London and Bath are both in the First tier, reflecting the strength of demand in those markets despite the challenges they face (page 09). Birmingham is the only promotion to the top tier where demand by the University at Selly Oak and Birmingham City University’s Eastside campus show that there are opportunities for development.
Meanwhile, the Upper Second tier has seen the most change, with Guildford, Norwich and Nottingham all promoted and offering greater potential for development in the right location and with an appropriate product.
Unlike its successful football team, Leicester is a non-mover still stuck in the Lower Second tier. It is joined by six relegations including Aberdeen due to the oil price crash and potential supply pipeline.
Falmouth continues its rise from last year while Swansea also moves up into the Lower Second tier. Swansea is arguably a better opportunity than Liverpool with a bigger supply-demand imbalance. However, it is constrained by the same challenges as faced by Liverpool but to a greater extent. Local rental affordability constraints mean it can be very difficult to develop a product that delivers a positive land value in the Swansea market.
The need for more supply in the Third tier is limited, and development should only be undertaken on the very best sites in these towns and cities. The Pass tier has seen four relegations, and speculative development remains very risky in these 21 towns and cities.
However, it is worth noting that a lower ranked town or city may still be attractive for investment (rather than development) if existing supply and demand are balanced and the potential investment returns are appropriate for the risks involved.
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