Unite Students highlight strong market conditions

Unite Students announced a return to full occupancy in their recently published annual report. The UK’s largest PBSA operator pointed to the sustained growth in student numbers as key to driving this performance as well as a positive long-term outlook. 

83% of rooms sold for 2023/2024

In addition to achieving 99% occupancy for the current academic year, Unite has sold 83% of their rooms for 2023/24. The report noted a wider trend of students looking to secure rooms earlier than in previous years. By contrast, at the same stage in last year’s letting cycle, only 67% of beds had been sold. 

Students switching from HMO

One of the reasons identified for this trend is that students are switching away from HMO properties in favour of HMOs. According to Unite, there are two factors at play here; 

• Reduction in the number of HMO landlords
• Utility costs

The report highlights a reduction in the available supply of student housing as landlords are driven from the market by increased costs and regulations. The suggestion is that as HMO supply reduces students are choosing to rent rooms in purpose built student accommodation (PBSA).  

In addition, Unite highlight the increase in utility costs as a key factor, with students looking for certainty as these costs increase. 

£900 p.a. utility bills per student in HMO

Unite have calculated that the average annual utility bill will be £900 per student in a HMO. As a result, they claim their PBSA rooms become more cost-effective and the students benefit from the certainty of fixed bills inclusive rent.  

Their scale of operation means they have been able to hedge utility costs, keeping them to  £600 per student. These efficiencies are passed onto the students. It is interesting to note that  utilities have been fully hedged for 2023 but only 65% hedged for the next 12 months.  

Strong rental growth offsets costs

In positive news for the operator, they are forecasting a headline growth in rents across their 157-strong portfolio of up to 7%. This is following an increase of 3.5% in 2022/23. This increase has been achieved as a result of the high level of demand from a growing student population and is used by the group to offset increases in operating costs. Costs are being driven up by staff and cleaning costs increases of over £2 million and utility bill increases of £900,000 in the year. This increase in utilities has occurred despite the strategy of centralised hedging. 

£6.7 Million marketing costs 

Even though market conditions are favourable, Unite invests heavily in marketing to retain their brand presence as well as drive bookings. The report shows they have an extensive marketing budget which increased by nearly £1 million over the last 12 months.

Targeting the HMO market

The report reflects Unite’s confidence about the future, highlighting the growth in the number of  students. In particular, they focus on growing numbers of 18  year olds in the UK, which is likely to result in 140,000 additional undergraduate places by 2030.

They also identify the 1 million students who currently live in HMO’s as a key target and believe their all-inclusive offer, combined with a potential reduction in the number of landlords will make Unite attractive to them.

However, they acknowledge the relatively limited impact they can have on this market given that they have just under 5,000 bed spaces in their development pipeline, meaning they could house a mere 0.5% of the students who currently live in HMO’s. 

www.accommodationforstudents.com is the UK’s leading student accommodation website and features both PBSA and HMO properties.