Recent years have seen a pronounced reversal of the traditional 'North South Divide' in the property investment market. By virtue of their greater affordability, many northern towns and cities have been delivering much better yields than their southern counterparts and, in numerous cases, they've shown that they've retained more room for capital growth. It has also become increasingly evident that some of the best property investment returns stem from regions with large student populations. University cities have been topping the charts when it comes to rental yields, and many have seen big gains in average property prices, too. Imagine those two factors as the two circles of a Venn diagram and the overlap between 'university cities' and 'northern markets' would give you some of Britain's most popular investment destinations. Manchester, Leeds and Liverpool might be some of the best known examples, but there are others, too. One of these is Sunderland. It might be less celebrated than Manchester but it's becoming increasingly attractive to investors - and for a whole host of reasons.
In this two-part post, we'll take a look at some of the most compelling arguments why the city is worthy of serious consideration.
The Student Market
Education is big business in Sunderland. Voted the 'top student town for landlords' in 2016, Sunderland has one of the best performing education sectors in the country. It grew by 15% between 2012 and 2015 and now adds around £73 million to the city's economy. As a result, the city boasts a huge student population.
Sunderland College, which is currently developing a new city centre campus, educates over 11,000 young people on part-time and full-time courses, while the University of Sunderland attracts 19,500 students from over 100 countries. This - together with a sizeable local population of academics - naturally buoys up demand for local rented accommodation. Nevertheless, there is a continuing under-supply of good quality student properties within the area, so there are good opportunities for landlords with higher specification units to let.
One of the biggest attractions to foreign students (who represent 30% of the university student body) is the growth of the digital industries. Dedicated courses are extremely popular and they are helping to fuel spectacular growth in the sector as a whole. The 2017 Tech Nation report listed Sunderland as one of the best places in the UK to develop a digital technology business. It found that, within the city, such firms support nearly 6,000 jobs and that the sector had more than doubled in size between 2011 and 2015. The Guardian newspaper recently described Sunderland as ‘one of the fastest-growing software hubs
The rise of a high-skill, high salary industry within the city inevitably spells good news for Sunderland's private rental sector, but the digital sector is only one example amongst many.
A Growing Economy
Numerous highly skilled sectors are now seeing rapid growth in Sunderland, and a whole raft of industries are helping to boost the local economy. What's more, with a major programme of investment now underway, economic growth looks certain to continue.
Sunderland is home to around 80 international companies, many of which are household names. Nissan is one of the biggest and best known, but there's a thriving community of other local and multinational businesses at work here - all contributing to a burgeoning economy.
According to a report by Irwin Mitchell in January 2018, Sunderland was the best-performing city economy in the North East over the third quarter of 2017. Victoria Brackett, the company's chief executive for Business Legal Services, said that Sunderland was "flying up the league table" and noted that this was due at least in part to some ambitious city planning. She said "Sunderland City Council revealed investment plans in 2015 and it is now believed that these are having a tangible effect ... with infrastructure in particular improving."
£1 billion of public and private money has already been invested in redevelopments across Sunderland, and with major employers committing to further large-scale projects, there are plenty of reasons to expect further growth.
The city's economic growth strategy is led by Sunderland’s Economic Leadership Board, whose "3, 6, 9 Vision" was launched in 2017. A £1.3 billion programme of investment, it will run for four years and will focus on big infrastructure projects. The plan aims to create 20,000 new jobs in the city and to raise economic performance by £1.8 billion per annum.
A major part of this strategy is the growth of the city's advanced manufacturing sector and, in particular, the automotive industry, which supports around 30,000 jobs. The City Council notes that "In the last five years Sunderland’s automotive companies created 3,742 new jobs, invested £917 million and built two million sq.ft. of new floorspace on 88 acres of land."
Nissan is notable for having its principal European manufacturing centre here - the UK's largest ever car plant, which is the result of more than £3.7 billion of private investment. It employs approximately 6,700 workers directly, but sustains a supply chain of more than 27,000 people. Moreover, this number is certain to grow, following the company's decision to make Sunderland the focus of its electric vehicle production. This year, the company is expected to invest around £14 million to expand its current facility.
Another important employer in the area is Vantec Europe, a subsidiary of Hitachi Transport Systems, which recently opened a 40,000 square metre logistics centre. This will create 120 new jobs in addition to its existing workforce of 900. The business has invested nearly £50 million in Sunderland since 2012.
Rolls Royce is yet another well known name that has made a strong commitment to the city. It is investing over £30 million in a site in Washington in order to expand its aerospace business. The site is expected to open later this year.
International Advanced Manufacturing Park
To consolidate the city's position as a centre for high tech production, the City Council is supporting the development of its International Advanced Manufacturing Park. Work will begin in 2019. Set on a 150 hectare site, the IAMP is expected to attract around £400 million of private sector investment and to create an estimated 5,200 jobs on the site. Many more will be supported across the broader supply chain. Key industries will include the automotive sector, logistics, offshore and a range of projects involving low carbon energy.
Sunderland is clearly generating some impressive figures when it comes to job creation and economic expansion. Sectors such as higher education, digital technologies and advanced manufacturing are partly responsible for this, but so too are other growing industries such as logistics and renewable energy. The private sector is making a huge and continuing contribution to the fortunes of Sunderland, but it's only half the story.
In our next post, we'll look at how public sector spending is also helping to revitalise the city. We'll look at local demographics and at the Council's strategic investment in transport and enterprise development. For property investors, things are certainly moving in a very encouraging direction, so we'll also be examining the property market itself, where yields are some of the best in the country.
To find out more about investment opportunities in Sunderland, please call our advisory team on 01244 343 355.