THREE-TIER RENTAL MARKET EMERGING IN BRUM
Residential property experts at CBRE claim a three-tier rental market will emerge in Birmingham’s city centre apartment market.
The warning comes a week after the Government launched a consultation paper - ‘Planning and Affordable Housing for Build to Rent’ - aimed at encouraging both councils and developers to build more affordable rental properties.
Adrian Willet, a senior director in CBRE’s residential development and capital markets team, predicts institutionally owned purpose-built and managed private rental stock will become the residence of choice among Birmingham’s ‘Generation Rent’.
The consequence of this, Adrian forecasts, is that non-purpose built stock delivered post 2016 will be a secondary option, and “first generation” city centre apartments, typically constructed between 1998 and 2008 will, by default, become the third tier of choice.
Birmingham’s first two purpose-built private rental schemes (PRS) are currently emerging from the ground: Rockspring’s £50m The Forum in Smithfield and LaSalle’s £100m Exchange Square in Eastside. These will deliver more than 900 units to the market
There are a further 1,415 PRS units planned on sites in Broad Street, Newhall Square and Great Charles Street; Seven Capital will be behind 3,000 private rented units, including its Landsdowne House scheme (206 apartments) being delivered in Edgbaston in partnership with Long Harbour. Another 1,250 units are on the drawing board at sites including Cornwall House, New Garden Square and Smallbrook Queensway.
"The Build to Rent market has been a long time coming to Birmingham but institutional investors Rockspring, LaSalle and Long Harbour have now committed to major residential projects within the city centre. They will not only bring much needed new stock to the market, but an enhanced product too.
“Their apartments will have facilities for residents such as gyms and cycle storage, free wifi in communal areas, social media connectivity, rooftop gardens and a range of concierge and delivery services.
“These will put some distance between them and existing product, and tenants will be prepared to pay a premium for it. I’d expect purpose built and professionally managed product owned by institutional landlords to trade at a ten per cent rental differential.“
According to Adrian, prime rents and stock shortage will encourage more institutional players in to the Birmingham market. In addition to PRS investors and operators, private house builders such as Berkeley and Galliard Homes are scouring the city centre for sites, as the private owner occupier market will remain an important part of the city centre marketplace.
Owners of secondary rental properties need not panic, however.
“A chronic shortage of rental stock in the city means their rents and property values will hold, and with the ever-improving leisure and retail offering, Birmingham is becoming a city where people naturally rent for extended periods in their working lives,” he said.
In terms of capital values, the West Midlands’ very best suburbs are giving Birmingham city centre a run for its money, with high-end values in prime Solihull currently eclipse the best prices in the city centre, at more than £450 per sq ft, compared to circa £375 per sq ft in prime city centre addresses.