Is suburbia being neglected in the rental property market?

Is suburbia being neglected in the rental property market? (Barratt website)

Property investors in central London and other major cities across the UK will have had much to get excited about and focus on in recent years. The growth of city centre living has been rapid, particularly in the Midlands and North, but the capital - where such a market was already well established - has still seen plenty of growth. 

A recent study by the Centre for Cities revealed some dramatic changes in city centre populations between 2002 and 2015. Because such an area is not strictly defined, the study judged this to be localities within a two mile radius of the geographical centre of London (Charing Cross); within 0.8 miles of the central points of other cities; and 0.6 miles of the heart of a city of between 135,000 and 550,000 inhabitants. 

On this basis, central London saw the highest growth in absolute numbers, from 268,700 to 327,200. However, this increase of 22 per cent was comparatively modest compared with the three-figure growth seen in cities like Manchester, Birmingham, Leeds, Bradford and table-topper Liverpool, which saw a 181 per cent rise.  

The rapid growth in these city centre populations has come with some very distinct demographic footprints. Those moving into the large apartment complexes and other homes that have sprouted up around city centres are disproportionately graduates, young, single and without children. In the 2011 census, it was revealed that half of those living in the centres of the largest cities were in their 20s. 

While many will marvel at what this has done for places like Manchester and Birmingham, which have become hives of construction activity with one skyscraper after another rising up, it does raise some wider questions about the development of rental property. 

Undoubtedly, the process of city centre repopulation has brought a dramatic change, from the crowded slums of decades ago through to sparse populations and now a flood of young, mobile renters with few ties and often no more of a commute than a short walk. But this is not the whole of the rental property market, and an excessive focus on booming city centres may leave significant gaps. 

Indeed, it is in response to this that some investors and developers are now deliberately targeting the under-served market for rented family homes in the suburbs and outside the cities. 

Earlier this month, Countryside Properties private rental scheme specialist Sigma Capital Group extended a partnership that has already seen Countryside building new family homes for the developer. An initial agreement to construct 927 properties was signed in 2014 and was followed in 2016 with 900 more. 

This has now been extended with a new deal for 5,000 more homes. Countryside will be expanding its operations in the Midlands and Yorkshire in the process. 

Sigma chief executive Graham Barnet observed: "There is a structural shortage of housing in the UK, across all tenures, and our unrivalled delivery platform brings together local authorities, home builders and funders with the common aim of creating new, professionally-managed rental homes for families, a largely neglected and growing part of the overall rental market."

Such neglect might be understandable in some ways. The growth of city centres has not just been residential, but also in terms of jobs, with Manchester topping the 2012-15 table with an 84 per cent increase in employment opportunities. The combination of this and the plethora of new city centre living opportunities may have caused some developers to take their eyes off the ball when it comes to the diversity of rental market growth. More people may work in city centres, but that doesn't mean they all want to live there. 

The reality is that, for all that city centre growth may be exciting and dynamic, there is still plenty of demand - and opportunities - in the suburbs and commuter towns.