Jonathan Morgan, Pioneer of City Living in Leeds and Partner at Zenko City Living
In the context of the wider housing market, perhaps the single most significant trend will be the impact of the huge weight of capital sitting in readiness, waiting to invest in what is known as “Single Family Rental” aka SFR. This is the suburban version of build to rent, which now dominates the skylines of most of our major city centres and is starting to appear in secondary cities.
The challenge of higher interest rates along with the end of the Helpto-Buy scheme has meant that housebuilders are increasingly turning to SFR funds as a means of propping up their targets and it seems that a shift towards longer term rental is well underway.
Leeds city centre has already seen a significant shift towards institutionally-owned apartment buildings, with multiple amenities and robust professional management. The arrival of schemes such as Mustard Wharf by L and G, New York Square by Moda and Leodis Square by Dandara coincided with the extraordinary impact of the end of Covid period on the rental market which effectively meant that two cycles of demand bumped into each other.
The net effect of this was an increase in average city centre rents to unprecedented levels. Underpinning this trend is the predominance of students from overseas, for whom the traditional affordability measures are largely irrelevant but there is plenty of evidence to suggest that local professionals also have an appetite for this new way of renting.
2024 is going to be another interesting year in Leeds city centre: the key sectors are the rental market, which is the engine room of any successful urban economic centre, the continuing upturn in the delivery of Purpose Built Student Accommodation and the proliferation of fractional sales schemes such as Springwell Gardens, Sky Gardens, Axis and Phoenix, which rely on sales to distant investors.
Sadly, there is little sign of the delivery of high quality apartments or houses specifically aimed at owner occupiers, for which there is still huge pent-up demand. This remains the area of greatest opportunity and whilst the likes of 2 Great George Street by Priestley are a step in the right direction, their sales campaign has been driven towards early off-plan investor demand.
There have still only ever been a handful of sales at over £750,000 in Leeds city centre which makes absolutely no sense in the context of the wider metropolitan area, where this sort of figure variously buys a four-bed semi in Rawdon or Roundhay.
Recent sales of penthouses at 2 Great George Street for £1.3m and a new apartment listing at £1m may herald the emergence of a premium city centre market but we are a long way from the £1.95m being asked for a penthouse in the Deansgate Towers in Manchester. It is likely that average city centre rents will increase in 2024. It remains to be seen whether or not the demand for premium rental from the overseas student sector will wane.