Rental market momentum continues to gather at pace, but what should investors be looking for?

API Global reflects on investor appetite for the Build to Rent sector in the UK and the ongoing demand for rental property.

By Michael Leighton, CEO at API Global | BTR News
By Michael Leighton, CEO at API Global.

Identifying the next up and coming property hotspots is the holy grail of property investment. Despite volatility in the property market, UK real estate remains one of the most stable, secure and popular asset classes in the world.

API Global identifies some key considerations investors should be looking for to secure long-term yields.

By Michael Leighton, CEO, API Global

Due to rising house prices, demand for rental property has doubled since 2002 and its estimated to rise even further within the next five years. But what are the key things property investors should take into consideration when choosing where to invest?

High student retention rates

For UK university towns and cities, student retention is vital to the local economy and talent pool. For the recently graduated 20 somethings though, top of the list is finding a community to live in with like-minded people where they can settle and start their careers. These are often in urban and semi-urban, up and coming locations with good transport links or cycle routes into the city.

Take the example of Birmingham, which boasts a student population of over 100,000 – 46% of whom stay in the city after graduating. Tens of thousands of new graduates looking for homes each year underpins Birmingham’s position as a real hotspot for growth, particularly in the Jewellery Quarter and the neighbouring Gun Quarter which are popular locations for the city’s younger residents. 

Talking business

More and more, big ticket blue chip and tech businesses are looking to relocate outside of London where rents are cheaper, but the same level of amenity and culture can be found on the doorstep.

When businesses relocate, its workforce is never far behind. So, when looking to invest, it’s worth checking out the big hitters that are looking to make a move and put down roots in alternative city locations.

New Bailey in Salford, Greater Manchester, is a prime example of this. Formerly an underutilised piece of land, ten years on, New Bailey is a highly successful, thriving business district and home to the likes of Freshfields Bruckhaus Deringer and communications giant BT.

According to Zoopla, rents in Salford are increasing quicker than anywhere outside of London. This is largely attributed to the huge amount of regeneration that the city has undergone in the last decade, including New Bailey and the £550m MediaCityUK development on Salford Quays, home to the BBC, ITV and a whole host of digital and media companies.

Regeneration and infrastructure spend 

Another key factor that property hotspots have in common is significant public and private sector investment. Major infrastructure plans like HS2 or Crossrail are great indicators, as are the locations benefitting from the Government’s £4.8bn Levelling Up Fund.   

In Birmingham, the Big City Plan will create 50,000 new jobs and 1.5 million square metres of new floor space for businesses, whilst in Greater Manchester the Places for Everyone long-term plan identifies strategic development sites across nine districts – including Manchester city centre – in a bid to drive inward investment and create new jobs, homes and sustainable growth. 

A growing population  

Smart investors will also be keeping an eye on population growth forecasts. Salford has seen the biggest population growth in Greater Manchester in the last ten years – 15% compared to neighbouring Manchester’s 10%. The increase has, in part, been driven by the relocation of the BBC, with the local economy expected to grow by over 46% over the next two decades

A bit of culture

Tapping into areas that host regular cultural and sporting events should also be on the list when looking for investment hotspots. Towns and cities with racecourses, arenas, established festivals and top-quality golf courses for example, are responsible for bringing in sustained economic growth, and can positively influence rental values in the local area.

In Manchester, the city recently welcomed Aviva Studios to the Castlefield Conservation Area along the River Irwell. The new cultural space features a 1,600-seat theatre and a 5,000-capacity warehouse space for events and installations, and as home to Factory International, promises to attract artists and their followers from across the globe.

Tracking indicators like this can help identify the next big locations where investors can capitalise on upward trends and achieve sustained capital and rental growth.