Unite Group confident amid strong student demand

(Sharecast News) - Student accommodation provider Unite Group issued a promising update on current trading and property valuations on Monday, as it anticipated nearly full occupancy and significant rental growth for the upcoming academic year. The FTSE 100 company said that for the 2024-2025 academic year, it was confident in achieving 98% to 99% occupancy, with 94% of rooms already reserved.

It said that strong demand was supported by universities securing 1,000 additional beds through nomination agreements compared to the prior year.

International students remained a robust segment, accounting for 18% of the portfolio's direct let tenancies, despite visa changes for family members of postgraduate students.

Unite said it expected rental growth of at least 7%, up from the previous forecast of 6%.

That growth would be bolstered by £47m in asset management initiatives, expected to yield an 8% return.

The company's strategy of balancing rent increases with property improvements aims to sustain long-term growth and value for students.

Unite said the Labour Party's manifesto highlighted the economic importance of UK higher education, with aims to enhance university access for a growing 18-year-old population.

Additionally, a review of the graduate route for international students recommended maintaining current visa policies, a decision upheld by the previous government.

Unite said its development plans were progressing, with the Central Quay project in Glasgow receiving planning approval.

The £124 project, expected to be completed by the 2027-2028 academic year, would offer 934 beds with a 7.5% yield on cost.

In Newcastle, planning consent was granted to demolish existing buildings at Castle Leazes, with a new 2,000-bed development planned.

USAF's property portfolio saw a 3.2% increase in value, reaching £2.93bn, driven by 3.3% quarterly rental growth.

The portfolio, with a yield of 5.2%, included 25,602 beds across 66 properties in 19 UK cities.

LSAV's portfolio increased by 2.8% to £1.96bn, with a 2.9% rental growth, maintaining a 4.5% yield.

It comprises 9,708 beds in London and Birmingham.

Unite said it was continuing to explore further development opportunities and university partnerships, particularly in London and other strong regional markets, aiming to expand its pipeline in the latter half of the year.

"Student demand remains strong from both domestic and international students, reflecting the continued appeal of UK higher education, our fixed-priced, all-inclusive offer and the growing shortage of high-quality student homes," said chief executive officer Joe Lister.

"Together with our alignment to the UK's strongest universities, this supports stronger rental growth for the 2024/25 academic year and underpins growth in our property valuations."

Lister said the company had also made further progress with the delivery of its record development pipeline, with significant planning milestones in Glasgow and Newcastle.

"These projects will deliver much needed new student homes in some of the UK's strongest university cities."

At 0817 BST, shares in Unite Group were up 0.98% at 927p.

Reporting by Josh White for Sharecast.com.