Empiric Student Property Navigates Shifting Sands: Occupancy Dips Amid Proposed Acquisition

Empiric Student Property (LON: ESP) reported an occupancy rate of 89% for the 2025/26 academic year, a decrease from the 95% achieved in the prior year.

This comes as the company progresses through its proposed acquisition by The Unite Group PLC, currently under Phase 1 investigation by the Competition and Markets Authority (CMA).

The company anticipates the scheme to become effective in the first half of 2026, subject to the terms and conditions outlined in the Scheme Document.

Like-for-like rental growth remains positive, aligning with guidance at 4.5%. This growth indicates continued demand and pricing power within Empiric's premium, studio-led student accommodation portfolio, despite the occupancy challenges.

The company is actively focusing on January sales activity and capitalising on the shorter-term student lettings market to boost occupancy rates.

The company has experienced a shift in its student demographic, noting an increase in reservations from UK students and a reduction in the number of Chinese students. UK students now represent 43% of reservations, while Chinese students account for 30%, and other international students comprise the remaining 27%. Geopolitical events are cited as a potential factor influencing the decrease in Chinese student occupancy.

Empiric continues to enhance its portfolio through strategic refurbishments. Three postgraduate conversions have been completed in Bath, Sheffield, and Southampton, with a fourth site in Bristol expected to open in early 2026, ahead of schedule. These improvements are part of the company's strategy to attract postgraduate students and improve the overall quality of its offerings.

The sale of Pavillion Court in Canterbury was completed in August 2025, generating £7.5 million in gross proceeds. This sale aligns with Empiric's strategy to exit non-top-tier cities and streamline its portfolio.

A further 300 beds are planned for refurbishment prior to September 2026, incorporating green initiatives such as carbon-free operation and improved building efficiency. Smart heating systems are now in place across 55% of the portfolio, contributing to lower energy consumption per bed.

As of September 30, 2025, Empiric's property loan-to-value (LTV) stood at 27.3%, based on June 30, 2025 valuations. The weighted average cost of debt is 4.4%, with a weighted average term to maturity of 3.9 years. The company maintains a strong liquidity position, with cash and available facilities totaling £101.8 million.

The Board has reconfirmed its dividend target of 3.7 pence per share for the year. A third-quarter dividend of 0.925 pence per share has been declared, payable on December 5, 2025. This commitment to shareholder returns underscores the company's financial stability and confidence in its future performance.

Driver Breakdown

• Portfolio Enhancement: Ongoing refurbishment program focusing on postgraduate conversions and sustainability.
• Strategic Disposals: Exiting non-core locations to streamline operations.
• Demographic Shift: Adapting to changing student demographics with a focus on UK students.

AskTraders Takeaway: The dip in occupancy presents a near-term challenge, but rental growth and strategic initiatives provide a buffer. The pending acquisition by The Unite Group PLC introduces an element of uncertainty but also potential upside. Markets will likely watch CMA's decision closely.

Duncan Garrood, Chief Executive Officer of Empiric Student Property plc, said: “The booking cycle for academic year 2025/26 has seen an increase in reservations from UK students and a reduction in the number of Chinese students staying with us, potentially the result of geopolitical events. Rental growth remains in line with guidance and we are well positioned for January sales activity. All the while, we have continued to improve the quality of the portfolio whilst delivering on capital deployment commitments.”