Unite Group, the UK’s largest provider of student accommodation, has announced significant changes in response to a notable drop in international student enrolment. The company has lowered rents and tenancy durations at various sites, including Bristol, while also revising its profit forecasts for the third time in four months. This shift comes as Unite grapples with the implications of reduced demand, leading to a marked decline in its share price.
Declining Demand and Financial Adjustments
The recent downturn in international student applications has prompted Unite Group to revise its profit outlook downwards, signalling an ongoing challenge for the company. Shares of the FTSE 250-listed entity plummeted nearly 10%, hitting levels not seen since early 2015. The firm has indicated it will halt any new construction of student housing after completing its first build-to-rent project in Stratford, which will provide 719 beds and is expected to be ready by June.
Currently, only 68% of Unite’s accommodation is booked for the upcoming academic year, leading the company to concentrate its efforts on maintaining and managing properties in cities with prestigious universities that require high A-level grades for admission.
Strategic Changes in Housing Offerings
In response to the shifting landscape, Unite has implemented cost-cutting measures and is actively selling off assets. A key move includes the £186 million sale of St Pancras Way, a 571-bed property in London, to its joint venture with Singapore’s GIC, the Unite UK Student Accommodation Fund.
Karan Khanna, Unite’s Chief Operating Officer, noted that cities like Nottingham, Leicester, and Sheffield have presented the most significant challenges, leading to reductions in both rent and tenancy durations from 51 weeks down to 44 weeks. In Bristol and Burnet Court in Edinburgh, where room rates begin at £250 per week, similar adjustments have been made to encourage occupancy.
Future Prospects and Market Analysis
Despite the current challenges, Unite’s Chief Executive, Joe Lister, expressed optimism regarding the enduring global appeal of UK higher education. He acknowledged ongoing changes in student demographics, including a trend of students remaining closer to home and a decrease in international postgraduate enrolments. Lister stated, “We should be focusing on those high tariff universities; we have seen changes in the marketplace coming from the move to more students staying at home and the fall in international postgraduates.”
The company is also looking towards significant property sales in the coming year, aiming to divest between £300 million and £400 million worth of assets annually. This decision comes alongside a strategic halt to previously planned developments, such as a £147 million project in Paddington and a 500-bed scheme in Bristol, as they reassess the best use of their land holdings.
The Current Landscape of Student Accommodation
The overall student housing market was once viewed as a reliable investment, attracting significant interest from private equity firms such as Blackstone. However, a recent downturn in international student applications has raised concerns. A government-imposed levy on international students and stricter visa regulations have both contributed to a 6% decrease in new postgraduate enrolments, marking the second consecutive year of decline.
Unite recently expanded its portfolio by acquiring Empiric Student Property, adding 7,700 beds across 68 buildings in 22 cities. However, the company has cautioned that occupancy and rental growth for the 2026-27 academic year will likely fall at the lower end of its expectations, with projections of just 93%-96% occupancy and rental growth of 2%-3%. This translates into minimal like-for-like income growth, expected to be between zero and 2%, a reduction from the previously anticipated range of zero to 4%.
Analysts have voiced concerns about Unite’s path to recovery, with Peel Hunt’s Matthew Saperia noting the considerable challenges ahead for the firm as it seeks to return to a growth trajectory.
Why it Matters
The adjustments made by Unite Group reflect broader trends in the UK higher education sector, where fluctuations in international student enrolment are reshaping the student housing market. As the company navigates these challenges, its strategies will likely influence the accessibility and affordability of student accommodation across the UK. The evolving landscape poses serious ramifications not only for the business but also for the students who rely on these services amid changing economic conditions and educational policies.
