A majority (72%) of investors are considering Scotland’s living sector in 2025, with interest highest among investment managers (86%) compared to fund investors (50%). The end of rent caps from April 2025 could provide greater stability, supporting growth in a market already facing a housing shortage, particularly in Edinburgh and Glasgow.

Lismore’s research found that portfolio diversification (26.8%) is the primary driver of investment in this market, followed by minimal void risk (24.7%) and liquidity (22.3%), highlighting investors’ focus on stability and resilience.

Sustainability (28.3%) remains a top priority for PBSA investors, reflecting the sector’s alignment with ESG standards, while demand is also driven by unit mix considerations (24.1%) and reliance on overseas students (23.0%), particularly in prime locations near Russell Group universities.

Chris Thornton, associate director of Lismore, said: “The PBSA sector continues to be one of the shining lights, performing strongly, driven by resilient demand and stable capital values, particularly in cities with a Russell Group university. Despite concerns over international student numbers, institutional investors, private equity firms and specialist platforms remain highly engaged in this sector.”

Murdo Mcilhagger, managing director of MYS Student Living, added: “The PBSA market has returned to fundamentals, with strong assets continuing to perform well, supported by macro tailwinds such as growing international student demand and policy shifts. While transaction volumes remain below average, activity is picking up as debt costs ease.

“Investors must focus on customer demand, location quality and operational efficiencies, particularly as sustainability becomes a key factor in both revenue generation and cost management. However, challenges persist, including a lack of sellers, thin interest in secondary assets and fire safety remediation impacting liquidity.”

Elsewhere in the market, Lismore’s quarterly review statistics show that it has been relatively slow start to the year, with cautious investor sentiment, limited stock availability and ongoing economic uncertainty dampening activity.

Transaction volumes in Q1 totalled £202 million, with the largest transaction being Realty’s £66.20m acquisition of Abbotsinch Retail Park in Paisley (as part of a portfolio) from Ashby Capital.

Other notable transactions included L&G’s purchase from Glencairn Properties of the PBSA development at Lower Gilmore Place, Edinburgh for £35m, Cervidea’s acquisition of 98 Buchanan Street / 31 Royal Exchange Square in Glasgow for £13.80m and French investor, Remake Asset Management’s acquisition of the Nike Store at 18-20 Buchanan Street, Glasgow for £11.87m.

Chris Thornton concluded: “The commercial property market remains cautious amid a mixed economic backdrop and geopolitical uncertainty, with a lack of quality stock delaying significant activity until Q2. Private capital continues to target prime city assets, while selective office yields attract opportunistic buyers.

“As spring arrives, signs of renewed momentum are emerging, particularly in the most liquid sectors - industrial, retail warehousing and living.”