A drop in the number of international students coming to the UK has hit the student housing provider Unite Group, which lowered its profit outlook for the third time in four months as weaker demand prompted it to cut rents in some cities.
Shares in the FTSE 250-listed company – which says it is the UK’s biggest student housing provider – fell almost 10% to the lowest level since early 2015. It said it would build far less student housing, after the completion of Hawthorne House in Stratford with 719 beds, expected in June.
Only 68% of Unite’s beds are reserved for the next academic year from September, prompting it to focus on owning and managing student accommodation in cities with “high tariff universities” – those requiring the best A-level grades from students and the most Ucas points for entry.
Unite is stepping up disposals and cost-cutting measures, as it announced the £186m sale of St Pancras Way, a 571-bed property in London, to the Unite UK Student Accommodation Fund, its joint venture with Singapore’s sovereign wealth fund GIC.
Karan Khanna, the Unite chief operating officer, said the “most challenging” cities were Nottingham, Leicester and Sheffield, where the group had reduced rents and tenancy lengths from 51 weeks to 44 weeks, with similar changes in other places, such as Bristol and at Burnet Court in Edinburgh, where student rooms start from £250 a week. It often offers shorter tenancy agreements, with the same weekly cost but lower overall cost.
Expressing confidence in the enduring appeal of UK higher education globally, Joe Lister, the Unite chief executive, added: “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, and repositioning the portfolio will take some time.”
With a shortage of affordable digs across the UK, student accommodation was, until recently, a bright spot in Britain’s commercial property sector, attracting private equity investors such as Blackstone, but has been hit by a drop in overseas student applications.
British universities reported a fall in the number of international students starting postgraduate courses in September for the second year in a row, down 6%, according to a survey. The government announced a new levy on international students last year, and granted fewer sponsored study visas.
Unite, which has just acquired Empiric Student Property with 7,700 beds across 68 buildings in 22 cities, warned that it would deliver occupancy and rental growth towards the lower end of its guidance ranges, of 93%-96% and 2%-3% respectively in the 2026-27 academic year. This will translate into like-for-like income growth of zero to 2%, down from zero to 4%.
The company is aiming for between £300m and £400m of property sales annually, starting this year.
As a developer, it recently ditched a £147m project for 605 beds in Paddington and deferred its 500-bed Freestone Island scheme in Bristol. It is exploring “all options” for the land it owns – sites for an additional 2,400 beds – including selling them and joint ventures.
A Peel Hunt analyst, Matthew Saperia, said: “The job of returning Unite to growth remains considerable, and execution risk remains high.”
The Unite chief financial officer, Michael Burt, said that, although across the market the new supply of purpose-built student housing increased last year, it remained at about half of pre-pandemic levels.
