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Investment into the UK PRS, senior living and student accommodation sectors is expected to reach £146bn by 2025 – up from £87.3bn pitched this year.

The numbers are crunched by Knight Frank’s inaugural Residential Investment report, which looks at the sector as a whole for the first time.

This comparison shows that over the next five years the investment-grade PRS sector is set to leapfrog Student Accommodation, in terms of size, with the sum of capital invested and committed in the investment-grade private rented sector (forecast to be £75bn) rising to more than the total value of the Student Accommodation sector (forecast to be £65bn).

Combined value includes investment into purpose-built student accommodation (including university-run and private PBSA), institutional grade PRS investments (including co-living, Built-to-Rent flatted schemes and single family housing) and purpose-built senior living rental accommodation.

When assessing where investment is coming from, the heads of our three specialist teams at Knight Frank cited the USA, Canada and the UK as counties from which they have seen the most activity in recent years.

“The growth of these sectors is mainly down to investor appetite for diversification, the granularity of occupiers that comes with individual units, demographic and tenure shifts and a housing policy landscape in the UK that is now embracing diversity of tenure,” said James Mannix, Joint Head of Residential Development & Investment at Knight Frank,.

“While there are significant differences in market drivers for each sector, there are key synergies in construction and operations, making a move across sectors even more appealing for investors,” he said.

Knight Frank also surveyed 43 leading investors, with a combined £32bn already invested across Student Accommodation, PRS and Senior Living Rental.

Key findings include:

  • 35% of respondents expect to be active across all three sectors (PRS, Student Accommodation and senior living rental) in 2024, up from 13% today.
  • In addition, 70% expect to be active in two sectors, up from the present 40%
  • 67% intend to increase holdings in residential investments over the next five years
  • When asked which sector would outperform in 2019, our survey respondents suggested that investment-grade PRS would narrowly beat Student Accommodation to the post

When survey respondents were asked to identify locations which would outperform over the next five years, London and Bristol emerge as key opportunity areas across all three sectors.

This suggests an overlap of the different drivers for each sector to provide a favourable investment environment – from strong student demand, large-scale city regeneration and development as well as strong employment conditions, and finally a lack of senior living units.

Birmingham is identified as the best opportunity for PRS by quite some margin, according to respondents, driven by regeneration and infrastructure improvements.

When asked about future rental growth, respondents expect annual rental growth in London Student Accommodation to be 3.2%, and 2.4% in the regions over the next five years.

Investors in the PRS sector also expect average annual rental growth in London  (2.9%) to be stronger than that of the regions (2.6%) over the same period.

Senior living rental growth is expected to be stronger again, at 3.5% in London and 3.2% in the regions, according to respondents.