Unite Group has issued a warning regarding the declining financial viability of new purpose-built student accommodation (PBSA) developments across most UK markets. The company cites increasing construction costs, higher funding expenses, and tighter regulatory measures as key factors that complicate the feasibility of new projects. In their interim results, Unite indicated that asset values now fall below build costs in many regions, necessitating weekly rents exceeding £300 for new developments outside London to be considered financially sustainable. In contrast, the average weekly rent for Unite’s properties in those areas is approximately £190.
The Impact of Economic Conditions
Given these challenging conditions, Unite believes that the delivery of new PBSA will significantly decelerate over the next two to three years. Developers will likely face difficulties justifying new schemes under the current economic landscape. Additionally, the Build to Rent sector is experiencing similar pressures regarding viability, further complicating the situation.
Shifting Focus to Existing Projects
Rather than depending on a pipeline of speculative developments, Unite is now concentrating its efforts on completing existing projects. It is prioritising partnerships with universities, which offer what it views as stronger long-term returns and more predictable demand patterns. Notably, the group remains committed to its developments at Hawthorne House in Stratford, which is on track for completion this summer, and Central Quay in Glasgow, where construction commenced in April 2025.
University Collaborations and Market Conditions
Unite is also actively engaging in on-campus joint ventures with several universities. For instance, construction has begun on the Castle Leazes scheme in collaboration with Newcastle University, facilitated by Bowmer + Kirkland. Similarly, at Manchester Metropolitan University, GRAHAM has been appointed to redevelop the Cambridge Halls, further strengthening Unite’s strategic partnerships.
Anticipated Supply Constraints
Unite anticipates a tightening of supply as older university accommodation is phased out and an increasing number of houses in multiple occupation (HMOs) exit the market. The company notes that surging mortgage costs and evolving regulatory changes are driving some private landlords out of the sector, which will contribute to a decrease in available student housing.
Despite these challenging market conditions, Unite holds a positive outlook regarding the imbalance between supply and demand. This situation is expected to sustain occupancy levels and foster rental growth for existing, well-located PBSA assets, particularly in cities housing the UK’s most prestigious universities.