In the UK, August’s A-level results day is often marked by images of jubilant high school students — and debates about the costs and benefits of university education. However, for investors in student accommodation providers, recent years have offered little to celebrate. This has prompted a shift towards consolidation, cost efficiency, and preparation for future opportunities.
Unite Group’s £723mn acquisition of smaller real estate investment trust Empiric reflects this trend. Under the deal, Empiric’s shareholders will hold a 10% stake in the combined group, which will manage 75,000 student beds, primarily in cities hosting prestigious universities.
The merger comes amid challenging conditions for the sector. Following the Covid-19 pandemic’s disruptions, companies have faced rising construction costs, higher interest rates, stricter building regulations, and increased local opposition to new projects. According to Handelsbanken, the share of major property investors seeking to increase their exposure to student housing has fallen from 80% in 2023 to just over a third today.
Unite’s share price has dropped 40% since the pandemic, after surging 156% in the previous five years. Despite this, there are signs of optimism. Demand for student housing remains robust, with domestic university applications from 18-year-olds up 2.2% year-on-year by June, even as foreign student visa approvals have fallen by about 20% in the past two years. Accommodation shortages remain acute, and Unite anticipates record numbers of students being offered places.
Investor interest is also picking up. CVC’s infrastructure arm has acquired multiple student housing assets this year, while Australian pension funds have backed ongoing projects. Both Unite and Empiric shares trade at roughly a 25% discount to their net asset values, suggesting potential long-term value.
While the current environment may not warrant top marks for the sector, the Unite-Empiric merger could position the combined entity to benefit from future growth — earning, at least, a pass in today’s tough market.
