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Maximising Returns in the West Midlands: A Strategic Approach to UK Co-Living Investments for Global Investors

Maximising Returns in the West Midlands: A Strategic Approach to UK Co-Living Investments for Global Investors

The United Kingdom is grappling with a housing shortage, prompting both the public and private sectors to explore innovative solutions. The country is short by over 1 million homes in the residential sector and by over 400,000 student beds. Learn more about student bed shortfall and investment opportunities in the UK. Co-living is one such strategy that is gaining popularity. Co-living programmes, which are defined by shared, reasonably priced housing, are becoming more and more popular as a tactical reaction to the rising housing demand, particularly among the singles, 18 to 40 age range. This blog examines the West Midlands' emerging co-living scene and its appeal to international investors.

Renowned for its strong industrial heritage, the West Midlands is becoming an attractive location for real estate investment. With 4.7 million residents and a thriving economy, this area presents a distinctive investment environment. Home to world famous universities like Coventry and Warwick, and institutions like Jaguar Land Rover and Bosch, the region continues to see growing influx of young men and women from across the world. Let's explore the main drivers of astute investors' interest in the West Midlands.

Why do global investors want to invest in the Midlands?

Maximising Returns in the West Midlands: A Strategic Approach to UK Co-Living Investments for Global Investors

Strategic location and connectivity are key

The West Midlands' excellent location and superior connections attract investors. Tier 2 and Tier 3 cities such as Stafford and Stoke are growing quickly because of their commuter-friendly location; they are less than 1.5 hours away from London by train, and with the completion of HS2, that travel time is likely to drop to an amazing 38 minutes from London Euston. City workers looking to get away from the chaos of the city will find this accessibility appealing. To top it all off, the area has a number of airports that connect it to 400 international locations, making it even more appealing.

Government Investment and Regeneration

The government's large financial contribution demonstrates its trust in the West Midlands as an investment hub. The £20 million invested in 29 redevelopment plans will go towards building new housing, a contemporary train station, and reviving city centres. With the potential to increase property values owing to these government-led initiatives, now is the perfect time for investors to take part in the region's economic narrative.

Economic Drivers and Industrial Prowess

The West Midlands has long been associated with industrial might, being home to major producers including Bombardier, Toyota UK, Jaguar Land Rover, Rolls-Royce, Bosch and Alstom. The region's strong industrial base plays a major role in its economic vitality. The government reinforces the robustness of the current economic foundation, built on diversified sectors, through its assistance and recent funding infusion.

Academic Prominence and the Distribution of Populations

Together with the region's economic growth, the West Midlands boast a youthful and vibrant population, with 1.5 million people under the age of 25 enrolled in education or working. Prestigious universities in the area, including Aston University, Birmingham University, Coventry University, Warwick University, and Wolverhampton University, demonstrate this demographic dividend. Young talent not only boosts the economy but also creates an atmosphere that is favourable to growth and creativity.

Optimistic Investment Results

Investors in the West Midlands are already seeing encouraging returns on their investments. Valuations of real estate have experienced notable increases even before the completion of ongoing projects. This early success highlights the region's potential, making it a desirable destination for investors seeking long-term returns. Average square foot prices in the region are less than half that of greater London and less than a quarter than that of Central London, and yet offer better yields than the big city. More value for money, more space for the same price, and more return on investment – different reasons but the same destination.

Why Co-Living?

Maximising Returns in the West Midlands: A Strategic Approach to UK Co-Living Investments for Global Investors

Overview of the Midlands Co-Living Scene

In the Midlands, co-living projects are progressing rapidly, with substantial advancements also occurring in London and other cities. Prominent initiatives such as Folk in Battersea and The Collective in Canary Wharf attest to the sector's expansion. Cities such as Manchester, Leeds, Birmingham, Edinburgh, Glasgow, Sheffield, Newcastle, Cardiff, Nottingham, Coventry, and Bristol are planning large-scale co-living initiatives, demonstrating the trend's spread outside of the capital. These well-located co-living places present an alluring option for fresh graduates, young professionals, and key workers looking for reasonably priced and communal living arrangements as demand develops.

Co-Living Investment Opportunities

The co-living industry is currently experiencing a notable surge in investment, with an estimated £2.25 billion scheduled for deployment over the next few years. The strong demand for rental homes, especially in large cities, and the increase in the number of students enrolled demonstrate a thriving market. Major players including APG, British Airways, BP Pension Fund, Co-Liv Fund (DTZIM), VITA, Blackrock, and Oaktree actively support co-living enterprises like Living Scape, Dandi, Folk, Ark, The Collective, Union, and Outpost. With existing owners holding on to their stock, buy-to-let is becoming difficult thus giving way to build-to-rent in this region. Investors now want to have their cake and eat it too – i.e. continue owning the asset while earning from the rents.

The co-living development pipeline

Prominent projects currently under construction include The Gorge in Exeter, which is nearing completion, and Downing's £227 million co-living development in Manchester. Between 2024 and 2025, Vita—which is well-known for its accomplishments in providing affordable housing through student housing and build-to-rent models, plans to construct a two-tower co-living project in Manchester. Co-living is gaining traction and is expected to further expand throughout the United Kingdom.

When considering investment in the West Midlands co-living sector, there are several important factors to take into account. Although the Midlands presents encouraging prospects, investors should take some aspects into account:

1. Market Dynamics: Evaluate how vulnerable the West Midlands co-living market might be to downturns in the economy. While co-living has shown resilience, it is important to comprehend its dynamics in this area in order to predict rental income stability.

2. Competitive Landscape: Examine the extent of market saturation in urban co-living. Despite the strong demand, an oversaturated market could raise competition and have an effect on rental income.

3. Financing Difficulties: Potential funding difficulties particular to co-living homes should be known to investors. Speak with lenders who have experience with this kind of investment to make the financing process go more smoothly. Or go with pre-approved deals.

4. Regulatory Environment: Remain aware of any new laws pertaining to co-living in the West Midlands or nationally. Regulatory changes may impact the operational features of co-living facilities, requiring investors to make adjustments.

In Summary,

When it comes to the exciting world of co-living investing, the West Midlands stand out as a bright spot for investors from around the world. With its favourable location, strong economy, and government-funded revitalization programmes, the West Midlands provides a special fusion of prosperity and stability. The Midlands is leading the way in the co-living movement, which is sweeping major cities and offering not only smart investments but also a game-changing answer to the UK's housing problems. By thoroughly evaluating market dynamics, competitiveness, financing intricacies, and regulatory environments, investors can strategically position themselves to capitalise on the growing success of co-living in this emerging sector. The Midlands encourages investors to join them on a revolutionary real estate adventure with its bright investment outlook and dedication to innovation.

 

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