Tariff St Marco Living exterior view p planning consultation docs

City Developments agreed to forward fund 1NQ, a £75.6m private rental scheme at Tariff Street. Credit: via planning documents

The Subplot

The Subplot | Beds not sheds, council assets, US money

Welcome to The Subplot, your regular slice of commentary on the business and property market from across the North of England and North Wales.


  • Relationship breakdown: beds and sheds are no longer the dream property pairing
  • Elevator pitch: your weekly rundown of who is going up and who is heading the other way


Time to re-think the Northern investment playbook

Beds and sheds was the defensive hot take of the last three troubled years. But the two asset classes are beginning to go in separate directions.

For the last two years beds-and-sheds has been real estate investors’ defensive play of choice. The idea was that buying into places to sleep, and the supply of things to eat and wear, would provide the property business with the safest possible strategy. The North has done well from it: lots of people needing places to live and stuff to buy, relatively low prices, leading to relatively good and stable returns. The end of the pandemic unsettled demand for warehousing. Since then sky-high inflation and the prospect of a hard landing have given the sector a nasty shake.

It’s me, not you

First, the upside. Purpose-built student housing and build-to-rent apartments have been big beneficiaries of the beds-and-sheds playbook, and there’s still plenty of evidence that they have investor’s attention. Earlier this week Place North West reported that Singapore-listed City Developments agreed to forward fund 1NQ, a £75.6m private rental scheme at Tariff Street in Manchester’s Northern Quarter (pictured). In December last year City Developments bought a £215m portfolio of PBSA including 117-bed Sycamore House in Leeds. It also has the 665-unity The Junction rental scheme in Leeds, following a £15.4m land deal with Alpha Real Trust in 2019.

Trial separation

There’s a growing body of data to suggest that some bed sectors, not least student housing, is delivering unmissable returns. The CBRE PBSA Index reported another year of positive total returns, at 7.7%. This comes despite what CBRE calls “a challenging economic and investment environment” and should be read against the negative 11.1% return on the all-commercial property index. That’s an enormous performance gap. CBRE adds that across all-PBSA assets, gross income growth in the year to September 2023 was 10.5%, while net income growth was 9.8%. The data shows that the larger the lot size the happier the outcome, with lots above £50m doing best of all. These figures will probably inspire further activity from the handful of investors who’ve been biding their time.

Where’s the fizz gone?

So how are sheds doing? It’s complicated, but it’s pretty clear the fizz has gone flat. Knight Frank has cast an eye over the North West and concluded that take-up of industrial units larger than 50,000 sq ft is 60% lower today than the same period last year. That doesn’t mean large deals have dried up completely – but Knight Frank reckons big shed take-up will land at around 4m sq ft, compared to 8m sq ft in 2021. Vacancy rates are already up thanks to new developments completing at the time demand is cooling: from 3.8% to 4.6%.

I still love you, but…

The shape of the market is clear. There was £1.67bn of UK industrial investment transacted in Q3, down 53% compared to the same time last year, says BNP Paribas Real Estate. The firm says take-up of units over 100,000 sq ft in Q3 was 41% down on the 10-year average. The North West is not an outlier, as Cushman & Wakefield data shows, the only difference being that marginally more speculative floorspace is under construction in Yorkshire (3.4m sq ft) than in the North West (2.7m sq ft). Cushwake puts a positive spin on this – at least Q3 was better than the first half – but confesses it’s a lot worse than the same period in 2022, and doesn’t challenge BNP Paribas conclusions.

Think of the kids

Developers and investors are pressing on, where the maths works or where they are already on a long-planned trajectory. On Monday, Harworth Group secured consent for 800,000 sq ft on a 50-acre site at junction 45 of the M1, a case in point. But what of those investors who have the freedom to redeploy capital to other real estate sectors? The latest twists of the commercial property story has narrowed its options, and probably increased prices, in the few bankable sectors that remain. Unless, of course, it chooses to take a little more risk.


Who’s going up, and who is going down this week

The Americans are still coming, even more of them, so hutch up, this lift is going to get crowded. Meanwhile, councils ponder huge defecits. Could land sales be the answer? Doors closing, going down!

Council sell-offs

This week a House of Commons committee took the first steps in working out why so many local councils are going bust. Unison, the public sector union, thinks that between them local councils are likely to be £3.7bn in the red in 2024/2025, a gap that can’t easily be plugged by cutting services (cut already) nor by savings (dangerously little left) or by fancy real estate investment strategies (mostly collapsed). Locally the numbers are large: Leeds has to find £59m for 2024/2025, Manchester is looking at a £72m deficit, Sheffield £62m, and so on.

The solution is probably going to be some kind of government help, plus asset sales. The difficulty here is that councils carefully guard the regeneration prospects of their land.

A nice illustration comes from Manchester, where the city council looks to be on the brink of selling a 5.5-acre slice of the 10.5-acre Central Retail Park in Ancoats to the Government Property Unit. A new long-mulled government regional office is planned, reports Place North West. The council paid a toppy £3.5m an acre in booming 2019. No doubt the regeneration pluses outweigh the transactional minuses, and it’s all for the best. But flogging off assets will not be a quick, easy, or timely way to balance the books. Watch out for distressed sales.

More Americans

Earlier this month Trammell Crow Company, a truly massive US real estate investor, made a splash into Northern offices (Subplot, 2 November). Now we learn others are following. Atlanta-based Cortland bought into Renaker’s Colliers Yard in 2021, overseeing completion of the 51-storey residential scheme just last month. Now the firm says it wants to “go big” in Manchester building a portfolio of more than 1,000 units, Place North West reports. The Colliers Yard scheme includes 559 units.

California-based Franklin Templeton is now heading this way, too. This week it bought a 28,000 sq ft fully let city centre block in Nottingham. There’s 10 years left on the lease. There’s hefty odds they are looking further North.

The firm has been on a journey recently – you all have Google, you can do the work yourself – but it has about £1tn in assets under management as of 31 October, and lots of capacity – one to watch.

Behind this rush of US interest sits the big ugly fact that, although the US economy is beginning to pick up, the stock market is a bit iffy and commercial real estate very iffy, so what one commentator described as the “Brexit bargain bin” of UK post-Truss real estate looks fairly tempting. More will come.

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