Unite Group Faces Profit Downgrade as International Student Demand Wanes
The Unite Group, recognized as the United Kingdom's premier student housing provider, has announced a significant reduction in rental rates and tenancy durations across multiple locations, including Bristol, Nottingham, Leicester, and Sheffield. This strategic move comes in response to a notable decline in international student enrolment, which has severely impacted the company's financial outlook. Shares in the FTSE 250-listed firm plummeted by nearly 10%, reaching their lowest point since early 2015, as the group issued its third profit warning in just four months.
Market Challenges and Strategic Shifts in Student Accommodation
With only 68% of beds reserved for the upcoming academic year starting in September, Unite is refocusing its efforts on owning and managing properties in cities with high tariff universities—institutions that demand top A-level grades and Ucas points for admission. The company has ceased all new student housing construction, following the completion of its first build-to-rent project in Stratford, which offers 719 beds and is slated for June delivery. To bolster its financial position, Unite has escalated disposals and cost-cutting measures, including the £186 million sale of its St Pancras Way property in London, a 571-bed facility, to a joint venture with Singapore's sovereign wealth fund, GIC.
Impact on Rental Policies and Property Development
In cities identified as particularly challenging, such as Nottingham, Leicester, and Sheffield, Unite has reduced tenancy lengths from 51 weeks to 44 weeks and implemented rent cuts. Similar adjustments have been made in Bristol and at Burnet Court in Edinburgh, where weekly rents start from £250. Despite these setbacks, Unite's chief executive, Joe Lister, expressed confidence in the enduring global appeal of UK higher education, emphasizing the need to reposition the portfolio over time. The company recently acquired Empiric Student Property, adding 7,700 beds across 68 buildings in 22 cities, but warns that occupancy and rental growth will likely fall at the lower end of guidance ranges for the 2026-27 academic year.
Broader Trends in the Student Housing Sector
The student accommodation market, once a bright spot in Britain's commercial property sector attracting investors like Blackstone, has been hit hard by a decrease in overseas student applications. British universities reported a 6% drop in international postgraduate starters for the second consecutive year, exacerbated by government policies such as a new levy on international students and fewer sponsored study visas. Unite aims for annual property sales between £300 million and £400 million, starting this year, and has deferred or canceled development projects, including a £147 million scheme in Paddington and the Freestone Island project in Bristol. Analysts note that returning Unite to growth poses considerable challenges, with execution risks remaining high.
