A German developer has bought a 20-acre site in Manchester, UK and plans to build 500 apartments to rent.
This is a rarity in the UK, where the private rental market is dominated by small-scale buy-to-let landlords, despite government attempts to stimulate a private build-to-rent sector of the sort more common in Europe.
German developer Patrizia Immobilien AG has bought the 20-acre "First Street" site in Manchester through its subsidiary Patrizia UK.
The site is partially developed with an 180,000-sq-ft office building, known as "No. 1 First Street".
There is capacity for up to a million sq ft more of office space and approximately 500 new apartments, which Patrizia intends to build and rent out privately.Â
This will be the company’s first investment in the UK’s nascent built-to-rent sector. On the Continent Patrizia manages 80,000 apartments together worth nearly $8bn (€7bn).
The UK’s severe housing shortage was a key issue in last week’s general election, with all parties pledging to get more homes built, including the victorious Conservative Party.
In 2012 the UK government created a £1bn equity Build to Rent fund to get purpose-built rental developments across the UK off the ground.
Coming at a time when the UK was in the depths of a post-recession freeze on mortgage lending, a number of developers entered the scheme. But when house prices began rising again many withdrew to return to the more familiar build-to-sell model.
The first phase of the scheme was supposed to involve 45 building projects with £700m spent on new homes, but in April 2014 it was revealed that that only 17 developments were going ahead, representing around £300m worth of work.Â Â
Patrizia said Manchester was a "key cultural, sporting and business hub" and one of the most sought-after cities in the UK for property investment.Â
It said First Street would be the first development of a growing private-rental portfolio.
"We have been carefully implementing our strategy of investing in high-growth locations across the UK," said James Muir, Managing Director of Patrizia UK.Â
"With this investment, our property assets under management in the UK now amount to more than a billion pounds. Driven by attractive economic and demographic fundamentals in Manchester, and the growing trend for urbanisation, we are anticipating strong demand for this centrally located, high-quality accommodation which will be tailored to the private rental sector."
Patrizia will develop offices and residential on the remainder of the site over the next five to seven years. The seller was a local private property company. Completion of the transaction is expected in Q2 2015.