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FEATURE ARTICLE

PRS - there’s substance behind the hype  

David Lathwood, lead director at JLL, talks PRS


The emergence of the Private Rented Sector (PRS) in the North West may be turning out to be more of a slow burn than the explosion many predicted, but I’m still convinced it’s set to become one of the most lucrative asset classes in the region.

The Moorfield group’s forward-funding of Glenbrook Properties’ 240-unit PRS scheme at Princes dock in Liverpool last year was something of a rite of passage for the regional market. Since then numerous PRS schemes have trickled through - many as part of some of the region’s major development schemes. Noma has Moda Living’s Angel Gardens while Patrizia’s investment in First Street brought with it a commitment to venture into the sector. Now, ECF and Legal and General have announced plans for the first custom-built PRS scheme in Greater Manchester at the New Bailey development.

More is set to follow – there’s significant institutional money seeking exposure to city-centre residential property. With a dearth of ready-made schemes for acquisition, this money is focused on new build. As a result the market is primed to see who will fund and deliver the first major dedicated PRS scheme on the scale of similar projects in the capital. Whoever does take that leap – investing in a large-scale scheme with on-site site amenities like gyms, retail and leisure - is likely to reap serious rewards.

The attraction – particularly in Manchester – is that schemes are likely to offer the kind of long term returns you might expect in London, but with a significantly lower cost of entry. This is spurring on funds that have traditionally been focused on commercial property to get in on the act, attracted by the fact that, with over 90 per cent occupancy, the residential market is arguably a safer bet than a speculatively commercial development.

We may also see Housing Associations move into the sector, with the government’s proposals to extend Right to Buy prompting them to seek new sources of revenue.

There’s such excitement around PRS because, driven by urbanisation, demand for city centre living has reached fever pitch – demonstrated by the fact that both capital and rental values for residential property have been rising simultaneously (we’d normally expect them to fluctuate on a countercyclical basis).

A contributing factor is that city centre living is no longer just the preserve of young professionals. Our residential teams have seen strong growth in enquiries from over 35s and families – creating demand for new types of city-based living.

A PRS boom is coming and its potential to boost Manchester’s growth prospects should not be underestimated, particularly given that London’s status as a major destination for international property investment owes as much to the strength of its residential market as to its thriving commercial sector.