Top 20 UK towns and cities with strongest demand drivers for BTR and multifamily over next decade

CBRE identified 20 towns and cities across the UK from a statistical model to analyse the demand drivers of the PRS across all local authorities in the UK. The analysis identifies three main factors influencing greater demand for rental accommodation: locations with higher percentage of population aged 25 to 34; high numbers of students; and the relative size of the economy. These three factors have a quantifiable impact on the size of the PRS in a given town or city, CBRE says.

The findings were then applied to forecasts for each metric to quantify the potential change over the next decade. To further support the findings, CBRE combined the results with three additional metrics, based on CBRE’s Creative Cities Index, projected employment growth, and the current multifamily development pipeline. Alphabetically, the 20 UK towns and cities are:

Scott Cabot, Associate Director, Research at CBRE said:

We excluded London from this analysis as we know there is already a substantial private rented sector and strong demand in the city, combined with a strong multifamily development pipeline. Instead, we focused on markets across the wider UK, looking at metrics for current demand, along with forecasts. This enabled us to identify the locations with the highest future demand, which could also attract significant multifamily investment.

“What is clear from our results is that there is a good geographical spread of potential future multifamily hotspots. These include cities with large PRS, like Birmingham and Manchester in England, and Glasgow and Edinburgh in Scotland. We also identified cities with large student populations like Nottingham, Belfast, Bristol and Coventry. People may decide to live in these cities after completing their studies, perhaps working in the growing tech and creative sectors, and will need a home to rent.

“Our research also identified cities where there is currently no multifamily development pipeline, but our indicators show there will be good levels of demand. For instance, Brighton, with its two universities, is one of CBRE’s top 10 creative cities, meaning it will attract future employers, and that there are healthy employment and economic growth forecasts underpinning the rental market.”

Peter Burns, Head of UK Development and Residential Capital Markets, CBRE said:

“Multifamily investment over the last five years has been evenly split between London and main regional cities, and with the sector on a growth trajectory we expect further geographical diversification. Domestic investors have already made significant deals in regional cities, and as these destinations become more established, and more developments are operational and showing good returns, international investors are following suit.

“London has led the multifamily revolution so far, and we expect continued strong performance in the capital. New market entrants see the relative value of the UK versus other European centres, but they need to familiarize themselves with all the markets across the UK.”

Following total investment of £2.4 billion into UK multifamily in 2019, the outlook for 2020 is favourable. There is £1.5 billion worth of deals currently under offer, illustrating the continued high demand for the sector. CBRE forecasts that total residential investment will increase by approximately 30% in 2020. Demand is being driven by an increasingly diverse investor base from both domestic and overseas institutions. In addition, a subdued sales market is set to persist in 2020, meaning multifamily will be the preferred disposal route for many developers.

james.wallace@realassetmedia.com