Business Insights: Unlocking the PBSA Opportunity: Develop, Refurb, Reposition

Fundraising and capital allocation strategies across real estate have been adjusting to market conditions. The PERE Fundraising Report H1 2026 shows that, in 2021, 15% of global private real estate fundraising was into Core or Core+ strategies. As the cost of debt moved out in 2024 there was a big pivot towards credit strategies which provided attractive risk-adjusted return profiles, with 30% of funds raised globally favouring credit strategies. However, with lending competitive and many credit funds under deployed over the last 18 months, there are early signs of a pivot into Value-Add (VA) equity strategies, which have accounted for 39% of funds raised in H1 2026. This is comfortably higher than the proportion for VA seen over any of the previous five years.

This has translated into a changing nature of PBSA deal activity in recent years. Since the start of 2025, there has been a handful of deals of 1^st and 2^nd generation PBSA assets built 5-10 years (or longer) ago, at blended yields of high 5% to 6%+. There are more investors looking for repositioning business plans that are less exposed to higher day one costs. By refurbishing and improving the product, operational efficiencies and rental reversion can support growth in the net operating income (NOI) to help deliver an internal rate of return (IRR) in the mid-to-high teens.

The majority of 1^st and 2^nd generation portfolios have an average capital value per bed below the current replacement cost. This is partly a function of the yield but, more importantly, a function of a more affordable rental value versus new-build product. The future development pipeline is unlikely to compete at a similar rental level to refurbished older stock, particularly in prime locations.

The UK has the most mature PBSA market across Europe, with over 750,000 student beds, according to CBRE data. As a result, the sector has an ageing stock profile with 219,000 (28%) of those beds being privately-owned and built before 2016 and 363,000 (46%) built before 2021. This represents a significant portion of the market that was built before the sector became increasingly professionalised, before fire safety regulations were tightened and before the bar for student expectations around living and study spaces had been raised. There is a clear gap between what these assets are offering versus what the market is demanding.

Older schemes do, however, have the benefit of typically being in prime locations as they were the ‘first movers’ in the market. This is something that cannot be built, particularly in urban areas where land availability is limited. Their building integrity is solid and the rent profile is often lower or more affordable, as they were largely developed with cluster models or non-en-suite, providing the opportunity for room enhancements and adding amenity. These are the kind of assets that fit the profile for refurbishment-led acquisition and they are plentiful. A number of these assets are owned by relatively passive investors who are not typically engaged in the day-to-day operations, providing further potential improvement to the student experience.

Through focusing on those assets with lower to mid-market day 1 rents, enhancement capex enables the end product to still deliver value-for-money offering to students, rather than relying on the need for premium-end market pricing, Clearly the asset base is there in strong micro-locations, and so is the case for refurbishment. Whilst improvement in net operating income can be driven by asset repositioning and increase in headline rents, there is often also the opportunity to optimise operational expenditure from initiatives such as energy efficiency improvements. Taking on fire safety remediation as part of a business plan also ensures asset compliance as well as future-proofs the asset to ensure exit liquidity.

Refurbishment is not a single strategy, and it will likely involve multiple levers depending on the value-add plan deployed.

• Reversion potential: Repositioning the amenity offering with social lounges, dedicated study and dining spaces or the addition of a gym to directly support reversion.
• Compliance / risk reduction: Remediation of unresolved fire safety obligations under the new Building Safety Act and PAS 9980 compliance removes uncertainty that has inhibited transaction activity. Schemes with clear fire safety certification and regulatory compliance protect capital value and support exit strategies.
• OPEX optimisation: Achieved through initiatives such as the implementation of energy efficiency management and smart controls to reduce running costs. This will not only protect NOI, but future-proof assets against ESG regulations through improved EPC ratings and reduced consumption.
• Occupancy protection: Managing the refurbishment programme through rolling-refurbishments or realising works through the summer period can maintain occupancy during works.
• Speed to market: Refurbishment programmes can move from acquisition to income uplift significantly faster than a ground-up development, particularly as funding cycles lengthen and planning risk increases for the latter.

Watkin Jones Group is one of the UK’s leading residential-for-rent developers and regeneration specialists. Refresh is a dedicated division created by Watkin Jones to respond to the growing market need for PBSA refurbishment, remediation and repositioning. It enables works to be delivered across schemes directly managed by Fresh, as well as for other clients and operators looking to enhance asset quality, improve the resident experience and protect long-term value.

At the lighter end, refurbishment can be largely aesthetic: replacing kitchens and furnishings, upgrading in-room fixtures and installing energy-efficient lighting to improve EPC ratings and drive immediate rental uplift. Refresh worked across a client’s six-asset Bristol and Glasgow portfolio delivered exactly this, with 800 beds refurbished across both locations in an eight-week accelerated programme.

At the other end of the scale sits pure remediation, removing non-compliant façade elements and installing replacement cladding systems in line with Building Safety Act requirements, as delivered at a property in Poole. The external fabric repairs ensured long-term building performance and durability. Due to the scale of the works and collaboration with Fire Engineers, Building Control and Principal Designers, the programme lasted 55 weeks.

The oldest and most underinvested assets in the market will often require both aesthetic improvement and compliance remediation, particularly where previous owners have not deployed accretive capital expenditure.

There were 148,350 international UCAS applications by the June deadline in 2026, 7.1% more than 2025, while domestic applicants increased by 3.9%. This meant there were an additional 9,900 and 20,800 international and domestic applications respectively. Acceptances to Russell Group universities increased by 9.4% in 2025/26, reaching 169,000, which was an additional 14,500 students from 2024/25. This followed on from an 8% increase in the previous year, highlighting that student demand for top-tier higher education shows no sign of slowing.

Age of stock is not evenly distributed across the UK. In London, more than 70% of all PBSA beds, including university-managed accommodation, are more than 10 years old. Across the largest regional markets of Nottingham, Leeds, Liverpool, Sheffield and Manchester, that figure exceeds more than 60% of total beds, with 50% of private beds alone pre-dating 2016. By contrast, cities that have seen high levels of recent development, such as Brighton, Belfast and Exeter, have a younger private stock base, with more than 65% of beds built in the last 10 years, leaving less room for the refurbishment play.

Delivering new PBSA beds from scratch is difficult in the current climate. Viability is challenged and development land in prime locations is limited. The refurbishment strategy therefore presents a real opportunity to invest in the PBSA market. The assets that fit the criteria are those with strong underlying locations, in markets where new-build supply is most constrained and where there is a demonstrable gap between what the current asset offers and what a repositioned one could provide.

As the sector matures around refurbishment, the number of available assets that meet a tight selection framework will fall. Clearly defined asset selection and strong operator relationships will be vital to make the opportunity work.