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29 July 2020

Unite Group

A student’s life consists of studying, as much as partying and socialising. Networking with your peers and building a web of new acquaintances and friends is a fundamental aspect of university life. But with COVID-19 tearing up the rule book, all this seems to be designated to the history class. Cambridge has made the entirety of the 2020/21 academic year online, while numerous other institutions have made the same plans for the first-term, up until Christmas.

This epitomic shift has presented Unite Group, one of the UK’s leading providers of student accommodation, with a serious issue; namely, whether students will be keen to rent accommodation on a university campus if all classes are digitised, and all social aspects are placed under draconian social-distancing regulations.
Given the tumultuous end to the past academic year, Unite made the difficult decision to forgo summer-term rents. This may have been graceful, but the financial impact was severe; pre-tax profits for the six months to the end of June, swung to a £73.9m loss, from a £125.5m profit a year earlier.

Reservations for the 2020/21 academic year stand at 84%, down from 93% last year, while only half of reservations are underpinned by nomination agreements. Unite are targeting 90% occupancy for upcoming year and are anticipating a 10-20% reduction in rental income; this seems optimistic.

The digitisation of teaching is only half the problem. Arguably the largest uncertainty facing Unite Group is the future of overseas students, and specifically those from China. The decrescent Anglo-Chinese relationship, which has focused on Huawei and the Sizewell nuclear power station, poses a grave danger to the entire UK higher education sector; there are roughly 120,000 Chinese students in the UK, whom account for £1.7bn in annual fees.

While Unite may be targeting their marketing towards domestic students, they provided little substance to this headline. Plus, a recent survey from the British Council highlights that between one-third and two-thirds of non-EU international students may cancel or delay their travel plans for the upcoming academic year. Unite’s tergiversate update will fail to heal investors’ worries, and only add to the √©garement.
 
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Unite Group
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