In the ever-evolving world of real estate, the ability to identify the UK’s top growth cities and promising sectors is crucial for real estate investors. In CBRE’s research, titled “Which City, Which Sector?” it provides a comprehensive analysis that does just that. It offers invaluable insights to guide strategic decision-making in the years to come.
The report delves deep into the real estate landscape across the 50 largest regional towns and cities in the UK. Moreover, comparing economic, demographic, and property market data will uncover the UK’s top growth cities and their opportunities. CBRE’s researchers were able to pinpoint the cities with the greatest potential. Furthermore, they were able to identify the specific real estate sectors that are poised for success.
UK’S TOP GROWTH CITIES: UNDERSTANDING OF LOCAL DYNAMICS
As Jennet Siebrits, Head of UK Research at CBRE, aptly explains,
“The way towns and cities grow and evolve is very much reflective of their local geographies, natural resources, and cultural history. As a result, no two cities in the UK are the same, and subsequently, different real estate sectors thrive in different locations.”
Understanding the dynamics in different geographic markets is key. It highlights the need for investors to adopt a hyper-localised approach to their market analysis and strategic planning. Furthermore, by delving into a city’s unique attributes and growth drivers, you can maximise your investments and development projects.
There are stark differences in the top-performing real estate sectors across the 50 cities studied. For example, Manchester, Bristol, and Birmingham emerge as standout growth markets overall. Although the specific sectors that are thriving in these cities can vary significantly.
WHAT ARE THE UK’S TOP GROWTH CITIES FOR EACH SECTOR?
Retail Sector Shifts
The continued growth of online shopping is driving a major paradigm shift in the retail industry. CBRE estimates that UK retail floorspace needs to decrease by 16% to reach 2015–2020 sales densities. Therefore, this places Sheffield and Bristol in a relatively strong position considering their limited retail supply.
Industrial Growth City Trends
Logistics Boom
The rise in online shopping is a key driver of demand for urban logistics space. Cities with high online penetration rates, such as Reading and Brighton, are in a good position to benefit. Moreover, cities with quality labour pools and a large population split between 25 and 40 years old with high disposable incomes will aid growth.
Self-Storage Demand
Millennials’ prefer smaller, more affordable living spaces and increased flexibility. This is fueling demand for self-storage solutions, especially in cities like Edinburgh, Glasgow, and Bristol that are seeing a rise in 35+ year-old residents.
Life Sciences Hubs
The “Golden Triangle” of Oxford, Cambridge, and London/Stevenage remain the epicentres of the UK’s life sciences sector. They have strong university programmes and significant venture capital funding, supporting future growth.
Office Real Estate Outlook
Manchester and Bristol claim the top spots for office real estate. This is due to their robust economic outlooks and large pools of highly educated talent. Moreover, Birmingham ranks third, boasting the highest projected GDP growth and the second-highest number of people with level 4 qualifications or higher among the cities reviewed.
Residential Sector Trends
Multi-Family Homes
Manchester is the top potential growth city, benefiting from strong population growth forecasts and its already-established large private rental sector. Moreover, Bristol faces housing supply challenges as they failed the 2022 housing delivery test for the city, which provides growth opportunities in the future. Brighton and Oxford are the most unaffordable cities outside of London, with house prices of 13.1 and 11.9 times the local average wage for 2022. Therefore, the price in balance provides more cost-effective housing models for young professionals.
Single-Family Homes
Birmingham leads in SFH demand, driven by its large renter population and family household growth. Manchester, Brighton, and Bristol also rank highly for employment growth over the next decade.
Senior Living
Demand for senior living is expected to surge as the baby boomer generation reaches retirement age. Furthermore, by 2030, the population of 75–84-year-olds will be 27%. Manchester and Brighton are expected to have one of the highest growths in the over-65 population. Moreover, cities such as Bristol and Glasgow are set to see some of the highest increases in over-65 populations.
IDENTIFYING THE UK’S TOP GROWTH CITIES AND SECTORS
Through a wide range of economic, demographic, and property market indicators, you can pinpoint the specific factors that are driving growth in each real estate sector. This granular understanding enables investors to identify the most promising investment and development opportunities, both at the city and sector levels.
In the office sector, for example, the report highlights the crucial role of expected GDP and employment growth, as well as the supply pipeline of new developments. The UK’s top 10 growth cities for offices, led by Manchester, Bristol, and Birmingham, are well-positioned to capitalise on these favourable market dynamics, with the potential for over 21.5 million square feet of new office space to be delivered by 2028.
Similarly, the report delves into the unique drivers of growth in the residential sector, including demographics, housing affordability, and the presence of major universities.
ZEROING IN ON NICHE SECTORS
Beyond the more conventional real estate sectors and focusing on the growth potential of specialised asset classes, such as senior living and self-storage. These niche markets often require a deep understanding of local conditions and tailored strategies to succeed.
For instance, the senior living sector is poised to thrive in areas on the south coast near Brighton, which are attracting a growing retirement-age demographic.
These specialised real estate sectors provide investors with the ability to diversify their portfolios. Moreover, tap into emerging areas of the market that may have previously been overlooked.
LEANING INTO MARKET TRENDS
Investors need to lean into the shifting dynamics. By exploring how trends like the rise of hybrid work, emphasising employee experience, and the accelerated demand for e-commerce logistics are transforming the real estate landscape. Therefore, by understanding these emerging patterns, investors can adapt their strategies and position their assets for long-term resilience.
A ROADMAP FOR SUCCESS
The roadmap for real estate investors navigating the complex and ever-evolving landscape of the UK market. Whether it’s targeting the UK’s top growth cities for a particular real estate sector, identifying promising niche markets, or adapting to shifting trends and uncertainties, the insights gleaned from this report can be a powerful tool for success.
As the real estate industry continues to evolve, those who can harness the power of data-driven analysis and a deep understanding of local market dynamics will be in a position to thrive in the years to come.
