It was back in the summer of 2018, when we noted that Sunderland possessed all the ingredients for an outstanding property investment destination. Some of the most important indicators included a large student population, an ambitious economic regeneration plan, and strong growth in key sectors such as digital industries and advanced manufacturing.
Since then, all those factors – and more – have played a part in transforming the city’s fortunes. As a result, it now stands as a genuinely exciting market for property investment. True, it is still trying to shed something of an image problem, but this arises from opinions and associations that are looking increasingly outdated and out of touch.
A Modern City with Big Ambitions
The reality today is that Sunderland is making good on its plans for economic rebirth. In 2017, Sunderland’s Economic Leadership Board published its "3, 6, 9 Vision", which aimed to deliver £1.3 billion of investment over 4 years, generating thousands of new jobs and boosting the city economy by around £1.8 billion per annum. Now, only three years into that plan, it has already surpassed its investment targets by a considerable margin.
Sunderland City Council now reports that the city will be benefiting from more than £1.553 billion of confirmed private and public investment. It has also published details of some of the region’s most important regeneration projects. Many of these focus upon the city centre. On its ‘Make It Sunderland’ website, the Council notes: “More than £0.5 billion of investment is pouring into the city centre, creating a new climate of confidence and optimism among the general public and investors alike.”
Widespread Economic Growth
However, growth is not simply occurring in the centre; the whole area is a hotbed of industry, and major employers in the aerospace and automotive sectors have continued to invest on an impressive scale. One example is Nissan, which in March 2020, announced a £52 million investment in a new press line dedicated to the production of its Qashqai SUV. This is part of an ongoing £400 million investment in its Sunderland car plant, which comes in addition to £100 million recently spent on expanding its manufacturing facilities for another of its SUVs - the Juke.
Legal & General is another headline investor. In November 2019, it confirmed a £100 million budget for the construction of three commercial buildings at the former Vaux brewery site in the fast-regenerating Riverside area. This, plus a host of major infrastructure projects – including the £117 million Northern Spire road bridge across the River Wear – is all helping to transform the economy and to prompt widespread job creation.
Jobs and the Housing Market
Rising employment is invariably a good indicator for buy-to-let property investors. Job creation tends to attract more people to an area, and more people in employment also tends to increase the money in the average tenant’s pocket. Accordingly, higher rentals may be easier to sustain.
Rental demand is strong in Sunderland, yet property prices remain well below the UK average. This is obviously good news for landlords looking for a high-yielding investment. It’s also part of the reason why two Sunderland postcodes made the list of ‘Top 25 buy-to-let areas’ in Totally Money’s UK Buy-to-Let Yield Map for 2019/2020.
The city’s SR8 outcode made 16th place overall, with an average asking price of £73,725 and a median rent of £450 – equating to a gross yield of 7.32%. The city’s SR5 outcode performed almost as well, delivering yields of 6.99%.
Over the long term, there has always been a close correlation between house prices and average disposable incomes. In Sunderland, a buoyant economy and rapid employment growth should certainly see average incomes rising over the next few years. All the changes now occurring with Sunderland therefore bode very well for investors who want to benefit from steady capital appreciation.
Already, there are signs that these effects are taking hold. Though average house prices still have plenty of room for growth, figures from Zoopla suggest that they are beginning to climb quickly. According to its March 2020 figures, average values across all property types rose by a staggering 7.94% over the preceding 12 months, more than 3% of which was achieved between January and March 2020.
Of course, capital growth over just one financial quarter – or even over just one year – is no reliable indicator of future performance. However, there is good evidence that the forces driving growth in employment and house prices should persist for many years to come.
Firstly, the improvements to the city centre will continue for years and, once complete, they will sustain many new jobs in the city. The Riverside Sunderland website notes that the scheme will see employment numbers in the city centre rising from 12,000 to 18,000, and that the local resident population will double from 2,500 to 5,000. If that proves to be the case, then this will put considerable extra pressure on local housing supplies and add greatly to local rental demand.
Riverside itself is worthy of more scrutiny. It’s a plan – now well on its way to fruition – that comprises commercial, leisure and public sector developments, all working as part of a holistic regeneration model. In addition to new, badly-needed housing, it will feature two other key elements: an employment zone and a civic zone.
One of the most notable buildings in the employment zone is The Beam, a mixed-use development and the first to be built on the site. It will provide top quality office accommodation and it’s already nearly fully tenanted. The first company to confirm its intention to locate there was the online grocer, Ocado.
More generally, across the city centre, important projects are taking shape. Riverside will see a new £16 million hotel in Keel Square (confirmed in August 2019); Legal & General is working on its three new office projects; and new development sites are opening up. These include the restoration of the former Gilbridge Police Station, and the ring-fencing of land at Farringdon Row for commercial development. (It will create up to 175,000 sq ft of space in the city centre for small technology-focused businesses.)
The Riverside plan also features a civic zone, which will be home to public sector buildings and a variety of cultural and recreational facilities. Amongst others, they will include a theatre, library and what planners are calling “a new civic heart;” a collection of public services in a purpose-made landmark building.
Importantly, there will be continuity between the employment and civic zones; the ground floors of many commercial buildings will feature cafes and other publicly accessible services, so there will be an interconnectedness between them. Moreover, the Council notes that the civic zone “stands in the shadow of Sunderland Minster, itself subject of a multimillion-pound investment programme, with public realm that can be enjoyed by day and night.”
All told, more than 2,000 office-based jobs are expected to be created in Sunderland’s new civic district, and the wider transformation of the urban centre is expected to create 6,000 new jobs by 2030. For investors with property in the centre, there is therefore good evidence that rental properties will attract increasingly strong demand and all the benefits of an up-and-coming location. However, what are the prospects for landlords in other parts of city?
Infrastructure and Investment
All around Sunderland, new developments and infrastructure improvement projects are helping to ensure that economic growth isn’t solely focused on the centre. What follows is a short list of some of the most notable examples.
Northern Spire is a £117.6m civil engineering project that, in August 2019, created a new road bridge over the River Wear. Three years in the making, it is improving connections between important development sites including the International Advanced Manufacturing Park on the A19, and the Port of Sunderland. The City Council notes that by connecting new employment zones, the Sunderland Strategic Transport Corridor will “help create an estimated 6,000 new jobs at development opportunities across the city.”
International Advanced Manufacturing Park
The IAMP is a focal point for high-value engineering and manufacturing businesses, and is making available up to 150 hectares of development land close to Nissan UK’s existing manufacturing plants. Well connected to the A19 (and especially accessible since the completion of the bridge), the site has been designated a ‘Nationally Significant Infrastructure Project’ by the British government.
Sunderland City Council estimates that by accelerating growth in the region’s automotive, advanced manufacturing and technology sectors, the IAMP could support the creation of 7,000 new jobs over the next 10 to 15 years. An important area for commercial exploitation will be the fast-growing electric vehicle industry.
Port of Sunderland
Sunderland’s port has always played a vital role in its economic successes and now, following a £1 million refurbishment programme, the Port is attracting new investors. The most recent of these was the fertiliser business Brineflow which, in October 2019, confirmed plans for a £2.3 million facility comprising a new import, processing and distribution terminal.
Matthew Hunt, director of Port of Sunderland, said: “The port has undergone a wave of major investments over recent years and this is another great example of all of this hard work and investment starting to bear fruit.”
University of Sunderland
Host to over 19,000 students and a host of teaching staff, the University has long been a reliable source of investment and innovation. In April 2019, it announced the completion of its latest large-scale scheme: the £10 million Hope Street Xchange, a centre for enterprise and technological innovation. Its role is to nurture SME business growth in high value industries, thereby strengthening Sunderland’s status as one of Britain’s top 5 locations for business start-ups.
Some of the fastest expanding sectors in the city – advanced manufacturing, aerospace, software development, financial services and electric vehicle technology – suggest that business growth plans are well on track.
The Bigger Picture
James Ramsbotham, chief executive of the North East England Chamber of Commerce recently stated: “We, in the North East, know all of Sunderland’s merits, but to attract investment on this scale today shows that the message is permeating beyond the region.”
The growing interest of commercial investors highlights the undoubted fact that a great deal is happening in Sunderland, and the resulting improvements in economic growth can only be good news for property investors. But it’s also worth viewing the city in the context of the wider region, which has set appreciable growth targets of its own.
The North East Local Economic Partnership is committed to creating “100,000 new and better jobs” by 2024. Its Strategic Economic Plan aims to ensure that at least 70% of new jobs are in higher value industries. It also reports that the region has “made significant progress, with 74,000 new jobs created since 2014 and improvements to our employment rates, economic activity rates and productivity.”
The bigger picture, then, looks exceptionally attractive to property investors. Sunderland is a strongly-regenerating city in a strongly regenerating region. Improvements in business growth, jobs and average disposable incomes are likely to follow and – with them – ever more rewarding conditions for landlords with good quality properties to let.
The Property Professional’s Perspective
While ill-informed outsiders might still be harbouring a certain prejudice towards Sunderland as a property investment market, that’s certainly not true of local property professionals. One such expert is Richard Burrows, manager at the Laycock Group, which has a Sunderland-based residential lettings and management division. We asked him for his views on the city.
Q: So, Richard, do you think it’s fair to say that Sunderland has been underestimated as a property investment location?
A: “Absolutely. There’s so much going on in the city and the surrounding area that investors really should be sitting up and taking notice. We’ve got around £200 million going into the Vaux Beam site, and well over £400 million being invested by Nissan. On top of that, there’s the new medical centre and the ongoing renovation of the coastal boroughs – Seaburn, Roker, and Whitburn.
“The city centre is seeing a massive revival but there’s good economic growth everywhere, and this is all helping to build a strong sense of optimism.”
Q. And is that optimism extending into the housing market?
A. “Mostly, yes. You still sometimes hear some very outdated views from commentators outside the region – some of them just don’t seem to have been paying attention to the news. But for those who live and work in the city, and for landlords who already have property here, then yes, they couldn’t be more confident. Rental demand is sky-high and a lot of investors are saying that if they could get hold of enough properties, they could be agreeing new tenancies every day of the week.
“That’s certainly been our experience; the lettings market is excellent – genuinely really strong – and we’re attracting ever more enquiries. That’s particularly true of younger people and professionals who are coming to the city for the first time.
“It’s an exciting market, full of energy, and it’s showing every sign of getting stronger.”
To speak directly with Richard at the Laycock Group please contact 0741 406 3263 or email firstname.lastname@example.org
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To find out more about investment opportunities in Sunderland, please call our advisory team on 01244 343 355.