Unite Group, the UK’s largest provider of student accommodation, is adjusting its business strategy in response to a notable decline in international student enrolment. The company has revised its profit forecasts downward for the third time in just four months, prompting measures including rent reductions and shorter tenancy agreements at several locations, particularly in cities such as Bristol.
Significant Drop in Demand
As international applications for UK universities decline, Unite Group is feeling the impact. The company reported that only 68% of its student beds have been booked for the upcoming academic year, underscoring the need for swift action. In response, Unite is shifting focus towards managing properties in cities with high-demand universities, which typically require higher A-level grades for entry.
The company’s shares plummeted by nearly 10%, reaching their lowest point since early 2015, as investors reacted to the weakened demand for student housing. Unite announced a significant reduction in its projected construction of new beds following the completion of Hawthorne House in Stratford, which will add 719 beds to its portfolio.
Strategic Changes and Cost-Cutting Measures
In an effort to navigate these challenging waters, Unite has initiated a series of disposals and cost-reduction strategies. The recent sale of St Pancras Way, a 571-bed property in London, for £186 million to the Unite UK Student Accommodation Fund—its joint venture with Singapore’s GIC—illustrates this strategic pivot.
Karan Khanna, Unite’s Chief Operating Officer, highlighted that cities like Nottingham, Leicester, and Sheffield are experiencing the most significant challenges. In these areas, the company has reduced both the duration of tenancies—from 51 weeks to 44 weeks—and rental prices, with rates starting at £250 per week in places like Burnet Court in Edinburgh.
The Broader Market Context
The situation is exacerbated by a broader decline in international student enrolment in the UK, with universities reporting a 6% drop in postgraduate applications for the second consecutive year. Factors contributing to this trend include a new government levy on international students and a reduction in the availability of sponsored study visas.
Unite has also recently acquired Empiric Student Property, adding 7,700 beds across 68 buildings in 22 cities, which the company hopes will enhance its competitive position. However, forecasts indicate that occupancy rates and rental growth will likely fall at the lower end of the company’s guidance, projecting zero to 2% growth in like-for-like income for the 2026-27 academic year.
Future Outlook and Challenges
Unite aims to achieve property sales between £300 million and £400 million annually, beginning this year. However, it has also put a hold on several development projects, including a £147 million initiative for 605 beds in Paddington and a deferred 500-bed scheme in Bristol. The company is actively exploring various options for its landholdings, which could yield an additional 2,400 beds, including potential sales and joint ventures.
Analysts, such as Matthew Saperia from Peel Hunt, caution that returning Unite to a growth trajectory will be a complex endeavor, with significant execution risks. Meanwhile, Unite’s Chief Financial Officer, Michael Burt, noted that despite an increase in the overall supply of purpose-built student accommodation, it remains at approximately half of pre-pandemic levels.
Why it Matters
The adjustments being made by Unite Group reflect broader trends within the UK’s higher education landscape and the commercial property market. As international enrolment continues to decline, the response from major housing providers like Unite will have significant implications for both students and investors. The ability of these providers to adapt to changing market dynamics will be crucial not only for their own sustainability but also for the future of student accommodation in the UK.
