Rental growth is a pivotal metric for investors, developers, and operators in the PBSA (Purpose Built Student Accommodation) sector, commonly used to gauge market health, asset performance, and investment viability. However, relying solely on city-level rental growth figures can be significantly misleading, masking crucial nuances that dramatically affect how these figures should be interpreted, according to Calum Martin, research analyst at StuRents.

Martin says: “In the PBSA market, pricing dynamics are uniquely complex. Factors such as dynamic and tiered pricing strategies, inconsistent room categorisation across operators, varying contract lengths, and the divergence between rental growth and contract value growth further complicate accurate year-on-year comparisons.”

Martin says that simplistic rental growth comparisons at the city level can distort the true picture of market performance. “We delve into common pitfalls, illustrate how underlying factors impact growth calculations, and provide practical recommendations for effectively interpreting rental data, ensuring your strategic decisions are grounded in meaningful data.”

Contract length variation
One critical consideration is the variability in contract lengths across the PBSA sector. Analysis of tenancy lengths signed via the Concurrent platform shows significant diversity, where over 40% of PBSA contracts are being signed are for 51 weeks. Shorter contracts, for example, 44 weeks, represent 19.8% of signed tenancies.

To accurately assess PBSA rental growth, Martin says that investors, developers, and operators need to look beyond simple year-on-year comparisons based solely on advertised weekly rents as differences in contract lengths significantly impact the true revenue generated by a room, making total contract value a more reliable measure.