Unite Group PLC is the largest provider of student accommodation in the UK offering some 42,000 rooms in 23 locations and has ambitious plans to provide many more.
According to a recent This Is Money report there are around 1.4 million fulltime students in the UK and only 150,000 who stay at home. The rest need somewhere to live when they attend colleges throughout the UK.
British universities must guarantee student accommodation to all first-year home and overseas students, now totalling around 600,000. However, the universities themselves are only able to accommodate just about half that number, so all the rest are forced to find their own accommodation, most with small private landlords.
Corporate specialist landlords like Unite house around 180,000 students every year. That leaves around 100,000 undergraduates scrabbling for accommodation, many ending up in rather squalid bed sits which are often too far from their campus.
Unite sees a gap in the market and aims to fill it by providing suitably located high standard accommodation for its student tenants. Its properties are newly built blocks, clean, modern and well maintained, with all the modern faculties students crave: wi-fi, broadband, laundry facilities, en suite showers, communal meeting places and even games rooms and gyms.
The company plans to add about 4,000 more rooms to its existing stock over the next three years and recently raised £50 million on the stock market to help fund these expansion plans.
This has been a bold move as the introduction of tuition fees of up to £9,000 by the Government brought concerns that student numbers would drop. This did result in a slight drop last year but these early declines have started to be reversed this current academic year.
Going forward forecasters are predicting that the better universities are likely to see increased demand for places. This could of course mean that some institutions will see a decline in their numbers.
Unite has made sure that it is well positioned by having accommodation in those cities whose universities are highly regarded: Manchester, Bristol, Leeds, Aberdeen and Glasgow. The group is particularly strong in London where around 8,000 rooms are currently available, including some central London luxury one-bed flats aimed at wealthy foreign students.
CEO Mark Allan is optimistic about the group’s future prospects: he sees land prices outside of London at their lowest levels since before 2003, the company’s success brings borrowing costs down and he sees strong demand for rooms going forward.
With average rents at an affordable level of around £4,750 a year outside London, (£7,500 to £20,000 in the capital) the company can see good profits through economies of scale.
The company recently acquired a new site in Wembley, North-West London for £7.4 million, which in two years should provide competitively priced accommodation for around 700 students.
Their task is made easier as they can economically source and develop sites which developers of private housing may avoid. Students are happy to live cheek by jowl with other less desirable properties such as factories, warehouses and railways, if the accommodation is well located and rents are at the right price.
Stock market analysts are expecting Unite Group profits of £22 million this year, possibly rising to £24 million in 2014 and £25 million the year after that.
This type of investment could come as a wakeup call to many smaller student landlords who have for many years provided some pretty shoddy accommodation at high prices. These landlords may have to “up their game” and be aware of the competition if they are to attract sufficient student tenants in the future.
Unite Group PLC