LONDON (ShareCast) - (Sharecast News) - UK student accommodation group Unite on Friday reported a rise in first- quarter portfolio valuation, but warned of cost inflation and supply chain headwinds to its medium-term development pipeline.
The company said its property portfolio valuation to March 31 rose 1.7% to £2.87bn compared with the previous three months, driven by rental growth of 0.7%.

"We continue to see inflationary pressure on build costs for our development pipeline, which typically account for 50-70% of our total development costs," the company said.

"This reflects ongoing supply chain disruption created by the pandemic as well as rising energy and materials prices, which have been exacerbated by the war in Ukraine."

Unite said it was seeing cost increases for schemes yet-to-be-procured for delivery in 2024 and 2025 and now expected the yield on cost to be cut by up to 20 basis points, compared to initial assumptions of 10 to 20 points.

"These schemes remain attractive and we will seek to mitigate the impact of increasing build costs through design efficiency and increased rental levels where possible," Unite said.

It added that around 77% of rooms for the academic year ending in 2023 are now sold, and guided for 97% occupancy for the total year. Unite said the high numbers increase its confidence in achieving rental growth of 3% - 3.5%.

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