Shares in student accommodation provider Unite Group (UTG) fell 9% after the company warned earnings would fall in FY26. The group said it had seen falling demand for university places, in particular from overseas students.
Double trouble
Unite reported a 9% increase in adjusted earnings to £232 million for FY25, which CEO Joe Lister called ‘robust’. While trading was strong in most areas, the firm noted weaker demand in some cities for the 2025/26 academic year.
Rent for 2025/26 rose 4% against an 8.2% rise for the previous academic year. Also disappointing, the occupancy rate dropped to 95.2% against 97.5% previously.
For the 2026/27 year, reservations were 68% against 71% for the current year, with fewer beds ‘nominated’ by universities. The firm predicted just 2% rental growth for 2026/27, the low end of its range, and 93% to 96% occupancy.
Compounding matters, the acquisition of Empiric Student Properties won’t deliver the hoped-for uplift with income for 2025/26 below expectations. As a result, group FY26 EPS are seen between 41.5p and 43p against 47.5p in FY25 and the 43.6p consensus.
With growing demand for higher education, providing student accommodation used to be a guaranteed money-spinner. Unite’s high-quality offering also tended to attract wealthier students, including a high proportion from overseas.
However, demand from international postgrad students has fallen due to visa policy changes. At the same time, there has been an increase in students opting to live at home, impacting lower-ranked universities.
Therefore, rents can’t be increased as much as they have previously, and occupancy is below the 97% target. Moreover, the proportion of university ‘nominated’ beds is below the firm’s 60% target and falling.
While shareholders might normally brush these off as temporary trends, they are less forgiving when it comes to M&A. The Empiric deal was based on continued strength in the higher spending ‘Returner’ market and EPS accretion in year one.
Instead, Empiric is trading below expectations and will actually detract from earnings this year. In fairness the firm has raised its annual synergy target from the deal, but it’s small consolation for investors.
Read the press release here: https://www.unitegroup.com/investors
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