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European PBSA Investment Barometer Report

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Contacts & Related Research

The Class Foundation in collaboration with Savills

Investor confidence drives European PBSA expansion plans

Contents


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 Purpose-built student accommodation (PBSA) sector continues to grow across Europe, with the investment case underpinned by rising student numbers, greater international mobility and a stronger focus on the living experience.

However, much more stock is needed to address Europe’s 3.1 million-bed supply shortfall, and this challenge has only intensified during 2026, as inflation concerns have returned and central banks have begun raising rates.

Collaboration between investors, operators, universities and the public sector is increasingly important to deliver much-needed accommodation across the continent. Investors and operators play a crucial role in the sector’s evolution, driving innovation and ensuring the product meets students’ evolving needs.

For the fourth year running, The Class Foundation and Savills have surveyed and interviewed major market participants to appraise current conditions and assess the outlook over the next two to five years. Respondents included institutional investors, fund managers and operators, predominantly equity investors, and some with vertically integrated operating businesses.


Key points

  • €15.8 billion – Respondents expect to increase their number of European PBSA beds over the next two to five years by 93%, adding c.99,200 beds and deploying a further €15.8 billion.
  • Southern Europe – For the second year in a row, Southern Europe is the top investment target. Spain (15%) and Italy (13%) are ranked as the most sought-after locations, with a further 8% considering Portugal.
  • A Maturing Sector – Primary cities remain the focus for investors, but interest in secondary and tertiary cities is growing. This diversification points to a maturing sector and greater confidence in opportunities beyond gateway cities.
  • 90% – Nine in ten respondents are concerned about interest-rate movements, up from 67% in 2025. Higher financing costs are adding pressure to development viability, highlighting the need to deliver accessibly priced accommodation.
  • 63% – Over three-fifths of respondents rate construction and site costs as very important in site selection, underlining the importance of viability in ensuring new PBSA is delivered.
  • Asia-Pacific Capital – Almost two-thirds of respondents expect investment from Asia-Pacific to increase over the next two to five years, pointing to a broadening capital base for European PBSA.
  • Collaboration – Closer collaboration between investors, operators, universities and policymakers is essential to balance affordability with viable delivery and meet students’ accommodation needs across Europe.

Investor landscape and target locations

Respondents to the 2026 survey included 19 investors and operators with over 107,000 beds across the continent, equal to c.12% of all private PBSA beds in Europe, with an asset value of c.€18.1 billion.

Over the past two years, these investors report that they have delivered close to 19,000 beds across Europe. The most common markets that the respondents have exposure to are the UK & Ireland (22%), Southern Europe (22%), Western Europe (18%) and DACH (18%).

Overall investor appetite for the PBSA sector remains high: Savills’ fourth annual European OpRE Investor Survey earlier this year found that PBSA was the most sought-after living sector for investors for the second year running. When investors were asked about their future allocations within the Living sectors, 58% said they were targeting the sector.

This latest Investment Barometer survey mirrors that picture. Respondents expect to increase the number of PBSA beds they have over the next two to five years by 93% to over 205,000, increasing the size of their portfolios by c.99,200 beds, and deploying a further €15.8 billion of capital.

For the second year in a row, Southern Europe remains at the top of the agenda for investors. Spain (15%) and Italy (13%) are ranked as the most sought-after locations, with a further 8% considering Portugal. These markets continue to have very low provision rates, while also recording rising international student numbers, which is putting pressure on existing PBSA and underscoring the need for more. This increased investor attention has been reflected in investment activity: over the first nine months of the year, Southern Europe has accounted for 27% of total investment in European PBSA, the highest level on record.

The UK (13%) has risen back up the priority list for investors, having only ranked joint sixth in 2025. This in part reflects some investors who have built sizeable platforms in Europe and are now looking to enter the UK for the first time.

Germany (11%) and France (8%) complete the top five. Both are among Europe’s largest student markets and have recorded annual international student growth of more than 3% over the past five years. Although provision rates are higher than in some other countries, much of their publicly owned stock needs modernisation, creating opportunities for accommodation better aligned with students’ needs.

The Netherlands remained low on the priority list for investors for the second year. In 2024 11% of respondents were looking to expand in the country, but this has dropped to 3% in 2025 and 4% in 2026. This likely reflects the market uncertainty caused by the previous plans to cut the level of international students and reduce the number of English-taught programmes (ETPs). However, with recent announcement of plans to drop the compulsory assessment of ETPs, this should bring a degree of regulatory stability to the market that could bring back investors.

Primary cities – those with the largest one or two student populations in each market remain the focus for investors, continuing the trend of the past three years. However, interest in secondary and tertiary cities is growing. This diversification points to a maturing sector and greater confidence in opportunities beyond gateway cities.


Interest rates, affordability and rising costs concern investors

Interest-rate movements return to the top of investors’ concerns

Interest-rate movements are again investors’ leading concern in 2026. This year 90% of respondents said they were ‘somewhat’ or ‘very concerned’ about this, up from only 67% in 2025.

This reflects a shift in the economic and geopolitical backdrop. At the start of 2026, easing inflation and falling swap rates had supported a cautiously positive outlook as central banks cut interest rates. However, the subsequent conflict in the Middle East and higher oil prices have renewed inflationary pressure. The European Central Bank (ECB) has raised rates by 50 basis points (bps) since June, and the Bank of England is expected to follow in November.

We have also seen this play out in swap rates. Five-year swap rates today are over 100 bps higher across the UK and Europe than they were a year ago. This increase has a direct impact on the cost of financing for investment and development.

This is already showing signs of impacting investment levels. Following a strong Q1, where volumes across Europe were up 87% year on year, activity in Q2 and Q3 was both down on last year, resulting in the lowest level of investment in these two quarters since 2020.

AI is starting to impact operations and leasing

Another defining feature of 2026 has been the continued rapid expansion and adoption of AI. In previous years’ surveys, investors have ranked their concerns over AI and wider digital transformation near the bottom of the list. However, it has now become a more prominent concern, reaching 7th this year, with 56% of respondents saying they were concerned.

AI is already changing the student booking journey. Operators report a sharp rise in students using AI to search for accommodation, influencing both how they find rooms and when they engage in the booking cycle.

We therefore expect marketing strategies to place greater emphasis on visibility in AI results. Pricing may also shift towards early offers that secure occupancy, with rents rising as the leasing cycle progresses.


Housing affordability climbs the ranks

Housing affordability continues to rise up the list of challenges, with 89% of respondents saying they were concerned, albeit only 26% are ‘very concerned’. The challenge for investors in some markets is the difficulty in balancing the need to offer more affordable beds to attract a deep pool of demand, with the rising costs of delivering new schemes.

The issue of housing affordability more broadly remains a politically sensitive one across many European markets, with recent protests in Spain and Portugal, for example, around the cost of housing. Investors worry about the potential for government intervention in markets and the risk of increasing regulation that could spill into PBSA. Respondents to our survey are less concerned about regulations this year, with only 58% of respondents concerned compared with 89% in 2025.


Refinancing remains low on the list of concerns

After three years of concerns about refinancing falling, they rose again slightly in 2026. However, they remain near the bottom of the list, with only a quarter of respondents listing it as a concern.

This might seem counterintuitive in the current climate, where rates are rising and economic uncertainty is high. But this highlights the fact that there remains a significant pool of debt capital across funds and traditional lenders that wants to gain exposure to the living sector, including PBSA. As a result, we are seeing strong competition from lenders to back quality sponsors, leading to better terms and tight margins.


Diverging views on future availability of debt and equity

Weaker economic growth, inflation and rising interest rates might suggest a bleaker outlook for capital availability. Instead, respondents’ expectations for debt and equity are diverging.

Despite increases in underlying interest and swap rates, respondents in 2026 remain relatively optimistic on the availability of debt for PBSA over the next two to five years, with fewer concerned this year than last. This is especially the case for refinancing, where only c.20% are concerned about its availability. Even the outlook for development debt has improved, although it remains one of the biggest areas of concern for investors.

In contrast, investors have grown increasingly concerned about the availability of equity over the near term. This is clearest when asked about equity for refinancing stabilised assets, where nearly a third of respondents are concerned compared with only a fifth last year. This is reflective of the paucity of core capital active in the market and the rise in value-add capital, which is resulting in a mismatch between buyer and seller expectations on pricing.

Diversifying global capital base

European PBSA is expected to continue attracting global capital, although its primary sources may shift. North America accounted for close to two-fifths of cross-border investment between 2021 and 2025. However, only 47% of respondents expect investment from the region to increase in the next two to five years.

By contrast, 63% of respondents are expecting to see an increase in capital from Asia Pacific. The UK has long been a key destination for East Asian investors, and we are starting to see signs of these investors exploring opportunities across Continental Europe.

European investors are also likely to remain a key source of capital within PBSA, with close to three-fifths of respondents expecting an increase in capital over the next two to five years. This is a continuation of the trend seen in 2025, where European cross-border capital remains dominant, with €1.3 billion invested so far in 2026 (68% of total cross-border investment).


ESG remains a core focus for the sector

The road to net zero and driving up environmental standards in the built environment continue to be a core focus for both governments and industry. The coming years will see further tightening of building standards ahead of the need for zero-emission buildings across the EU from 2030. While the pace and stringency of rule tightening varies across the continent, the end goal is consistent. As a result, investors are having to consider what they do with stock that doesn’t meet future standards.

Across our respondents, the proportion of stock that needs to be brought up to ESG standards ranges from 0% to 100%, with an average of c.16%. This represents a not insignificant future challenge for some investors. When asked about what they plan to do with stock that doesn’t meet ESG standards, half said that they would either refurbish or demolish and rebuild.

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 Savills European Living survey at the beginning of this year.

Two-fifths of respondents said they would look to sell assets, similar to 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. This could align with the rise in investors targeting value-add returns and willing to take on a degree of development risk, if the cost of refurbishing isn’t prohibitive.

The challenges of developing new stock

The sector needs to deliver new stock to support the continued growth in higher education student numbers across Europe. While there are some markets, such as the UK, which have a high proportion of beds to students, the average across Europe is only 13% and is as low as 3% in Belgium.

Positively for the sector, respondents in 2026 paint a more optimistic view on acquiring land, with the proportion reporting difficulties in acquiring land falling to 53%, compared with an average of 77% over the previous three years.

However, investors still need to be mindful of several factors in choosing the right site. The most important factor reported by respondents was construction and site costs, selected by 63% of respondents, up from 50% in 2025 and only 31% in 2024. This reflects concerns around construction costs, highlighted earlier, which have risen to the third greatest concern for investors.

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.


Regulations are seen as a hindrance to investor appetite

Concerns around housing affordability are rising up the political agenda, as mentioned earlier in the report. While to date most regulation that has been brought in to address this issue has carved out PBSA, there is always the potential that this could change.

Fewer investors identify regulation as a near-term concern, but many remain wary of its potential future impact. The main concern is that affordability measures could make target returns harder to achieve, diverting capital towards other real estate sectors and constraining PBSA supply.

With the current market dynamics seeing rising costs of finance and construction stretching viability in many markets, if regulations limiting rental growth were brought in, it would remove one of the few levers available to make projects viable.

This underlines the importance of the sector engaging closely with policymakers and demonstrating PBSA’s contribution to higher education, wider housing needs and communities. Early engagement can help shape measures that support affordability without undermining delivery.

Encouragingly, more respondents recognise that long-term affordability regulation can mitigate investment risk. Consistent, predictable rules allow investors to assess opportunities against target returns. Uncertainty over future changes remains a significant disincentive.


Conclusion

European PBSA continues to attract capital, supported by rising student numbers and a persistent shortage of accommodation. Respondents’ expansion plans point to further growth, with Southern Europe remaining a priority and the UK also regaining investor attention.

Growing interest beyond primary cities signals a maturing market, although appetite alone will not close the supply gap. Translating this ambition into new beds remains the central challenge. Higher financing and construction costs are testing viability, while access to equity is more constrained than debt in parts of the market. Alongside new development, refurbishment offers an opportunity to modernise existing accommodation and improve environmental performance, provided the costs and risks support viable returns.

Closer collaboration between investors, operators, universities and policymakers will be essential to balance affordability with delivery. Stable, predictable regulation gives investors greater confidence to commit capital, while partnerships can help unlock sites and align accommodation with student needs. The Class Foundation’s National Action Frameworks* provide a platform for this engagement, helping translate shared ambitions into practical solutions.


*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.


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