Student accommodation giant Unite has experienced another decline in property valuations as elevated interest rates and softer rental income continue to impact the FTSE 250 landlord.
The Bristol-headquartered company announced on Thursday that its UK Student Accommodation Fund dropped in value by four per cent during the third quarter to £2.8bn, while its London-focused joint venture recorded a 3.4 per cent fall to £1.9bn.
Higher yields and weaker rents
The decreases were attributed to higher yields being demanded by investors and weaker rental income across certain properties, compounding difficulties for the group following a £417m pre-tax loss reported in July.
Unite, the country's largest student accommodation provider, confirmed that 95.6 per cent of its beds have been reserved for the 2026 to 2027 academic year, marginally up from last year's 95.3 per cent.
Nevertheless, strategic rent cuts implemented to secure tenants meant that like-for-like rental income rose by just 0.6 per cent, with average annual rents dropping 0.3 per cent, as reported by City AM.
Pricing strategy and disposals
The firm has been modifying its pricing to boost occupancy levels, including in Nottingham, where this approach helped drive income up by 15 per cent.
Chief executive Joe Lister said Unite had achieved bookings in line with forecasts despite shifts in student demand and university practices.
"We are making good progress on our strategy to increase alignment to the UK's strongest universities and are on track to deliver £300-400m of disposals this year in a market which continues to adjust to higher interest rates", he said.
The landlord has already completed £200m of property sales this year, at an average six per cent discount to book value, with another £225m of assets under offer.
Portfolio reshaping
It intends to reduce its portfolio from 70,500 beds to between 55,000 and 60,000, focusing on universities where demand remains at its most robust.
Unite also reported an improvement at Hello Student, the business acquired through its takeover of Empiric, where occupancy rose to 92 per cent from 87 per cent a year earlier.
The company held firm on its full-year adjusted earnings guidance of 41.5p to 43p per share.
The update comes in the wake of a challenging first half for Unite, when a £530m property revaluation contributed to a £417m pre-tax loss, wiping out a £186m profit recorded in the same period the previous year.
Elevated borrowing and construction costs have taken their toll on the broader property sector, with Unite having previously cautioned that developing new student accommodation outside London had become increasingly challenging.
