The FINANCIAL -- According to new research compiled by the University of Leeds and property agents operating in the Leeds city centre market – Knight Frank, Morgans City Living, King Sturge, Savills and Allsop - the Leeds market is starting to see a revival.
Rachael Unsworth, University of Leeds, commented: “The research reveals that the market has contradictory features: there are high levels of occupancy in city centre apartments, yet development is at a standstill.”
The research shows that the rental market has remained strong during the recession. The properties managed by six major firms of agents total 3153 apartments and these are more than 92% occupied. Only one scheme is entirely vacant (Waterside, the second phase of City Island), though the investors have recently indicated that the building will be let over the next few months.
Sale values dipped from the fourth quarter of 2007 but stabilised during 2009. The dip was less severe in good quality and / or well-located schemes such as One Brewery Wharf, 1 Dock Street, The Gateway and Langton’s Wharf (where some values actually rose).
Rents have stayed at more or less the same level as they were in 2007, with some high quality, well-located schemes showing some rental growth. Some building owners are letting apartments for the medium term with a view to later sale when values recover.
Only two schemes are under construction – Indigo Blu and Saxton – and only five schemes, totalling around 600-700 flats, seem to have a chance of delivering within the next 5 years.
More than 30 schemes with planning permission, totalling over 9,920 units, have stalled and seem unlikely to proceed in the originally proposed form. Many more sites are still at pre-application stage and are even more unlikely to come to fruition in the form originally indicated.
Funding for large-scale apartment blocks is highly unlikely to return within 3 to 5 years. The viability of schemes is no longer underpinned by off-plan sales. Once conditions do improve, we expect to see growing numbers of owner occupiers. Of those buying as investors, most will choose apartments with a tenant already in place.
Land values are now much lower than the prices paid during the boom. This value gap has paralysed the development pipeline.
The public and private sectors need to work together to identify the areas of the city centre/fringes that are most likely to be attractive to occupiers and investors and co-ordinate the phasing of development plus physical, social and retail infrastructure and public realm improvements to maximise the chance of creating confidence and viability. East Bank and the Aire Valley, Holbeck and Beeston are likely starting points.
Newly worked proposals need to feature varied home types, including some family houses, in order to meet demand.
Leeds remains an attractive option for occupiers, and investment in retail, leisure and other facilities continues to improve.
Jonathan Morgan, Managing Director, Morgans City Living, commented: “We are delighted to have worked with our partners in producing what we believe to be a crucial report which sets the context for the future of city living in Leeds.”
Anne Haggas, partner, Knight Frank, commented: “This report provides the evidence we required to paint a true picture of the property market in Leeds. We are seeing growing numbers of owner-occupiers, and when investors are buying they choose to buy with a tenant already in place. Property will still be income-generating, but for longevity rather than through ‘flipping’.”
Andrew Hunt, partner, Allsop, commented: “Without doubt, the threat of over-supply in Leeds city centre has averted. Capital values are at a realistic level. This has resulted in apartments within landmark and prime located developments having strong appeal to owner occupiers whilst units within fringe schemes are once again selling to high net worth individual investors as well as parents of students.”
Guy Ackernley, partner, King Sturge, commented: “This report has underpinned the reality behind the Leeds city centre market. Quality developments in good locations are still in demand for both sales and lettings. Poor quality schemes built in peripheral locations have suffered and there is little development likely to happen in the next five years. All in all the city's residential market is in a much better state than many believe."
Matthew Jones, Director at Savills, commented: “It’s clear that stabilising sales and a strong rental market reflect Leeds’ popularity as a destination city. However, renewed consumer confidence and developer investment are key to its future success.”
Rachael Unsworth, University of Leeds, concluded: “This collaborative survey corrects some misapprehensions about the Leeds market. There has been great co-operation between the agents in drawing together the evidence and interpreting it. Now there should be co-operation between the public and private sectors to ensure that the next phase of development is as coherent as possible, creating environmentally-sound buildings in pleasant settings which appeal to occupiers for the longer term.”
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