How far can demand for city centre living in Manchester go, and what part do students play?
Demand and city centre growth
In 1980, Manchester’s city centre population was 500 people. Fast forward 45 years and it is now estimated at 80,000 people, increasing to 100,000 by the end of the decade. Demand for urban living is being driven by several factors, not least access to thriving employment and consumer economies, and fuelled by a fast-paced development landscape. Even as construction inflation and viability have thwarted much of the proposed commercial development in recent years, residential pipeline continues to flourish, and there continues to be plenty of activity in the Manchester doughnut around the city centre. But with supply constraints in the historic city centre itself, development can only head upwards or outwards. Densification is key to unlocking the value from challenging sites.
On the edge of the city centre, Victoria North stands as a testament to Manchester’s development prowess, with plans for 15,000 homes and £1 billion investment. This project will increase the city centre’s population by a further 50%, to follow the 25,000 homes delivered over the last decade. Meanwhile, other areas continue to open up and expand the city dynamic, such as the First Street cluster, St John’s, Middlewood and Blackfriars. The Old Trafford regeneration area is expected to create a new quarter opposite Salford Quays, effectively doubling the land area, with up to 17,000 homes being considered. More areas will need to be unlocked if the ambitions of 90,000 jobs and 75,000 homes in or close to the city centre over the next ten years are to be realised. Either way, these underline the city’s growth trajectory and will feed demand for other uses.
So, what is driving this extraordinary growth? It would be too simple to state that housing development is solely meeting demand. It is the lure of culture, jobs and education that continues to drive residential growth in the city centre, and the appeal of great places to live completes the circle. Manchester is seen by investors as a place where things get done.
However, affordability is an ongoing issue. Manchester house prices have increased 81% in ten years, and PRS rents have increased by over 40% in the last three years. This is a problem for young professionals who want to live in the city centre and is consequently pushing demand out to alternative locations. Perversely, on an international stage and compared to London, affordability remains competitive for wealthy overseas visitors, many of whom have taken up residence in the Deansgate Square cluster or invested in W Residences, the first branded residences in the UK outside of London. The influx of more affluent consumers may constrain supply in some quarters but is providing a shot in the arm to retail, leisure and food & beverage in the city centre, as well as playing an important role in supporting development viability and attracting foreign investment. This polarisation in residential demand is driving the need for alternative and more affordable products close to the city centre.
Supply shortfall
Despite the growth seen to date, the wider PRS market has been characterised by a huge shortage of supply. Demand for rental homes has grown since Covid, and people are moving less often, which is reducing the number of available rental listings; 8% down in Manchester compared to pre-pandemic, while demand continues to increase year-on-year. Tenants are often staying for longer because they can’t get on the housing ladder, which further reduces natural churn and limits choice for renters.
GMCA remains ambitious, and its housing fund is targeting 10,000 additional homes. Renaker, who has redefined much of the city’s skyline over the last decade, has received over £500m in funding, and the developer’s pipeline is expected to deliver more than half of the GMCA’s target in ten developments.
Purpose-built student accommodation (PBSA) and Co-living homes play a key role in addressing the supply shortage, with the former releasing traditional PRS stock and the latter providing greater choice for PRS tenants, particularly those seeking their own space at an affordable price. Increasing the supply of both should help to reduce competition for larger properties across Greater Manchester, freeing them up for families.
Over the next decade, Co-living and PBSA are likely to become almost as important to the development pipeline as BTR and PRS. Savills analysis finds that almost 15,000 PBSA units are required to meet current demand in Manchester. Furthermore, as products become higher quality and provide better facilities, so too will the expectations of the quality of accommodation sought once graduates enter the jobs market, which the traditional PRS market may be ill-equipped to fulfil.
Students & graduates
The student story is an important one, not least given the growing number of people studying in the city, but also those who stay beyond education. The large student population (110,000) has much to do with the fact that Manchester is considered the 25th best student city in the world. The high standard of education has important overseas appeal and is attracting wealthy students; 30% of all students are non-domestic, and two-thirds of these are from Asia Pacific. It’s no wonder the Asian food scene is thriving across the city – the influence of diverse communities on Manchester’s cultural and food scene cannot be underplayed. Over one-third of students now live in private PBSA, with international students four times as likely to live in PBSA than domestic students. The development pipeline has been relatively flat in recent years, but with almost 5,000 units with planning permission and some of the highest rental levels in the UK, developer interest is understandably at an all-time high.
The benefit of students on a local economy can be considered a short-lived rolling population in most cities, but not so in Manchester, where the prospects of finding work after graduation are compelling. Graduate retention is an impressive 50%, and more arrive after their degrees than leave (all other UK cities see more leakage than draw, with the exception of London). That’s equivalent to 31,000 graduates entering the job market each year, all of whom need places to live, and many of whom will look towards the city centre for their first few years of work. The University of Manchester was ranked the sixth best UK institution for employability in the 2023 Times Higher Education Global University Employability Ranking. The University of Manchester is also the second most targeted university by the UK’s top 100 recruiters, according to the High Fliers report on the Graduate Market in 2024.
Hub and spoke effect
Indeed, the success of Manchester as a student location and the high student retention creates an opportunity for peripheral locations on the edge of the city centre. Supply in the city centre is low and current developments are not meeting demand, meaning that buyers and renters are seeking new locations that can still offer them the flexibility of working in the city. Lack of supply also increases demand, and this naturally increases competition. Coupled with increased mortgage rates and stretched affordability, the further demand for properties in outer locations is only expected to increase, in particular the demand for rental properties and, in the longer term, family homes in the wider area.
The city centre’s popularity, driven by job opportunities and urban living, has outpaced the available housing supply. As a result, people are looking to nearby towns for more affordable options. In line with this and as residential development becomes increasingly competitive, developers need to take a more strategic approach to how, what and where they choose to build – and who they build for. As people move out of the city into peripheral locations, there will be an evolution of the demographic and age profile of these areas. Given that demographic trends are closely related to housing and housing needs in an area, changes in consumer preferences and needs will have a significant impact on the demand for residential development.
Manchester’s increasing unaffordability to the steady influx of young professionals seeking both employment and cosmopolitan living is consequently benefiting town centre development in well-connected satellite towns like Stockport, Stretford, Sale and Altrincham – but also reaching out to Bury, Tameside, Oldham and Rochdale. In these locations, housing demand has spurred regeneration projects, enhancing infrastructure, amenities, and public realm. Proposals for the Bee Network, including the integration of rail, are also currently being drawn up and will, in time, also have a positive impact on the attractiveness of these satellite towns.
Every town in Greater Manchester has seen housing targets increase under the new government, but delivery is slow and pricing strained. The key challenges are funding (often requiring public subsidy) and good quality amenity. Key to the success of regenerating these areas is having placemaking at the heart to create a vibrant destination that is popular with both residents and non-residents, as well as existing residents in the area. In so doing, the high-quality development will help to regenerate currently underdeveloped areas whilst also making significant improvements to the public realm offering in the area. Altrincham stands testament to what is achievable when the amenity improves, and Stockport is following suit. But with rents now being recorded in Stockport equivalent to the city centre, is the pricing advantage eroding?