global capital into the sector over the next two to five years. While North American capital is expected to remain a strong source, it is down from its peak last year. Interestingly, respondents expect to see a strong return of European money coming into the sector. This is a trend that has already started to come through in investment activity this year, with c.€2.3 billion of cross-border investment from European investors so far in 2025, compared with only c.€340 million in the whole of 2024.
The ESG challenge
The drive towards net zero and improving environmental standards in the built environment remains near the top of the industry’s to-do list. The pace and stringency of tightening rules vary across the continent, but the direction of travel is consistent. This means that investors have to grapple with what to do with stock that needs improving.
Across the respondents, the proportion of stock that needs to be brought up to ESG standards ranges from 0% to 100%, with an average of c.26%. For some investors, this therefore paints a sizable challenge. When asked about what they plan to do with stock that doesn’t meet ESG standards, close to two-thirds said that they would refurbish stock, slightly up from last year.
This is a laudable aim and will ensure that stock remains in the market and that investors are thinking about embodied carbon. Although it also likely points towards the concerns raised earlier in the report about accessing stock, also a potential barrier raised by respondents to the Savills European Living survey.
Less than two-fifths of respondents said they would look to sell assets, down from 30% last year. These assets offer potential investors an opportunity to acquire aged stock and progress with a “brown to green” strategy of refurbishing and repurposing older stock. As long as the cost of refurbishing isn’t prohibitive.
Development difficulties
The delivery of new stock is a key challenge for the sector, and essential for its continued growth. However, investors are facing difficulties in acquiring land. Two-fifths of respondents this year report challenges acquiring brownfield land, up from a fifth in 2024. And a further third indicate challenges in acquiring both green and brownfield land.
When considering where to develop, respondents reported that construction and site costs are the most important factor this year (50%), compared with only 31% of respondents in 2024. This reinforces the concerns highlighted earlier around construction costs and the added complexity and cost of bringing forward development on previously developed land.
Site connectivity and difficulty, and complexity remain important when choosing sites, and these could make it more challenging for investors to find suitable opportunities to continue to grow their portfolios.
Regulatory impact
As mentioned earlier in the report, investors are concerned about the impact of regulation on their business, which dovetails with the wider affordability challenges that are emerging off the back of strong rental growth in recent years. The latter makes the idea of enacting tighter regulation appealing for governments, as a way to be seen to be acting to help their constituents.
However, it is clear that many investors view regulations as a negative for the sector, and a greater proportion of respondents this year are concerned about it than in the last two years. They highlight that these regulations would decrease interest in delivering more PBSA, which is already in short supply in many markets, as well as drive innovation. This aligns with the results of Savills European Investor survey, where respondents flagged rent regulation as the biggest risk to further investment in the Living sectors.
While this outlook is clear from respondents to both surveys, it does highlight the need for the industry to be engaging with the government to articulate the needs and benefits of the sector to the wider housing challenges. And ensuring that the sector is part of the conversation around any potential regulatory change to ensure that, if it is brought in, any damage to the sector is minimised.
The one positive is the fall in the proportion of respondents who say that it makes it difficult to meet targeted returns. But this is likely predicated on regulatory certainty and the ability for investors to know and understand what these are when they deploy capital. A big challenge, and a way to disincentivise future investors, is through constant changes to regulations and the uncertainty this brings.
Conclusion
The European PBSA Investment Barometer Report 2025 highlights a growing PBSA sector in Europe. As investors are looking to increase their exposure to the broader Living sectors, the strong fundamentals of the PBSA sector mean it is attracting a growing share of capital. Respondents are looking to significantly increase their investments across the region, with Italy, Spain, Portugal and France highlighted as key markets for growth. This will see much-needed supply come forward and a greater diversification of active operators in these markets.
Development of new stock remains challenging, with investors remaining concerned about construction costs and the availability of land and equity for new development. These point to barriers in driving a significant increase in new stock in the near term and the need to strengthen relationships across the development and financing landscape.
The challenges facing investors in the acquisition of land for new development point to the need for greater collaboration between the public and private sectors, especially around how to unlock opportunities for new housing in and around universities by leveraging the skills and assets of both sides.
Housing affordability challenges continue to push potential regulation further up the political agenda, which is raising concerns for investors. As regulations surrounding affordability gain traction, collaboration with policymakers will be crucial. Investors and operators will need to actively participate in policy discussions to help create a balanced regulatory environment that safeguards investor interests while supporting both new and reformed policy decisions.
This highlights the much-needed work being undertaken through the National Action Frameworks* that The Class Foundation has established this year for key markets such as the UK, Italy, Spain and France (in progress). By bringing together operators, investors, universities and the public sector, they present an opportunity to tackle the challenges facing the sector in a collaborative way and find solutions that meet the needs of students and other stakeholders.
This progress also reflects the strategic work The Class Foundation has been advancing with the European Commission’s Housing Task Force, supporting the inclusion of student and young people’s housing within the forthcoming European Affordable Housing Plan. This EU-level recognition underscores the growing understanding that housing for students is essential to Europe’s broader affordability and mobility agenda.
The report underscores that as investors assess opportunities, collaborate with educational institutions, and engage with city officials, they're not just making business decisions; they're influencing the educational journeys of countless students. Through The Class Foundation’s ongoing collaboration with the European Commission’s Housing Task Force and the rollout of National Action Frameworks across key markets, the sector can work towards creating the much-needed conditions for coordinated investment, that can enable investors bridge the affordability gap, drive innovation, and ensure that the PBSA sector remains a cornerstone of not only real estate investment but also of higher education itself.
* National Action Frameworks are inspired by the Dutch model introduced in 2022; a cross-sector, multi-stakeholder initiative uniting the national government, municipalities, universities, student unions, and private and public housing providers and investors, to deliver 60,000 new student beds by 2030 in response to the Netherlands’ student housing crisis.
About The Class Foundation:
The Class Foundation, established in 2011, operates as a partner-based non-profit organisation with the goal of advancing the professionalism and understanding of student housing across Europe. Serving as the largest European Student Living ecosystem, its mission centres on being the foremost think tank dedicated to the realm of student housing and experience. With research, events, collaborations and awards, The Class Foundation fosters an extensive international network comprising more than 100 complementary partners creating homes for more than 3 million students. By facilitating connections among operators, investors, policymakers, universities, service providers and student organisations, we provide a community and platform for thought leaders to exchange high-quality information and best practices.