A severe undersupply of residential development sites and office space created by strong economic growth in Leeds City Region, which includes Barnsley, Bradford, Calderdale, Craven, Harrogate, Kirklees, Leeds, Selby, Wakefield and York, could see local prices rise sharply over the next few years.
The estate agent forecasts that the average price of a home in the region will rise 10% by 2021 and Grade A office rents will reach £30 per sq ft within three years.
The firm’s Spotlight: Leeds Cross Sector report highlights a potential housing shortfall of 30,000 units by 2021, driven by an increase in population related to jobs growth and high student retention.
There are now fresh plans in place to build thousands of new homes across a number of key sites across the region to help address the city’s growing housing crisis, but while official data estimates the region needs 90,000 new homes by 2021, Savills has identified just 60,000 in the immediate development pipeline (comprising 16,500 under construction, 19,100 permitted and 24,400 under application).
Already, reduced new supply means average house values are close to or level with their 2008 peak across Leeds City Region, with some hotspots outperforming this.
York is currently 14% above its 2008 peak with average values of £231,700, while Leeds is 3% above its peak with average values of £165,600. By 2019, Savills forecasts that house price growth in the region could start to outperform the rate of growth in London.
Matthew Jones, development director at Savills, commented: “Housebuilding was damaged by the 2008 recession and although delivery has steadily recovered since 2012, there is now an urgent need for residential development sites to be brought forward.
“The issue is exacerbated by greenbelt constraints and the cost of developing out major regeneration schemes. It is therefore vital that local authorities across the region work together to meet the housing demand created by the growing economy.”
In terms of the office market, Savills reports that strong take up has been a catalyst for development and 47% of space delivered in Leeds in 2016 is already pre-let.
While the city centre’s new build development pipeline appears robust with 109,000 sq ft due to complete by the end of 2017, this falls far short of the average annual Grade A take up of circa 250,000 sq ft, placing upward pressure on rents.
Paul Fairhurst, head of Savills Leeds, commented: “Although office rents are rising, Leeds is still great value compared to other big regional cities and we expect ‘north-shoring’ to remain a theme as businesses look to control costs in a more uncertain world. Yet with new accommodation rapidly being absorbed, Leeds City Region ultimately needs to address the demand for more housing and commercial space if it is to continue to attract investment and remain a key UK office market.”