Unite Students, the UK’s leading owner, manager and developer of student accommodation, has published an update on the potential impact of Coronavirus on its business.
Coming from such a substantial player in the field, this provides an interesting insight into the student letting market and how changes could impact on many lettings agents and landlords who rely partly or wholly on this sector for their incomes.
2019/20 academic year
In line with our previous announcement, we have contacted students to see if they wish to leave their accommodation for the summer semester of 2019/20.
Based on cancellation requests received to date, we expect to forgo rent on around 43,000-46,000 beds representing around 62-65% of all owned and managed beds.
Our remaining beds are accounted for by students who have chosen to continue their stay with us and beds let under nomination or lease agreements, where Universities collect rent directly from students (21% of beds).
Reflecting the strength of our University partnerships, we have received 94% of the rent due to date in April under these nomination and lease agreements.
Remaining payments by Universities for the summer semester are staggered between April and September 2020.
Overall, we expect a reduction in income from the 2019/20 academic year of 16-20% on a Group share basis, an improvement on our previous expectations.
2020/21 academic year
Reservations across the Group for the 2020/21 academic year are currently at 80%, compared with 81% at the same time last year.
Positively, we have seen healthy levels of demand from UK students, reflecting our decision to switch the focus of our sales and marketing efforts to the domestic market.
We are still seeing enquiries from international students but, as expected, demand has slowed.
Nomination agreements account for 70% of reservations secured for 2020/21 with over two-thirds now contracted, including multi-year agreements and single-year extensions which have already been signed.
A number of Universities have already begun to allocate students to us for the new academic year, reflecting confidence around their accommodation requirements.
The majority of the non-contracted income is accounted for by High and Mid-ranked Universities where we have long-standing relationships.
We will maintain a close dialogue with our University partners as their accommodation requirements for 2020/21 become clearer.
In the event beds are not taken up by Universities, we are ready to shift our sales focus to a direct-let basis where we are already targeting students living in houses of multiple occupancy (HMOs).
Higher Education sector outlook
The Government’s central planning scenario is for the 2020/21 academic year to start in September, broadly in line with the usual admissions cycle.
This follows confirmation that students will receive their A-level results on 13 August as originally planned.
However, there is still some uncertainty over start dates for the academic year, which could result in both a later start and finish to the autumn semester.
Universities UK recently proposed a package of support measures for Universities to counter the risk of a reduced intake of first-year students from non-EU countries.
The proposal includes increased research funding and one-year student number controls to ensure the financial viability of all Universities.
The Government is expected to publish its response in the coming weeks.
We will continue to work closely with our University partners to adapt to any changes in admissions for the coming academic year.
There are 1.5 million full-time students in the UK seeking accommodation, of which 1.2 million are domestic students living away from home and international students studying multi-year courses.
We expect Universities to offset a potential reduction in first-year international student intake by recruiting additional UK students from surplus applications, which totalled 101,000 in the 2019/20 academic year.
We also expect demand for purpose-built accommodation to be supported by market share gains from the 865,000 students currently living in HMOs.
We have already shifted the focus of our marketing activity to target students living in HMOs, where we believe that our offer of purpose-built, affordable accommodation with a range of value-added features such as 24-hour security, all-inclusive bills and on-site support will be considered an attractive alternative.
Even a small shift of students from HMOs to purpose-built student accommodation would help to substantially offset potential reductions in international student numbers.
Comments (5)
This statement is for the investors….. the ship has sailed on the Unite offering, and the big pot of cash they have just landed from Canadian Pension funds will prop them up. In Oxford they have let all their students go…. my guess is they are less than 40% occupied, and many of The Brookes overseas students will not return opting instead for online learning. Given the hole in income plugged temporarily with capital it seems to me that their already maxed out rents will have to go up? The huge returns they have promised investors will not be reached, and the blocks will be repurposed for key workers and the homeless.
Yes, I’ve always said that it is only a matter of time before they become repurposed for the lowest-paid/homeless. It’s been predictable from the start.
They want to steal students from HMOs? Very interesting.
I am not convinced by this particularly for domestic students. You can see why PBSA suits foreign students: 1 cheque, all shiny, ensuite, all easy.
But PBSA lacks character and you lack independence. You have to obey the rules.
If the HMO is reasonably priced and good quality I just cannot see Unite switching people out of them.
So I think Unite will have to lower their prices to tempt students; I don’t see that discussion in their press release.
My hearts bleeding for them. They been creaming off the top end students for years and now they’re getting their comeuppance.
They’ll have to slash their rents to compete with HMO’s, the gravy train has come off the rails.
I have already shifted the focus of my marketing activity to target students who would normally live in far more expensive, small box-type, purpose-built, accommodation with my offer of far more affordable accommodation in HMOs, that is real homes in the community, where students have far more space to knock around in and don’t feel they’re living in an institution. If required, I will also offer all-inclusive bills and of course always offer 24-hour support for any issues. I believe this will be considered an attractive alternative (lol).