When the first shovel breaks the soil on a site at Edinburgh’s Fountainbridge later this year, it will signify something of a coming of age for the private rented sector (PRS) in Scotland.
The site, which will take some five years to complete, will eventually offer 525 new homes available to rent to tenants.
The £215 million agreement struck between property firms Moda Living and Apache Capital and landowner Grosvenor for the project will also see the purchase of 46 existing private rented homes.
The new housing at the Springside site in the district will sit alongside 25,000 square feet of new-build commercial space including of shops, bars and restaurants. Residents will have access to amenities including a gym, communal lounges, BBQ area and roof terraces.
As the biggest-ever investment in the private rented sector (PRS) in Scotland, the development announced at the end of last week highlights the extent to which the PRS sector has developed in recent years.
The scale of the Springside project underscores what the Scottish Cities Alliance – a body which works to make the most of the economic potential of the nation’s seven cities – recently described as a sea change in the past few years with PRS emerging as a key trend for both occupiers and investors. Figures released last year show the sector in Scotland has almost tripled in size over the past 16 years.
The growth of PRS is a response to the fact a growing number of individuals have little chance of getting on the housing ladder given the huge inflation in house prices seen in the UK. Even if home ownership is affordable, many young and not-so-young adults – particularly living in cities – don’t see it is a priority like previous generations. They don’t want the maintenance and financial obligations that come with home ownership and also want more flexibility to move around for work.
Estimates suggest Scotland needs 465,000 new homes by 2035 and it is hoped the PRS sector will play a major role in helping fill that gap, not just in terms of quantity bit in quality as well.
As Homes for Scotland points out: “The emergence of a new, professionally managed, institutionally invested, purpose-built private rented sector will result in the rapid and volume delivery of high quality new housing; boosting flexibility, choice and affordability in doing so.
“With innovative design and modern construction techniques, supplemented by new standards of professional management and service delivery it also represents an opportunity to transform the customer experience of the private rented sector in Scotland.”
According to Richard Jackson, managing director of Apache Capital Partners, from an investment point of view it is also a good sector to be in right now.
“The supply/demand fundamentals are still prevalent post-Brexit and further underline the defensive nature of PRS as an attractive investment in times of economic or political uncertainty, with its ability to generate long-term, stable and diversified income streams,” he pointed out.
The latest scheme will be Moda and Apache’s second in Scotland, having purchased the former Strathclyde Police headquarters in Glasgow in October last year, with a view to delivering the city’s first homes purpose-built for rent.
The £115m redevelopment will see the complex transformed into around 400 apartments coupled with on-site amenity areas and new commercial space.
Given its potential to deliver thousands of new homes and stimulate wider investment in Scotland’s cities, the Scottish Government is understandably keen to support its development.
It is currently working on plans for a rental income guarantee scheme (RIGS) which aims to provide greater confidence to investors.
It has even appointed a PRS “champion” in Gerry More who enthusiastically welcomed last week’s Fountainbridge announcement. More said the proposal was a “substantial vote of confidence in both the Edinburgh property market and the Scottish Government’s plans to create flexibility, choice and affordability in the wider housing sector”.
“This kind of purpose-built, high-quality and professionally-managed PRS development can rapidly increase the provision of much-needed new-build housing, while at the same time positively transforming the experience of rented accommodation in Scotland for the long term,” he said.
Although there is a growing number of PRS developments in the pipeline in Scotland, the Scottish Cities Alliance believes there is potential for much more.
“Overall, there is much work to be done and a lot of work being done to improve the quantity and quality of Scotland’s Private Rented Sector,” is the conclusion of a recent article on its website, which adds: “Watch this space.”