Is Unite failing the grade, or has it been marked down too far?

September is normally a good month to be a student accommodation landlord. Students return to university, rents start flowing and halls fill up. Yet for Unite Group (UTG), one of the UK’s largest student accommodation providers, the start of the new academic year comes with a rather less welcome arrival: activist investor Saba Capital – by Richard Williams

Saba disclosed in August that it had built a 5.1% economic interest in Unite (mainly held through total return swaps), making it Unite’s fourth-largest shareholder. The US activist has been enticed by a substantial 43% discount to net asset value, following particularly poor share price performance over the past year.

Softer occupancy, fears over student affordability and international demand, the poorly received acquisition of Empiric Student Property (ESP) and higher property yields have all challenged what had previously been regarded as one of the more dependable areas of the listed property market.

Student accommodation may no longer be the straightforward rising-tide story it once was, but the characteristics of the best parts of the market – growing demand at higher-ranked universities, constrained supply and high barriers to new development – may be considerably better than Unite’s share price currently implies.

The question for investors, and perhaps now for Saba, is whether Unite can concentrate its portfolio on those attractive parts of the market quickly enough to close the discount.

What has gone wrong for Unite?

Unite’s recent problems are partly the result of a student accommodation market that has become more polarised.

For the 2025/26 academic year, Unite’s occupancy fell to 95.2%, from 97.5%, while like-for-like rental growth slowed sharply to 4.0%, from 8.2%. The weakness was concentrated in a relatively small number of cities, including Leicester, Nottingham and Sheffield, where softer demand coincided with significant existing and new supply.

Near-term trading remains subdued. Unite expects 94-96% occupancy and just 1-2% rental growth for 2026/27.

A worrying trend is the growing number of students deciding that the economics of moving away to university simply do not stack up. UCAS says 89,510 UK 18-year-olds who secured a university or college place in 2025 intended to live at home, 7% more than the previous year. That represented a record 31% of accepted applicants, up from 22% a decade earlier.

The obvious reason is affordability. Tuition fees have continued to rise, while maintenance loans often fail to cover students’ living costs. With accommodation one of the largest additional costs associated with going to university, living with parents is an obvious way of reducing the eventual bill. The Department for Education expects undergraduate borrowers starting in 2025/26 to enter repayment with average debt of around £46,000.

This is potentially a significant structural change for student accommodation. Britain has traditionally had a strong residential university culture. The impact, however, is unlikely to be uniform.

Students from more disadvantaged backgrounds are much more likely to live at home. UCAS says that 52% of UK 18-year-olds from the most disadvantaged areas intended to do so in 2025, versus 17.9% from the least disadvantaged areas. Meanwhile, demand remains considerably stronger at the higher-tariff universities on which Unite is increasingly focusing.

A flight to quality

Despite more students choosing to stay at home, demand for university places is actually rising. By the end of June, 344,760 UK 18-year-olds had applied for higher education in 2026, 5% more than the previous year. Total applicants across all ages and domiciles reached a record 695,740.

More importantly for Unite, that growth is heavily skewed towards the strongest universities. Applications by UK 18-year-olds to higher-tariff institutions were up 6.9% at the January deadline, compared with 2.8% growth at medium-tariff and 1.8% at lower-tariff institutions.

International demand presents a more mixed picture. HESA data show that international student enrolments fell 6% in 2024/25, with particular weakness in the postgraduate market following changes to visa rules. More recent undergraduate application data are considerably more encouraging, however, with international applicants for courses starting in 2026 up 5.1%, including a 10% increase from China.

The strongest argument in favour of UK student accommodation remains supply.

Development has become increasingly difficult as construction and financing costs have risen, planning remains cumbersome and new building-safety requirements add further complexity. Unite estimates new purpose-built student accommodation (PBSA) supply is running around 50% below pre-pandemic levels.

All of this, arguably, explains both Unite’s recent problems and its opportunity.

Demand is increasingly concentrated around the universities with the strongest reputations and employment outcomes. A bed near a Russell Group or other high-tariff university may therefore have very different prospects from one serving a lower-ranked institution, where students are more price-sensitive and more likely to commute from home.

Unite has recognised this. In a significant strategic shift, the company is now explicitly concentrating on the UK’s strongest universities, looking to shrink its footprint from around 29 cities to 20 and ultimately operating around 55,000-60,000 beds. It has identified 15,000-20,000 beds for sale and intends to bring substantially all of them to market this year.

Did Unite get the timing wrong with Empiric?

That shift towards quality, combined with weakness in international postgraduate demand, also raises questions about the timing of last year’s acquisition of Empiric Student Property.

The £700m-plus deal added around 7,700 beds and increased Unite’s exposure to postgraduate and returning students through Empiric’s Hello Student brand. Strategically, there was logic to broadening Unite’s customer base beyond first-year undergraduates. The problem was timing.

Empiric entered the combination with weaker occupancy than Unite, and Unite subsequently acknowledged that Empiric’s 2025/26 income was below its expectations. Unite’s own 2026 earnings guidance of 41.5p-43.0p (from 47.5p in 2025) reflects, among other things, lower Empiric income and occupancy.

There are signs, however, that the rationale for the acquisition is beginning to come through. Occupancy expectations for 2026/27 remain muted at 88%-90%, but Unite has increased its annual run-rate cost synergy target from £13.7m when the deal was announced to £18m from 2027, with £9m expected this year.

Enter Saba

Which brings us back to Saba.

Boaz Weinstein’s activist fund has shown that it is willing to target investment companies and listed property companies trading at persistent discounts to NAV. Its campaign at Workspace Group (WKP) is particularly relevant. Saba built a 29.1% stake, called for a managed wind-down of the flexible office landlord and subsequently sought extensive changes to the board, which were rejected by shareholders.

There is no indication, yet, that Saba intends to pursue anything similar at Unite, and there are important differences. Unite’s scale, operating platform, development capability and relationships with more than 60 university partners have genuine value.

Nevertheless, Unite’s own actions are beginning to look remarkably similar to an activist prescription.

At its interim results announced in July, management reiterated plans for £300m-£400m of disposals during 2026, having completed £130m in the first half. It intends to sell 15,000-20,000 beds, concentrate the business around stronger universities and recycle capital into areas offering higher returns.

It has also deployed £165m buying back its heavily discounted shares.

That leaves Saba with an interesting question. Does it need to agitate for radical change, or is Unite already doing much of what an activist would demand?

A wind-down would seem an extreme response for a business operating a property portfolio worth around £10bn, with a high-quality operating platform and exposure to a structurally undersupplied market. Saba could reasonably argue for faster disposals, greater portfolio concentration and further buybacks while the shares remain substantially below NAV.

If management successfully executes its new strategy – owning fewer beds, in fewer cities, serving stronger universities, while buying back its own shares rather than pursuing growth for growth’s sake – Saba may ultimately find there is relatively little left to campaign for.

If it does not, Unite’s new shareholder has already demonstrated elsewhere that it is unlikely to remain quiet.