The Pitt Street plans envisage cafes, restaurants, a residents' lounge, rooftop gardens and around 450 apartments on the site of the former Strathclyde Police base, says Francis Shennan.
A PLANNING application submitted in June marks a potential major shift in Scotland’s property market.
The application is for a £105m development on the site of the former Strathclyde Police headquarters in Glasgow.
The plans designed by Glasgow architects Haus would see the city centre site in Pitt Street become a community known as Holland Park with 450 apartments, ranging from studios to three bedrooms.
The community element will come from cafes, restaurants, a residents’ lounge and gardens on the rooftops.
It is one of a number of projects in a sector with almost as many names as it has developments in Scotland: the Private Rented Sector (PRS), Build-to-Rent (BTR) and Private Rented Community (PRC).
It stems from what Jason Hogg, director of JLL Residential and Development Land in Edinburgh, described as “a complete turnaround in the appetite, desire and view towards city-centre living”.
He said: “The strength and pace of change has led to the emergence of the PRC institutional investment model. Progress has been slow but is now gathering momentum.”
David Melhuish, director of the Scottish Property Federation, told insider.co.uk: “We are looking at the introduction of a new asset class. It has been going longer in England, and not just in London.”
Amy Norton, partner at law firm CMS, said: “Generally the sector hasn’t yet received recognition as an asset class in Scotland. The lack of momentum may be due to the perceived political uncertainty along with the threat of legislation introducing rent controls. It will be interesting to monitor when the mind-switch happens for investors. It’s clear that the demand for privately-rented housing is strong and growing and that supply is not meeting demand. As the current schemes complete, the market will be using the lessons from these to inform future developments and this will enable to sector to grow.”
The purchase price of the 1.37-acre Pitt Street site, marketed by Rydens, was not disclosed but the developer, Moda Living, in a joint venture with investment manager Apache Capital Partners, has said it was one of the largest post-Brexit property deals in Scotland.
On-site work is expected to start next March with completion scheduled three years later.
At the other end of Glasgow city centre, residential investment firm Get Living, one of London’s biggest PRS developers which owns and operates the former Athletes’ Village in Stratford, has bought a site in the Merchant City for its first project outside London.
Construction on the £200m scheme of 600 apartments could start in the next 12 months.
Scotland’s biggest BTR project to date will be the £215m construction of 500 homes in Edinburgh’s Fountainbridge.
Moda and Apache bought the site from property firm Grosvenor Britain & Ireland, along with 50 existing rented homes.
CDA architects will design the housing to go alongside 25,000 sq ft of new shops, bars and restaurants.
As in Pitt Street there will be communal lounges and roof terraces.
On-site work could start by the end of this year, completing the first phase in two years and the final phase three years later.
Burness Paull and KPMG acted for Grosvenor, while Brodies and Rettie & Co acted for Moda and Apache.
CMS’s Norton said: “At Edinburgh’s Waterfront, agents were appointed to market the Taylor Wimpey site at Western Harbour which could create over 300 PRS units being built. Another development in Leith offering mid-rent properties was reported to have received more than 3,400 applications for under 100 units, proving the imbalance between supply and demand in this sector.”
However, Scotland’s first bespoke BTR development was Forbes Place at Stoneywood, Aberdeen, constructed by developer Dandara and owned by real estate manager LaSalle Investment Management.
Managed by Dandara Living, it has 292 furnished apartments and townhouses and on-site concierge services.
It was more than 50 per cent pre-let before the first units were completed.
“Although the PRS or BTR market in Scotland hasn’t yet seen as much activity as in English cities like London and Manchester, there are some encouraging signs that this is beginning to change,” Norton said. “The same factors exist in Scotland which could create a booming BTR sector – the housing shortage, rising house prices and people being unable to save for a mortgage deposit.
“Securing private investment into Scotland to build for rent could be a game changer in helping to remedy Scotland’s serious supply shortages.
Even though there is a demand for high-quality rental accommodation, Generation Rent is not currently living in accommodation that lives up to those standards.”
She added: “Young professionals want to live in the centre of cities and within a stone’s throw of their desired amenities.”
Melhuish said: “Quite a lot of the audience will be people looking to move up from student accommodation.” He added: “It’s also a new way of living.
“You have a more mobile workforce, people in graduate-level jobs, not wanting the traditional tie of a mortgage.
“People are looking for more flexibility, and with it more of a US-type concierge lifestyle.”
Norton noted: “We have seen some student accommodation providers branching out into PRS. These organisations and their investors are able to make this transition relatively easily due to the synergies between the sectors, the way they are managed and the similarities in the funding and tax structures.
“Since professional and high-quality management is the key to attracting tenants, there are huge opportunities for management companies in the PRS sector.
“We expect to see a rise in companies offering this type of management service which will bring competition into this market.
“For developers and architects there are opportunities to transform the rented housing experience with ground-breaking design and the highest quality finishes.
“We’ve already seen the plans for current schemes involving communal outdoor spaces, gardens and rooftop areas which will certainly be attractive to tenants.”
Melhuish added a note of caution, saying: “There are some differences between Scotland and the wider UK.” He added: “The Scottish Parliament introduced the possibility of rent pressure zones in specific areas if a local authority requests it.”
The Private Housing (Tenancies) Scotland Act 2016, due to come into force this December, would allow a council to ask the Scottish Government to designate all or part of their area as rent pressure zones. Landlords would be allowed to put up rents only by the rate of consumer price inflation (CPI) plus one per cent.
“For some investors there is a bit of a fear factor,” said Hogg, “but you now have some mayors in England talking about doing something similar.”
Norton added: “It brings some significant changes to the market and these are concerning institutional investors.
“For example, the ability of a local authority to impose rent controls, although the Scottish Government has offered some reassurance that these controls will only be used in exceptional circumstances.”
The Act will also replace assured and short assured tenancies with a new private residential tenancy to improve security of tenure for tenants while offering safeguards for PRS landlords, lenders and investors.
“The Scottish Government is currently developing a Rental Income Guarantee Scheme (RIGS) to help kickstart the BTR sector in Scotland,” Hogg said. “This is designed to provide greater confidence during the early stages when lettings risk is likely to be highest. Should an investor not achieve their anticipated level of rental income a Scottish Government guarantee would compensate them for part of this. The Scottish Government is finalising detailed work on the proposed initiative and an announcement on this is expected shortly.”
Hogg is confident of the demand from companies in the sector.
“The appetite from investors and developers is strong,” he said. “The investors and developers are all active in other cities. They love Edinburgh. It fits the whole demographic profile. Finding sites is the problem. I think Leith could start to benefit from that. Locations around Ocean Terminal and the centre of Leith could benefit. In Glasgow we have got the sites. The land is there. One or two schemes have happened in Glasgow. We are advising on two or three other similar sized opportunities with established names who have done it elsewhere in the UK.”