Build-to-rent investors were slow to head north and when they did their preferred location was Manchester.
Now they have turned their attention to Leeds and their plush, amenity-rich apartment schemes look set to almost double the number of flats in the city centre and revolutionise the rental market.
Graham Bates, CEO of LIV, which offers advice and management for build-to-rent schemes, says he is working with institutional investors on projects that will deliver 3,500 flats in the next three to four years. He predicts that the city centre’s existing 11,000 flats could grow to 20,000 within the next seven years thanks to the purpose-built rental blocks that offer everything from gyms and cinemas to pools and roof-top sports courts
He is advising a number of clients on build-to-rent, also known as private rented sector (PRS) ventures, in Leeds. They include American fund AIG, which is investing in the Clarendon Quarter to create 330 flats on the edge of the city centre. Meanwhile, London-based neighbour.co.uk has acquired Flax Place, which has planning permission for 200 flats.
One of the first schemes out of the ground in Leeds will be at Quarry Hill, where Moda Living plans to build 705 apartments in two phases. It should be on site in early 2017 with the first homes ready to rent by 2019.
Moda is now a key player in the PRS sector. A company borne out of respected Yorkshire construction firm Caddick, it is backed by Apache Capital Partners and has 5,000 flats in the pipeline across the UK, including its flagship Angel Gardens development in Manchester.
Tony Brooks, of Moda Living, says: “We started working on plans for purpose-built rental accommodation three years ago. It is all about creating a long-term income stream. In terms of build style, it is about quality, longevity and creating a community. The management style is hospitality.”
Moda is also considering building in Sheffield, where developers CTP and the council are collaborating on the city’s first PRS development. Porter Brook, a190-apartment block, will be close to the train station. News of the £38m development was announced this week in Cannes during MIPIM, the world’s leading property show, where institutional investors are being sought to partner the scheme.
Graham Bates, who offers advice on location, planning, design and fit-out for rental block projects across the UK, says rents for the swish new apartments in Leeds will be up to 20 per cent higher than most other city centre flats. He believes that tenants will be happy to pay. “People will pay more for quality. The old world was boxes thrown up by developers that no-one could live in long term. This new world is about bigger, well-designed homes with an emphasis on creating a community. People will stay in a building longer if they make friends, which is why amenities are such a big part of the PRS offering,” says Graham, who adds that quality of service is another key aspect.
“The bar is set low at the moment. If something is wrong with your rented flat, the letting agent will contact the private landlord and he may or may not be responsive. With PRS, you have one landlord for the building who is highly responsive.”
The schemes can also offer security of tenure. A block of 250 apartments requires an investment of about £35m and most institutions are looking at keeping buildings for 30 to 50 years to maximise profit.
The advent of PRS looks set to be a game changer for the traditional rental market and could force existing landlords to improve the appeal of their properties.
While major investors want blocks of 200 to 300 flats, smaller schemes are starting to pop up in key towns and cities. The owners of the former Abbey National building on Forster Place in Bradford have converted it into 57 flats to rent.
Critics of big schemes say that the returns are low compared with conventional buy-to-let.
“What they don’t understand is that this is a long-term investment. The other thing to bear in mind is that big institutions can borrow money much more cheaply than buy-to-let investors, so the model does stack up and it will appeal to tenants,” says Graham Bates.
*LIV, Liv-group.co.uk; Modaliving.co.uk