Future tenant demand
Chris - is this meant to be the same text as
market appraisals? It is important to analyse both current and
potential future demand carefully. Measuring current demand is probably
the most easy. Check advertising portals and note how quickly properties
let. Evening telephoning and conducting a viewing on a property similar
to the one the investor is considering is useful. At the viewing, it
should be possible to obtain a sense as to how popular the property is
as well as the kind of standard the property is to achieve that demand.
Just as important is assessing long term tenant demand. This is more
difficult but a few pointers might be:
- Public Transport. New transport infrastructure will
result in more demand in an area. However, while property prices
might well rise well in advance of the opening of the new
infrastructure, rents will not rise until just after the new
infrastructure has bedded in. Buy2LetExpert would recommend
proceeding on the assumption of current rental prices, although
demand will be increasing as the new transport starts to operate. In
the longer term rents should rise more than in areas where transport
provision remains stable (assuming other demand and supply factors
remain constant).
- Changing Transport. There is no doubt there has been a
change or expansion in the number of transport modes used in London
in the last 10 years. A couple of key changes that are often
overlooked are:
- Buses. There has been a big expansion in the use and
quality of buses in the last 10 years. More bus lanes, improved
buses, better information about routes and timings have all helped.
- Bicycles. There has also been a huge expansion in the use
of bicycles and scooters in London in recent years as cycle lane,
canals, bus lanes and more offer more opportunities for safer, more
enjoyable cycling.
These trends should be considered carefully by the property
investor. No longer is an underground train necessarily essential to
the potential renting client. The investor should not dismiss other
transport modes like he historically might have done.
- 'Up and Coming' Area. The oldest game in the book is to
try to predict areas that might become fashionable for whatever
reason. One can speculate for hours about particular future demand
drivers in particular areas! But2LetExpert recommend something far
simpler in the first instance. Buy a compass and draw circles at
half mile intervals around the main focuses of employment in London.
Then, identify the area that are cheapest that fall within these
circles. Visit the areas and find out why these areas are cheap and
if the reason is going to change. If so it may be worth looking in
that area. Locations Buy2LetExpert has worked with in London include
the
- London East End:
To illustrate the key issue regarding this area it is important to
make a distinction between the old East End and the New East End.
- Old East End. This is the traditional historical East
End. It is the area of London to the East of the City of London.
Historically the area was adjacent to the docks and industry and an
area in close proximity to the manual work opportunities in the
town. It was therefore the location where the manual workers lived
and also a cheap area of London attractive to various waves of
immigrants from the Irish to the Jews and later the Bangladeshi's.
Building quality was low, the area poor and before the second world
war, littered with slums. The last 30 years has started to see a
gradual but progressive change for the following reasons:
- The old London docks closed and the surrounding industry moved
further out of London. This was in part because many of the labour
intensive jobs were lost to lower waged overseas competitors but
also because London was growing. The old 'edge of town' was no
longer the edge.
- Construction of the Docklands area began in the 1980’s. A new
employment focus was becoming a reality. The Old East End was
becoming sandwiched by the City and West End to the west and
Dockland to the East. No longer on the “edge of town”.
- Infrastructure followed. The initially small DLR (Dockland Light
Rail) system to Canary Wharf in Docklands expanded. The Jubillee
Line was extended just in time for the millennium. The DLR linked
with this and extended south of the Thames to Lewisham.
The major changes above have resulted in the Old East End becoming
fashionable particular in certain hot spots such as Shoreditch,
Canary Wharf, Brick Lane, Stratford and more. The process will
continue. The 2012 Olympics will have a knock on affect. Already
Stratford is seeing enormous investment with a huge new shopping
mall, transport hub and more.
A consequence of the changes is the usual influx of restaurants,
cafe’s, shops and quality housing. Prices of property both to rent
and purchase have risen sharply. However a consequence is the
traditional 'East Ender' has been pushed out. Manual workers must
live in the New East End. The Old East End is becoming an area
steeped in history but not a place for manual workers to live.
- New East End. This area is the new location of choice for
recent immigrants to London which includes the large influx from
Poland and other former Eastern European nations. Inhabitants are
mainly skilled and unskilled manual workers and include the
descendants of inhabitants of the Old East End. The area is broadly
an area to the East of the old East End. It would include
Leytonstone, Walthamstow, Canning Town, Stratford and further to the
east Dagenham and Barking.
Specific Buy2LetExpert targets in the old East End have included:
- Shorditch. This area of London was historically mainly
industrial and composed of warehouses serving the nearby London
docks. The London docks died (as a port) along with the use of the
warehouses by the 1970's. In the early 1990's most the warehouses
were empty and the area was very run down. Transport was very poor.
However, the area was a walk to the City of London and it was cheap!
First it was artists and students that began to see the area as
value space in central London. Later developers started to develop
the old warehouses. Money poured in. Restaurants, shops, cafes and
more followed. Now Shoreditch is an expensive area. Prices per
square metre rocketed as did rent per square metre.
- Brick Lane. An area literally adjacent to the City of
London. The former Spittlefields fruit and vegetable market closed
in the early 1990s to be located in the New East End. The old market
is still in the process of transformation. Many shops, cafe's mini
markets and more have been born with the original wrought iron
market structure. Brick Lane its self is no longer the cheap
Bangladeshi area it was. The mix of Bangladeshi restaurants is far
broader. The area has been rebranded as 'Banglatown' to emulate
'Chinatown'. In addition old Trumans's brewery on Brick Lane closed
in the 1990s but businesses and restaurants have been born within
its beautiful Victorian structure.
- Hackney. Always an interesting area. Part of the old East
End but plagues with historically very poor transport links yet very
close to the City and Docklands. The housing stock is good on the
whole and many streets are either beautiful or potentially so. New
London over ground services have recently linked the area to the
tube system.
- Areas such as Bow, Whitchapel, Stepney Green and more could also
be analysed in detail and all these and the areas discussed offer
excellent investment opportunities.
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