The Unite Group, the UK’s largest developer of purpose-built student accommodation (PBSA), has raised concerns about the future of new student housing projects. Chief Executive Joe Lister has indicated that the escalating costs of construction, alongside stricter regulations and diminishing investment values, are rendering many new developments financially unviable. This trend is evident particularly in regional markets, where developers are now facing the necessity to charge rents exceeding £300 per week to make projects feasible, a stark contrast to Unite‘s current average weekly rent of £190 in those areas.
The Expected Slowdown in Development
According to Lister, the implications of these rising costs are not limited to the PBSA sector but are also impacting the Build-to-Rent (BTR) market. He stated, “New supply of student accommodation will slow significantly over the next two to three years, and we see the same challenges impacting the Build-to-Rent sector.” This forecast presents a notable challenge, especially considering the anticipated growth in demand for student housing. The decreased number of new developments, coupled with the exit of private landlords from the HMO sector, is expected to further tighten supply.
Current Projects and Future Focus
Unite has confirmed its commitment to 1,653 off-campus beds currently under construction, notably at the Hawthorne House in Stratford and Central Quay in Glasgow. The Hawthorne House scheme, featuring 719 beds, has completed construction but is awaiting Building Safety Regulator approval before it can open for the 2026/27 academic year. Meanwhile, the 934-bed Central Quay project is on track for completion in 2027. In light of the current market conditions, Unite is reviewing options for an additional 2,400 consented beds in London and Bristol, which may include disposal or seeking third-party funding.
Portfolio Restructuring and Investment Strategy
As part of its strategic response, Unite is accelerating a comprehensive portfolio reshaping initiative. The organisation plans to bring around 15,000-20,000 beds identified for disposal to market this year, strategically concentrating investments around the UK’s most robust universities. Furthermore, Unite has projected a spend of £61 million over the next two years for fire safety remediation, with expectations of recovering 50-75% of these costs through claims from contractors. However, the processing of these claims is likely to lag behind the costs incurred for necessary remediations, posing an additional challenge for the company.
Overall, the financial pressures facing the PBSA market underscore the importance of strategic planning and adaptive measures for developers. As the demand for student accommodation remains steady, the ability to navigate these challenges will be crucial for future growth and sustainability in the sector.