UK Property Development & Investment News - Alliance Investments

Pandemic bounce back 2022 – cities outperforming expectations

Written by Alliance Investments | Jan 20, 2022 2:21:35 PM

No part of the UK was unaffected by the pandemic. Every industry and every place had to make huge changes on a very short timescale, leaving many questions as we adapted to the new day-to-day reality.

The UK’s cities and large towns arguably felt the impacts most of all. These places account for approximately 60% of the national economy and more than half the population. Anything which affected cities was sure to be a major issue for everywhere else too.

Now that the worst of the pandemic has passed, and public health measures are allowing the country to open up and return to something like normal, the UK’s cities are bouncing back – and that is very good news for anyone investing in property.

It was not always easy to see that cities would return to their former strength so quickly. As Oxford Economics notes, “Cities are typically home to large numbers of office-based jobs, most of which can be done anywhere with an internet connection and space for a desk. But cities are also hubs for entertainment, hospitality and culture, sectors serving both residents and visitors.

“For these sectors, a combination of lockdowns and travel restrictions generally meant complete closure. The same was initially true for many retailers, and for other activities such as gyms and sporting events.

However, the same report notes that positivity is returning. For example, if we take the offices sector, it is becoming clear that the levels of working from home seen throughout the pandemic will not be maintained in the long-term. Instead, a survey from the Office for National Statistics shows that 85% of people prefer a “hybrid approach”.

This is a relief for those cities hardest hit by the sudden move to home working en masse such as London. The capital saw many people leave the city centre in the pandemic, but now they are returning as the hybrid approach to work is coming into place, and people wish to live closer to the city centre again. Confidence has returned to the London office sector to such a degree that Savills is predicting 8.2m sqft of office lets will go through in 2022 as occupiers look to maintain space or expand.

Likewise, Manchester is likely to see more than 1.25m sq ft of office space uptake in 2022 according to OBI, as reported in Business Desk. The North West city is the Northern equivalent of London and the general health of its office market is a good sign for wider economic prospects in the region as the bounce back from the pandemic continues.

To take Manchester as an example, JLL anticipates that property values will grow 25.8% in the city by 2026 – far exceeding most of the rest of the country over that period. This follows growth of 8.5% in 2021 as recorded by the latest Hometrack Cities Index.

Rental growth is also expected to be strong in the city. Demand increased by 36% for Manchester rental property over the course of 2021, and this shows no signs of slowing. Indeed, Alliance City Living reported in Q4 2021 that rents for studios, two- and three-beds in Manchester are at all time highs, and the lack of supply means they should keep increasing further in 2022. JLL agrees with this assessment, projecting rental increases of 15.4% in the city by 2026 – good news for anyone investing in property in 2022.

Likewise, the London residential property market looks set to have a strong 2022 and beyond according to the reports. Returning to the same JLL report, we can see that almost 26% house price growth is expected in the next four years – putting London on a par with Manchester – and that rents could also increase by 16% over that period.

When it comes to property investment in the UK, over recent months London has seen rising competition from other UK regions, especially the North. The rising cost of entry combined with falling demand has seen rental returns and capital appreciation for London fall far below regional hotspots like Manchester. Now, however, indications are that the London market may come out of the pandemic recovery stronger than ever.

The economy as a whole is beginning to perform again, but certain cities are doing far better than average. That is true for the property market as well, and this is a good time to consider your next UK investment.

To learn more about which markets should be on your wish list, and to find out about the outstanding investment opportunities on offer at Alliance Investments, get in touch with our team today