Unite Group Ends 2023 on a High Note: Record Reservations and Confident Rental Growth for 2024/25

The Unite Group, a prominent player in the UK student accommodation market, has released its Q4 trading update, providing insights into the current state of the Unite UK Student Accommodation Fund ('USAF') and the London Student Accommodation Joint Venture ('LSAV') as of 31 December 2023.

Continued Strong Demand and Record Reservations

Unite Students reports a robust start to the 2024/25 academic year sales cycle, with an impressive 71% of beds already reserved. This figure remains consistent with the record-setting levels seen in the previous year. The company continues to experience high demand, reflecting the enduring appeal of its fixed-priced, all-inclusive accommodation offer.

Joe Lister, Unite Students Chief Executive Officer, notes, "The letting performance highlights the ongoing strength of demand from students and universities and underpins a positive outlook for rental growth for the 2024/25 academic year."

Confident Rental Growth and Earnings Guidance

Unite Students expresses confidence in delivering rental growth of at least 5% for the 2024/25 academic year. The company's strong letting performance in the current cycle supports this optimistic outlook. Despite the challenges posed by the cost-of-living crisis, Unite remains focused on providing value-for-money accommodation while ensuring sustainable rental growth.

The 2023 earnings guidance is maintained, with higher-than-expected rental income in term 1 of the 2023/24 academic year offsetting increased operating costs in the second half of the financial year.

Property Values and Quarterly Fund Valuations

Quarterly fund valuations reveal positive performance. At 31 December 2023, USAF's property portfolio witnessed a 2.1% increase on a like-for-like basis, driven by quarterly rental growth of 2.8% and a slight yield increase. LSAV's property portfolio experienced a 0.7% decline due to quarterly rental growth and a modest yield movement.

The USAF and LSAV portfolios are now valued at weighted average yields of 5.3% and 4.5%, respectively. The weaker valuation performance for LSAV in Q4 is attributed to its higher London weighting.

Development Pipeline and Future Outlook

Unite Students is actively pursuing new development opportunities, with four schemes totalling 2,000 beds currently in progress for delivery between 2024 and 2026. Additional projects are under consideration, with expectations of further growth in H1 2024.

The company continues to prioritize building safety, completing cladding remediation on 16 buildings in 2023. Unite Students expects to make provisions for remediation costs on an additional 10 buildings at the end of 2023.

Recycling Capital and Disposal Activity

Unite Students aims to enhance its portfolio quality through capital recycling. Disposal activity is progressing well, with plans to dispose of £150-200 million of regional assets in H1 2024.

Unite Students' Q4 update showcases sustained demand, record reservations, and positive valuation growth. The company's strategic approach to development, capital recycling, and building safety positions it for continued success in the evolving student accommodation landscape.