Cracks Appear In The Student Accommodation Sector

Until now, listed UK student accommodation sector specialists had by and large insisted that, in spite of the impact of the coronavirus pandemic, things were not looking too bad for the 2020/21 academic year. But that veneer is starting to come under pressure.

In results for the six months to 30 June, Unite, the UK’s largest student accommodation company, said it expects rental income to be down 10% to 20% in '20/'21 compared to what it had expected in 2019/'20. That figure is predicated on there not being a significant second wave of COVID-19 cases that causes universities to suspend in-person teaching. 

A big part of the drop will come from a reduction in travel from foreign students, who make up a significant proportion of UK student accommodation residents, particularly in the more expensive properties. Unite cited a British Council survey that found that between one third and two thirds of international students were likely to choose not to study abroad. Unite said it would try and fill the gap with UK students. 

The pandemic is already hitting Unite’s income — it gave back a big chunk of the rent the students across its 76,000-bed portfolio paid for the summer term, costing it £27M, and leading to a 12% reduction in earnings per share compared to the same period in 2019. Overall it received £154M in rent in the half year. 

While its business has taken a short-term hit, Unite is looking to come out of the crisis stronger. In June it raised £300M from shareholders to fund its development pipeline and take advantage of peers that might run into distress.

Contact Mike Phillips at mike.phillips@bisnow.com.