Potential for growth: five redevelopments to look out for
If you’re a landlord operating in the Private Rented Sector (PRS), there’s a good chance you’ll be on the lookout for new opportunities and new ways to increase the rental yields you can achieve.
One way in which you can manage this is to invest in emerging areas that are likely to become tenant hotspots. We regularly hear of up-and-coming areas, regeneration projects or the beneficiaries of new infrastructure or major transport projects. It’s these locations that are likely to experience a boom in tenant demand and, if you invest wisely, could bring significant rewards in the long-term.
We’ve seen it in recent times with locations in London – including Shoreditch, Brixton, Peckham, Hackney and Hoxton.
Equally, Salford has become a hotbed for tenants in the North West in recent years thanks to the positive impact of MediaCityUK, which has brought investment, jobs, infrastructure and swarms of young professionals to the area.
Stratford, too, witnessed the positive effect that holding a major sporting event can have on demand for rental homes, with the London 2012 Olympics giving a much-needed boost to a once neglected part of the capital.
Where, though, should landlords be looking next? We pick out five locations, currently undergoing major redevelopment projects, which could experience a spike in renter demand in the not too distant future.
One of the major cities of the North, Leeds is an intriguing mix of modern and Victorian influences, home to a number of Grade I listed buildings – including Kirkgate Market and Leeds Corn Exchange – and a wide range of shopping, entertainment and leisure venues.
Already a major legal and financial hub – second only to London – Leeds has a population of over 770,000, is home to thriving universities and has a proud sporting heritage.
Regeneration and redevelopment works are ongoing – continually tinkering here and there to improve the look and feel of the city – while Leeds has a growing tech sector which is drawing many young professionals to Yorkshire.
What’s more, Leeds is set to benefit more than most when (or perhaps more accurately if) HS2 is finally completed. The nationwide transport project is struggling to get off the ground, with protests, disputes and issues over funding all stopping it in its tracks, but HS2 would reduce the journey time from Leeds to London from 131 minutes to just 81 minutes, as well as improving links to major cities in the North and Midlands.
The mere prospect of HS2 is having an impact, with demand upped and rental prices rising. Since 2011 there’s been a 3.1% rise in population in the Leeds region, with a further 2.1% rise predicted in the next five years. Property is highly affordable in Leeds – with an average price of just over £150,000 in the city centre – which means strong rental yields can be achieved, further aided by average rents of over £1,000 pcm.
The UK’s most central city, Derby is set to benefit from major regeneration in the next few years which will up demand and increase its desirability as a place to live and work. It already has a thriving rental market thanks to its strong student population – the University of Derby has around 29,000 students – and its booming manufacturing sector. It’s long been home to Rolls Royce and is also the location for the headquarters of a number of major train, plane and car manufacturers.
As part of the Derby City Centre Masterplan outlined by the city’s council, the plan is for 4,000 new jobs, 1,900 new homes and £33.5 billion of new investment between 2015 and 2030. In addition, Infinity Park Derby is a collaboration with the private sector to develop a world-class science and industrial park and Connect Derby aims to create flexible workspace for self-employed people and start-ups.
Derby, with an overall average asking price of around £175,000, has the dream combo of affordable homes and high tenant demand – making it an ideal choice for landlords and investors.
A coastal location in Scotland, and the country’s fourth-largest city, Dundee is home to the University of Dundee and built its name off the production of jams (in particular marmalade) and jute. It also has a long association with journalism and is home to two football teams who enjoy a fierce local rivalry.
Down in the post-industrial doldrums not so long ago, it is having something of a comeback, using its history, its strategic position between the River Tay and the Highlands and significant restoration projects to turn itself into a tourist destination of some repute.
In particular, Dundee’s waterfront is undergoing extensive renovation, with older buildings replaced by swanky new developments. Dundee’s waterfront is currently in the midst of a £1 billion redevelopment, with the V & A Museum of Design set to open in 2018 and a wide range of businesses, retailers and hotels expecting significant growth and the creation of around 7,000 new jobs as a result of the project.
The city is being regenerated economically and physically and, with a significant student population already in place and a soon-to-be booming jobs market, it could well become one of the UK’s rental hotspots in the coming years.
Wales’ second city, Swansea is best known for its university (home to around 14,000 students), its Premier League football club and the picturesque Swansea Bay, which incorporates popular tourist locations such as The Mumbles, Gower and Afan & The Vale of Neath.
Although Swansea already has a wide range of shops, restaurants, parks and entertainment venues, the city centre has long been in need of regeneration and redevelopment. Public backing for the regeneration of the St David’s site in the city centre has been received, but it hasn’t been given the green light by the council yet. If approved, the £500 million regeneration project will herald the biggest change the city has seen since WW2, with new housing, shops, a new indoor arena, a new cinema and a new hotel all in the pipeline.
As well as this major project, other regeneration projects are taking place to increase Swansea’s appeal. Swansea, with an average property price of under £150,000, can definitely be counted as an affordable location to invest in, while average rents of over £750 pcm will be attractive to would-be tenants. Cheaper property prices, however, means rental yields are less squeezed, with demand for rental properties remaining consistent – helped in large part by a sizeable student population.
This suburban town on the outskirts of London has been one of the main beneficiaries of the popularly known Crossrail effect, with rents increasing in locations situated on the new line as tenant demand soars. The reasons for this are simple: Crossrail will drastically reduce commute times from places like West Drayton, and other commuter towns, which means it has huge appeal to those who work in London but don’t want the hustle and bustle of city life.
While journey times from West Drayton to Paddington are currently a reasonable 25 minutes, getting to other London locations in double-quick time is less easy. Once Crossrail becomes fully operational in December 2019, the journey time to Bond Street will be cut from 44 minutes to 23 minutes, while it will take 31 minutes and 37 minutes to get to Liverpool Street and Canary Wharf respectively.
As part of the Crossrail programme, major improvements and upgrades have been carried out at West Drayton station. In addition, Crossrail has worked with Hillingdon Council to improve the area around the station, making it a more attractive place to live and commute from.
Its position as a Crossrail hotspot has inevitably attracted the interest of buy-to-let investors and developers, with major developments springing up and the creation of a garden village that aims to make West Drayton more commuter-friendly.
An average price of around the £340,000 mark will be music to the ears of landlords and investors, while the excellent transport links and improvement works brought about by Crossrail has made West Drayton a far more attractive prospect to tenants working in Central London locations.