Rents for purpose-built student accommodation (PBSA) increased by 2.36% for the 2019/20 academic year, up from 2.26% in 2018/19.

While the macro picture shows steady rental growth, there are variations in performance dependant on both location and property type, highlighting the importance for investors, funders and developers of adopting a localised approach when examining individual markets.

In our analysis, rental growth has been weighted to reflect the split of bed spaces by room type in each individual city market, as well as the size of the market by total bed spaces.

Some other key trends identified by our research include:

1. Stronger rental growth for rooms within cluster flats with shared facilities compared with self-contained studios.

Both en suite and non-en suite rooms outperformed studios in terms of rental growth, with such outperformance reflecting the higher level of demand for more affordable bed spaces.

Average weekly rents for en suite rooms, which comprise 48% of PBSA across the UK outside of London were up 2.46%. Studios, meanwhile, which account for 23% of PBSA rooms in the UK and 40% in London, were 2.13% higher year-on-year. The average rent for an en suite room outside of London is £130 per week, whilst studios are £175 per week on average.

The importance of affordability when it comes to driving demand was highlighted in the results of the 2018/19 Knight Frank Student Accommodation Survey, undertaken in partnership with UCAS, with 97% of respondents ranking value for money as being important when choosing where to live.

2. Rooms with the lowest rents have seen the highest rental growth

The higher levels of demand for more affordable bed spaces also resulted in variations in rental growth dependant on price, regardless of room type. Generally, rooms with the most modest rent - where demand tends to be greatest - have seen the strongest rental growth. Growth at the top end remains positive, but lower overall.

Take London, for example. Rental growth in the city averaged 2.61% in 2019/20. However, above average increases were seen for bed spaces priced in the lowest quartile of stock compared with higher priced rooms, as the chart below shows.

A shortage of new PBSA accommodation at the most affordable end of the market is likely to continue to underpin above average rental growth for lower quartile-priced stock.

3. Rental outperformance in university-owned and university-linked schemes

University-owned and managed schemes and privately-owned schemes with nominations agreements with universities - which act as a guarantee for full occupancy - both reported above average rental growth. Outperformance was particularly noticeable at the premium end of the market.

Stronger rental growth for studios within such schemes is explained, in part, by the fact that they tend to trade at a discount compared with the direct let market – the data shows that the average weekly rent for a studio in a scheme with a nominations agreement with a university, or one within a university-owned scheme is £185 per week, compared with £216 for a studio on the direct-let market, some 16% lower.

Growth is also underpinned by their relative scarcity, with studio provision within university-owned schemes and schemes with nominations agreements representing just 11% of the total PBSA market.

Individual markets, meanwhile, are seeing varying levels of performance, largely dependent on the balance between supply and demand. We have examined them in more detail here.