Jonathan Morgan of Morgans City Living, looks at the past, present and future of the Leeds city centre property market
It’s been an interesting and unpredictable journey over the past 25 years of city living in Leeds. In one breath, the conversion of empty city centre space into apartments was lauded as the 20th century solution for decaying urban centres and yet a few short years later The Sunday Times declared that Leeds was witnessing the construction of the “slums of the future” and had become the “empty flats capital of the north”. While never true, this mantle has been very hard to shake off.
Steady growth in the delivery of new apartments from 1997 to 2001 was unexpectedly accelerated by the events of 9/11, following which, money poured out of stocks and equities and into property, which was seen as a safe, easy-to access haven in times of dire economic uncertainty. The commoditisation of the buy-to-let market which followed was spearheaded by such organisations as Inside Track, who provided thousands of novice investors with a route into property ownership. The boom, which started in 1997, ultimately only ended 10 years later with the mother of all financial crises, when the world banking system appeared to collapse. The 600 or so apartments which had housed the pioneers of city living were by now around 10,000 in number.
Inevitably, it took six years for the city centre market to recover from the downturn and, even today, the rate of delivery of new apartments is at a fraction of the 450 or so which were delivered in each of those boom years.
It is something of a mystery, then, in the context of an economy whose diversity has long been key to its robustness and where growth is very much in evidence that Leeds city centre is seeing almost no new development activity.
The skylines of Birmingham, Manchester and Liverpool are festooned with cranes delivering high-rise residential buildings. Demand from the city’s workforce, the “engine room”, continues to grow and all city centre agents are reporting almost full occupancy. The population is expected to rise in the next decade and job creation is expected to exceed that in other key cities.
The PRS or build-to-rent model, which is driving residential delivery in other northern cities, has yet to manifest itself in Leeds. The perception that the market is not strong enough or that premium rents cannot be achieved may be still be fuelled by the ghost of the ‘empty flats capital’ past.
Desperately short of development activity and yet with demand at record and growing levels, it is a matter of time before supply increases.
Speculative residential development finance is almost impossible to secure on high-rise buildings, where it is not possible to reduce risk and exposure through phasing and this is where the forward-funded PRS model has had such an influence elsewhere. In the short term, bereft of PRS funding, we will have to find different ways in Leeds; a number of long-term investor/developers are already delivering schemes for rental using either their own equity or funds from overseas investors who can see significant value here, particularly post-referendum, and we expect this to continue. Schemes such as Tower Works, Iron Works, Pearl Chambers, St Peter’s, Rivers House, X1 Aire and Low Fold are underway and we expect that it will be the pioneers and entrepreneurs who, through their Yorkshire grit, innovation and vision will create the conditions in which external investors will ultimately invest.
Leeds city centre is undervalued in the context of its near neighbours, such as Harrogate and York, and its peer cities and we are convinced that this imbalance will be adjusted.
*Jonathan Morgan, winner of the Yorkshire Residential Property Awards Lifetime Achievment award and co-founder and MD of Morgans City Living, www.cityliving.co.uk