• Fabrik Invest highlights significant shift from new builds to conversions
• Lower prices, higher yields and faster income all driving the change
• Location winning out over facilities in terms of investor priorities

Property investment firm Fabrik Invest has reported a shift in developers’ and property investors’ priorities, driven directly by the pandemic. Managing Director Dale Anderson comments:

“We’re seeing much more emphasis – from both the developers and the investors that we work with, and particularly over the past six months – on commercial to residential conversions. This is marking a significant and sustained swing away from new builds, as lower risk, more economical projects appeal more in the pandemic era.”

Dale Anderson, Managing Director, Fabrik Invest

It’s cheaper to convert an existing building than to build one from scratch. This means that savings can be passed on to the investor, resulting in a better purchase price per square foot than new build homes. They can also be passed on to the tenant, with lower rents meaning the building is faster to fill.

Given Covid’s impact on the economy, lower rents are certainly appealing to many tenants right now. Rent arrears protection service Only My Share reported last month that it had seen a 300% rise in claims during the pandemic, as tenants struggle financially. From a development perspective, this emphasises the need to focus on lowering costs where possible.

The other major factor behind the rise in commercial to residential conversions, according to Fabrik Invest, is the speed at which the work can take place.

“New builds can take two to three years to complete, whereas a conversion can be finished in just three to six months. That’s a huge difference for developers in terms of risk, as well as cost. It’s also extremely appealing for investors looking to receive income as quickly as possible.”

Dale Anderson, Managing Director, Fabrik Invest

Off-market apartments at Albion Place, in Manchester city centre, is one such example. Newly launched to the market this month, the first phase of homes are due to complete before the end of the year, providing investors with much faster returns than a new build ever could. Available from £140,000, the one- and two-bedroom apartments are also competitively priced – again, due to being a conversion, rather than a new build.

Commercial conversions also tend to deliver maximum benefit in terms of location. Albion Place, for example, sits in an enviable position between Spinningfields and MediaCityUK, just 850m from Salford Crescent station. According to Fabrik Invest, this is another plus point for investors.

“The pandemic has led investors to focus on location over and above amenities. This comes back to price, again. Cinemas, pools and gyms are all very nice, but they also eat into yields significantly by driving up service charges. In a price-conscious era, the right location – with a price-tag that can attract tenants fast – is proving far more appealing than on-site facilities and services.”

Dale Anderson, Managing Director, Fabrik Invest

Over 60,000 homes have been created using permitted development rights over the past four years, according to Housing Secretary Robert Jenrick. With demand increasingly favouring commercial to residential conversions as a result of the pandemic, it will be interesting to see how many more are created over the next four years.

For more information, please contact Fabrik Invest on 020 8175 9891 or enquiries@fabrikinvest.com, or visit www.fabrikinvest.com

• “Taxes pose the greatest threat to buy-to-let investment” (Fabrik Invest)
• Record 228,743 buy-to-let companies up and running
• Around 2,000 buy-to-let mortgage products now available

The UK housing market has, thus far, weathered the COVID storm remarkably well. The Stamp Duty holiday led to an unexpectedly busy 2020, with provisional data from HMRC showing that 121,640 sales went through in January. That’s an increase of 24% year-on-year.

Plenty of families used the holiday to upgrade their home, with space becoming a highly prized commodity as a result of the pandemic. But what about landlords? An increasingly punitive approach to taxation over the past few years has seen the addition of a 3% Stamp Duty surcharge for those buying a second (or subsequent) home, along with a significant reduction in the amount of mortgage interest that landlords can offset against their profits.

Will the impact of this spell danger for the buy-to-let market in 2021? Far from it, according to Dale Anderson, Managing Director of Fabrik Invest.

“Taxes certainly pose the greatest threat to buy-to-let investment in 2021, particularly as government debt has spiralled due to Covid. The Chancellor will be looking at all angles when it comes to rebalancing the books. However, interest in buy-to-let properties in the UK continues to be strong. We still have a major shortage of housing in many areas of the country, along with a growing gap between salaries and property prices. All of this continues to create plenty of demand for rental properties.”

Dale Anderson, Managing Director, Fabrik Invest

The increasingly availability of mortgage products certainly seems to back up the case for interest remaining strong. There are now approximately 2,000 buy-to-let mortgage products available, based on figures from Moneyfacts. That’s a rise of over 500 products since May 2020. Not only that, but lenders are increasingly dropping their requirements when it comes to deposit size. Back in May just 19 buy-to-let mortgages were available to investors with a 20% deposit. That number now stands at 100.

When it comes to taxes, buy-to-let investors are increasingly turning to holding companies in order to make a saving. Investing through limited company is, in many cases, significantly more tax efficient than buying property as an individual. As a result, a record 228,743 buy-to-let companies are now up and running, following a record number being formed in 2020.

“Investors are increasingly using companies to hold their properties, as the savings can run into the thousands for each home that they own. We saw a record number of buy-to-let holding companies formed as a result of this in 2020 and there’s every reason to believe that the same will occur in 2021, as more and more investors seek the most tax efficient setup possible.”

Dale Anderson, Managing Director, Fabrik Invest

Taxation aside, there is one further threat that Fabrik Invest has identified for 2021: the oversupply of rental properties in certain cities, or in particular areas of certain cities.

“Investors really need to do their homework and perhaps focus more heavily on tertiary cities this year. We expect to see smaller cities such as Preston out-performing some of the bigger hitters in 2021, in terms of both capital growth and yields.”

Dale Anderson, Managing Director, Fabrik Invest

This is why Fabrik Invest is focusing on developments such as Bishopgate Gardens right now. Centred around an impressive plaza, the 130 homes and seven retail units are raising the bar for Preston’s rental market. Two show-stopping rooftop gardens, a coffee pod café, an extensive lounge area and a stylish work-from-home space will set new standards for the city’s renters. As a result, investors have been flocking to the scheme, which now has just 14 homes left for sale.

For more information, please contact Fabrik Invest on 020 8175 9891 or enquiries@fabrikinvest.com, or visit www.fabrikinvest.com

• Post-pandemic market projections occupying investors’ minds
• Big wins for tertiary cities already beginning to play out
• Local migration patterns and employment fluctuations being carefully monitored

Property investment agency Fabrik Invest has shared insights into the top concerns that property investors are expressing as they navigate the dual complexities of the pandemic and Brexit. The company works with investors from more than 20 countries and has been monitoring their top property-related concerns for the past year.

“The impact of the pandemic on the UK property market is, naturally, top of investors’ minds right now. They are even more keen than usual to see the latest data on price movements both nationally and locally. There’s also a lot of interest in what’s next for the market – what’s the landscape going to look like in the future, post-Brexit and post-Covid?”

Dale Anderson, Managing Director, Fabrik Invest

The stamp duty holiday – now extended to the end of June – has done much to not just keep the property market moving over the past year but to accelerate transactions significantly. Prices have risen as a result, with Nationwide’s February house price index showing annual growth of 6.9%.

Of course, the question on property investors’ minds is whether or not a crash is on the cards. Yet key industry analysts think not. Savills is projecting 4% growth in prices in 2021, followed by 5% in 2022. In fact, in the five years to 2025, the firm is anticipating price growth to total 21.1% across the UK, led by growth of 28.8% in the North West. The figures reflect the measures in the spring Budget, including the introduction of a government guarantee on 95% loan-to-value mortgages. The scheme is set to provide further stimulus for the housing market.

The fact that the Office for Budgetary Responsibility now expects, “a return to pre-Covid levels by the middle of next year, six months earlier than first thought,” according to Chancellor Rishi Sunak, is further good news for investors’ looking at the UK property market’s potential for growing their capital.

Quantitative easing and the recently announced Corporation Tax hikes will also play into the UK’s overall economic picture over the coming months and years, as will migration patterns driven by the pandemic and by local fluctuations in employment levels.

“I expect a short-term dip in prices in certain parts of the country – specifically the prime London and Manchester city centre markets. We’re likely to see homeowners and investors looking for better value outside of these areas instead. Third tier cities should make for the most attractive prospects.”

Dale Anderson, Managing Director, Fabrik Invest

Preston, in Lancashire, is one such example. With a rapidly growing population and £434 million worth of investment schemes underway, plus a further £19.9 million from the Towns Fund announced in the spring Budget, the city has plenty going for it.

The fact that Bishopgate Gardens, a 130-home residential scheme in Preston, is seeing a surge in interest right now speaks to the appeal of tertiary cities in property investors’ eyes. With shared social spaces including a stylish lounge area, a coffee pod café, show-stopping rooftop gardens and a shared working space, plus seven ground-floor retail units, the development offers a lifestyle experience designed to level up choices for Preston’s renters – and for its investors.

“What we’ve also heard over the past year is investors’ need for significant reassurance over the online nature of their transactions. This has been a direct result of the pandemic. Investors want to know how they can be sure they’re making the right decisions when everything is done virtually.”

Dale Anderson, Managing Director, Fabrik Invest

Fabrik Invest has fared well in this respect. The firm’s knowledge-based approach has seen it partner with leading financial and mortgage advisors as it works to provide investors with an honest approach to their investment options. That means not only providing deeply researched information on each investment location, but also being upfront about the risks associated with off-plan investment. The company’s consultants, all of whom have a minimum of a decade’s experience in the sector, host personal strategy meetings online, working to understand each investor’s goals at an individual level. 

It’s an approach that clients have found reassuring in the face of the adversity created by the pandemic – and by Brexit too. It means that, while the market is changing in terms of localised demand, property investors are still keen to be a part of the UK’s economic future. They’re just keen to know which cities will provide the best returns and the best potential for capital growth – so while the questions at the top of their minds have changed, their fundamental needs remain the same.

For more information, please contact Fabrik Invest on 020 8175 9891 or enquiries@fabrikinvest.com, or visit www.fabrikinvest.com

• Just 29% of high street addresses are retailers (Office for National Statistics)
• 1 in 12 shops closed in 5 years to 2018 (Ordnance Survey)
• Blending retail units with new homes is key to city centre survival (Fabrik Invest)

Property investment specialists Fabrik Invest have spoken out about the importance of balancing residential development in city centres with commercial premises in the post-pandemic world. City centres have been hit incredibly hard not only by successive lockdowns but also by the reduced footfall resulting from a far higher incidence of home working throughout the pandemic. According to Fabrik Invest, this puts an onus on developers and investors to take an active role in keeping urban centres alive.

“Our town and city centres were already struggling when the pandemic struck, with one in 12 shops closing in the five years to 2018. Yet town centres do so much to help communities connect. That’s something that has become infinitely more valuable as a result of the prolonged isolation of the pandemic. Developers have plenty of scope to help nurture our towns’ and cities’ growth and this needs to be a key focus moving forward.”

Steve Jacob, CEO, Fabrik Invest

By March 2020, just 29% of high street addresses were retailers. Squeezed salaries and the shift to online shopping have been two of the key reasons behind this, both of which have been significantly exacerbated by the pandemic. The closure of offices and the shift to students studying online has intensified the problem, due to the huge drop in the number of those passing through town and city centres. For retail units, footfall is everything

People’s changing preferences have also had an impact on town centres in recent years. While the pandemic has served to push people towards country living, that followed a boom in demand for city centre homes, which is likely to pick up once more as the vaccine roll-out continues and we look forward to a post-pandemic return to relatively normal life.

“People increasingly want everything on their doorsteps – to live within walking distance of excellent restaurants, a selection of shops and the best leisure facilities available. The relaxation of planning laws meant that many old office spaces could be converted into residential buildings, but we need to balance that with keeping commercial premises in urban centres too, as those are a key part of the reason that people want to live centrally.”

Steve Jacob, CEO, Fabrik Invest

The planning law relaxation allowed people with B1 office space to convert it into residential accommodation without the need for a full planning application, provided they stuck to national framework guidelines. The move led to a lot of unused office space being turned into homes and continues to do so to this day. Fabrik Invest regularly offers such developments for investment.

Bishopgate Gardens in Preston is a prime example of this. The office block, which had stood vacant since early 2019, is being converted into 130 one-, two- and three-bedroom apartments, with shared social spaces including a stylish lounge area, coffee pod café, shared working space, reception area with 24/7 concierge and show-stopping rooftop gardens on the eighth and eleventh floors.

Bishopgate Gardens will also be home to seven retail units on the ground floor, including a deli, barbers, beauticians and florist. Budding entrepreneurs to take over the high-spec shops, which face onto the development’s impressive plaza, are currently being sought.

“With commercial to residential conversions, there’s often plenty of scope for developers to provide retail space on the ground floor. This will be key to the long-term survival of our town and city centres as places where individuals can connect with local businesses and with the wider community. In the post-pandemic era, this will be more important than ever in keeping the commercial heart of our cities alive.”

Steve Jacob, CEO, Fabrik Invest

For more information, please contact Fabrik Invest on 020 8175 9891 or enquiries@fabrikinvest.com, or visit www.fabrikinvest.com

• Investors increasingly seeking additional bedrooms and on-site co-working spaces
• Outdoor space to remain at a premium over the longer term
• City homes in particular being scrutinised by landlords looking for ideal amenities

Property investment company Fabrik Invest is reporting longer-term changes in landlord behaviour and requirements, as the continuing impact of the pandemic is felt across the UK’s private rented sector.

“There’s still plenty of interest from investors looking to become landlords. Indeed, the Bank of England putting banks on notice to prepare for negative interest rates in the next six months is doing much to fuel a shift of liquid assets into bricks and mortar. Many of our investors are already moving to do this. What’s interesting is the sustained shift in the types of property that they are seeking.”

Dale Anderson, Managing Director, Fabrik Invest

This shift in demand has put a spotlight on properties such as Bishopgate Gardens in Preston. Priced from £120,000 and due for completion in September this year, Bishopgate Gardens’ 130 apartments have been designed to deliver an exceptional living experience. Residents of the one, two and three-bedroom homes will have access to a shared working space (‘The Common’) and on-site coffee pod café, as well as a stylish lounge area and reception with 24/7 concierge. The show-stopping rooftop gardens on the eighth and eleventh floors, meanwhile, more than tick the oh-so-important outdoor space box.

It is the shared working space, as well as the outdoor areas, which Fabrik Invest has found that investors are increasingly focused on. Home-based working has flourished of necessity during the pandemic, but over the longer term it will continue out of choice for many.

“The increase in home working is driving interest in on-site co-working spaces like never before and it’s not stopping there. Many investors are now looking to put their cash into properties with an additional bedroom that can be used as an office. Landlords are adapting their behaviours and approach to the new normal.”

Dale Anderson, Managing Director, Fabrik Invest

It is city centre homes in particular that landlords are scrutinising through a new Covid-lens. People aren’t using city centres in the same way they used to. Many behaviours are expected to return to normal as the vaccine rollout reaches the masses. However, the fact that Covid-19 may well move from pandemic to endemic in the human population means that some changes will be for good. This means, according to the Fabrik Invest team’s experience, that landlords are hedging their bets by investing in homes with on-site facilities that make localized living easy. In Preston, Bishopgate Gardens’ seven ground floor retail units are a case in point, with residents enjoying easy access to a barber, hair salon, beauty shop and grocery store, among others.

Location-wise, it’s all eyes on the North West. Savills’ latest mainstream residential market forecast pegs the North West as leading the UK for house price growth over the next five years, projecting growth of 27.3% for the region (compared to 20.4% for the UK as a whole). This is already unfolding, looking at recent figures. Zoopla’s latest House Price Index shows that the highest house price growth since April 2017 is being led by northern cities, with Liverpool house prices climbing by 6.3% over the past year, followed by those in Manchester at 6%. But that’s not to say that landlords are looking in precisely the same locations within these cities that they were pre-pandemic, according to Fabrik Invest.

“In big cities like London, Birmingham and Manchester, we are seeing investors looking at areas further out, such as the home counties and commuter belt towns for London. Kent is a good example of this – it has the good transport connections for those who need to commute into London, as well as plentiful green space and more affordable prices than the capital. In Manchester, it is Salford Quays that is turning heads. Tenant demand is strong there and investors are racing to meet that demand.”

Dale Anderson, Managing Director, Fabrik Invest

As 2021 unfolds, all eyes will be on the UK housing market to see what happens after the stamp duty holiday ends. Ultimately, though, the country has a sustained imbalance between its supply of rental homes and the demand for those homes. With the prospect of negative interest rates also coming into play, demand from investors doesn’t look to be dropping off any time soon.

For more information, please contact Fabrik Invest on 020 8175 9891 or enquiries@fabrikinvest.com, or visit www.fabrikinvest.com