Remember the X Factor? The reality TV music competition franchise created by Simon Cowell which was centred on the search across the country for the undefinable "something" that makes for star quality. Well, real estate investors are on a similar hunt, always on the lookout for the next big opportunity.
The X Factor I refer to in this instance relates to the findings of our latest Next X analysis, which has revealed the top regional communities with the most significant real estate investment potential across the UK, signalling a business case for deploying increased capital into the suburbs, urban villages and regional centres as consumers engage more locally post-pandemic than seen in decades.
Scoring highest against community focused metrics including access to good childcare, food and beverage and independent retail offering, engagement with high streets, as well as business resilience and access to talent - are more ‘local’ locations than ever seen before. Cambridge, Oxford and York, Reading, Exeter and Aldershot scored highly in our analysis. Brighton and Southend also made the top of the list, illustrating that seaside locations are becoming more investable post-pandemic. Edinburgh and Glasgow were the only two of the “Big 6” regional cities to make the top ten.
With workplace footfall still circa 20% below pre-pandemic levels, the daily commute is an almost-distant memory for millions, and access to retail, hospitality and cultural venues – one of the key benefits of urban living – has been severely restricted for much of the last two years, forcing individuals to engage with their immediate surroundings more frequently. As a result, we are seeing smaller locations and local businesses become more popular than seen for many decades. For real estate investors, these areas are showing value and thus practically singing out for investment.
Curious about examining this further, we partnered with Visitor Insights, a leading geodata platform, to provide additional footfall data for the analysis. They found that the average 2-year growth rate of visits to independent businesses on high streets in Next X locations outside London was circa 78% between 2019 and 2021. This is much higher than the average growth rate for general high-street retail occupiers over the same period, which showed a 6% decline.
Clearly retail offering has a role to play here and behind the dominating headlines of CVA’s and closures, many local high streets are thriving. Many of those local retail destinations once with the high street chains have since revived their offer, much to the benefit of the immediate consumer, who are valuing supporting local businesses more than ever.
Further evidence is that resident footfall to locations like Aldershot and Exeter grew substantially in relation to a pre-pandemic baseline in 2019, whereas in the “Big 6” is still lagging far behind.
Next X top South East locations Reading (75%) and Aldershot (73%) have the highest proportion of residents in Acorn Categories 1-3, indicating above-average consumer spending power, so the potential is there and waiting to be tapped into if you know exactly where to look.
Access to talent and access to quality childcare was another metric I touched on earlier. Our tool tells us that aside from the Oxford-Cambridge-London triangle, Edinburgh and Aberdeen have the highest percentage of the working population with a qualification at NVQ4 or above, and Luton has one of the highest-quality childcare provision in England outside of London, with almost 30% of providers rated Outstanding. These play a role when settling on an area and regional locations are performing strongly in these categories.
Being in a position to follow these socio-economic trends closely is what separates the winners from the losers. We can clearly see there is underlying value for real estate investors and occupiers in community locations, and this should influence decision-makers when eyeing up new markets for entry.
So my advice is to look beyond traditional real estate market metrics and invest into communities and you might just take the win.
To find out how Next X could help your business, contact the team or click here.
