In 2018, we featured a Spotlight on Preston, noting many of the factors that were helping to make the Preston property market a hotspot for investment.
To sum up that post, key trends include a rising population, the revival of its city centre, and a City Deal, which is delivering £434 million of funding for economic regeneration. This is expected to generate around 20,000 new jobs, and to boost GVA by around £1 billion over the next decade.
Other developments that are boosting the prospects for employment (and therefore rental demand) include a £1.2million improvement programme for one of Preston's central squares, and the £1.5 million modernisation of the city's mainline railway station, which is also expected to benefit from proposed HS2 rail links.
Our 2018 article also touched upon Preston's university: the University of Central Lancashire, also known as UCLan. We noted that it was one of the largest British universities (ranking 19th in size) and the fifth biggest employer in the North West. However, in recent months, much has been happening at UCLan that could be of interest to property investors, so we thought we'd take a closer look.
The University of Central Lancashire
Established in 1828, UCLan is classified as a 'large' university. It is home to 18,115 undergraduates, approximately 4,500 postgraduates, and a sizeable body of academic staff and managers. In the current academic year, these include 98 professors, over 600 researchers and tutors, and 763 research students. It also provides a number of non-degree courses, and hosts over 2,000 international students. In all, the number of staff and students is close to 38,000.
The sheer number of people drawn to the university is an important driver of demand for rental accommodation. University-owned accommodation accounts for only 2,200 places, so there is a lot of slack for the private rental sector to take up.
However, UCLan is also a major centre for world-class research and it engages intensively with business. It is working on numerous research projects with cutting-edge partners such as NASA and BAE Systems, and it has close working links with more than a thousand UK employers. This supports a steady stream of inbound visitors from private business and other stakeholders. This, in turn, is helping to buoy up demand for profitable short-term rentals and serviced accommodation of a kind suitable for demanding professional tenants.
Ranked in the top 4% of universities worldwide, UCLan continues to invest in new facilities and growth. Currently, for example, it is benefiting from a £200 million modernisation and expansion programme. This includes a brand new £32 million Engineering Innovation Centre, which will open later this year. It will feature teaching and exhibition space, as well as several specialist labs and four flight simulators.
UCLan's modernisation programme will continue for at least the next ten years, driving steady improvements and providing regular boosts to the city's economy. Other related developments include two new social spaces, which opened in 2018, and a new £57 million Student Centre, which the University states will incorporate "a new campus reception building, student services, meeting rooms, office space, event venues and a rooftop garden."
There is little doubt that UCLan is an important contributor to the city's economy. It is a major employer in its own right, and its business incubators have helped to spawn countless small and successful ventures. Equally importantly, it produces thousands of new graduates every year.
Some of its most popular courses relate to growing and high value sectors such as engineering, business, health, media and law. UCLan's extensive links with employers mean that many of these promising young job-seekers quickly find employment with local businesses rather than getting siphoned away to cities such as Manchester and London. This retention of graduate talent keeps money and expertise circulating within the city, which all helps to underpin Preston's growing prosperity. A further consequence, of course, is that it increases local demand for good quality rented accommodation.
The Preston Property Market
For buy-to-let investors, the University is an invaluable local asset for the Preston property market. So many of the features that make Preston so attractive to investors owe at least some of their success to UCLan, its students, academics and outreach programmes. It is one of the reasons why rental demand is so strong and reliable, and why the city's economy is making such a pronounced recovery.
However, it is by no means the only contributor. Another reason why investors are so interested in Preston property is because yields here are some of the best in the country.
According to TotallyMoney's Buy to Let Yield Map 2018/2019, Preston's central PR1 postcode ranks in the top 20 UK destinations. Average rental values here are £845 pcm, average asking prices are £147,076, and average rental yield are 6.89%.
The relative affordability of property is clearly one of the reasons why yields in Preston are so rewarding; TotallyMoney's figure of £147,000 compares against a national average of £230,776 (according to the Land Registry, December 2018.) Paying so much less to acquire a property inevitably makes it easier to achieve higher yields.
Rental demand is the other big factor, and TotallyMoney notes that universities play an important role in sustaining it. In the commentary that accompanies its Buy to Let Yield Map, the company states: "For a buy-to-let safe bet, start looking for properties in university cities. Locations with a high student population boast some of the UK’s highest rental yields. Regular term times and a consistent, annual flow of new students put landlords in a strong position: void periods are less likely, and with more students looking to rent, finding the right tenants is easier."
Preston would certainly appear to bear out that assertion; UCLan sits firmly within the PR1 postcode that is performing so well.
We previously noted that the Preston property investment market was one to watch. Very low property prices, together with robust rental demand have earned the city a place in the top rankings for buy-to-let yields.
Looking forward, healthy rental demand appears almost certain to continue. UCLan is one of the chief reasons for that, and its multi-million pound investments can only help to accelerate the trend. But on top of that, landlords can expect the city to generate around 20,000 new jobs in the coming years, thanks to a number of important regeneration schemes and a City Deal that has already begun to transform many of Preston's urban spaces.
To find out more about investment opportunities in Preston, please call our advisory team on 01244 343 355.