In an age of rising nationalism, there is nothing quite like a pandemic to show just how inextricably connected we all are.

Having experienced one of the world's more fervent bouts of country-love in recent years, the U.K. has been given more reason than most to reflect on its strong ties to the rest of the world during a health crisis that has ripped mercilessly through countries, continents and economies. Its world-class university system, and the student accommodation sector that services it, offers a perfect example of those bonds.

International students made up about 20% of the total student population in the U.K. in the 2018/2019 academic year, with 54% of full-time taught postgraduates and 49% of full-time research degree students coming from abroad. For purpose-built student accommodation, or PBSA, providers, they represent a significant and sometimes disproportionately large chunk of annual revenues.

With the COVID-19 pandemic deterring and often preventing international students from studying on-campus at U.K. universities, their importance to student accommodation providers has been brought home like never before. "The U.K. market is pretty reliant on international students, particularly Chinese students who make up about one-third of all internationals in the U.K.," David Feeney, partner, student accommodation advisory at real estate services firm Cushman & Wakefield.

"It's very difficult at the moment to get hard figures from universities on how many international students have actually turned up [for the 2020/2021 academic year]," he added. "All the survey data we've seen suggest that a portion of Chinese students will defer for this year or cancel."

Staying away

The latest occupancy figures from listed U.K. student accommodation provider Empiric Student Property PLC give some indication of the number of international students that have so far stayed away. Normally, about two-thirds of Empiric's residents are overseas students, half of which are from China, according to CEO Duncan Garrood. Empiric reported occupancy of 70% in an Oct. 23 trading update, down from 94% at the same point in 2019, with international students falling to about 60% of total residents.

The PBSA sector is hoping that some of those losses can be recovered in January as international students regain confidence in traveling to the U.K. and some postgraduate courses postponed from 2020 commence, said Feeney. One university has introduced 20 new January starts for postgraduate courses to attract international students, he added.

International students have become an increasingly important market for PBSA providers in recent years. The number of international students studying in the U.K. rose by 5% between the 2011/2012 academic year and 2017/2018, according to Universities U.K. Despite the COVID-19 pandemic and tensions around Brexit, applications from international students to study in the U.K. for the 2020/2021 academic year reached a record 138,770 in June, data from the Universities and College Admissions Service showed.

International students are attracted to studying in the U.K. for a number of reasons, foremost among them the opportunity to get a valuable English-language, third-level education. The standard of universities in the country, many ranked among the best in the world, and the attraction of the U.K.'s history and culture also play an important role, said Philip Hillman, chairman of living capital markets at real estate services firm JLL.

Capital losses

The fall in the numbers of international students coming to the U.K. to study on-campus for the 2020/2021 academic year is particularly impacting PBSA providers in the London market and those with the kind of higher quality product popular with overseas students, according to sector experts. Some student accommodation properties in London have previously had as much as 80% of their occupants originating from abroad, said Hillman.

The disruption to the international student market has forced many PBSA providers to adjust their approach. "There had been an obsession with marketing towards international students," Hillman said. "The operators have refocused on the domestic market, which has proven to be remarkably resilient."

Still, with all available data pointing toward increasingly strong demand from international students to study in the U.K. in the coming years, most in the sector remain upbeat. "We're quite sanguine about the medium to long-term prospects for the sector in the U.K.," said Matt Beech, associate director of national capital markets at real estate services firm Colliers International. "While this year is going to see a bit of a hit, things should return to the trend of increasing international student numbers, and the market is very positive generally."