Which Locations Work Best for Serviced Accommodation?
Do you want to start making money from serviced accommodation but are unsure which location is going to give you the best returns? Today, Rob Jones and Paul Winder discuss best places to invest and ask whether the size of the city or town you choose really matters when you are deciding where to invest your capital.
Robert Jones: It's Rob from Property Investments UK, and in today's video, we're going to be looking at specifically what locations, what geographical areas work best when it comes to serviced accommodation.
We're currently in Manchester, fantastic backdrop here. This is a city centre apartment. Prime location, I guess, in effect for serviced accommodation.
Areas like this is obviously something that you focus on, isn't it?
Paul Winder: Yeah.
Robert Jones: From Residential Estate's point of view when you're looking at a property, a location that'll work, what is it you tend to look for, I guess?
What locations work best?
Paul Winder: It's fundamentally the business hub, what's going on, headquarters there, property limited to certain locations that are very commutor-based or contractor-based, et cetera.
So London's obvious ... We deal with three areas. I'm sure big places like Edinburgh, Glasgow have all got this model in place somewhere.
Robert Jones: Comes back to the corporate tenant profile effectively, isn't it?
Paul Winder: It's the corporate tenant profile. Yeah. It's got to be good for transport links.
I'd say it's just where we know that people are coming to work somewhere. So whether it's in London or whether it's in Manchester, and we know that companies have got their headquarters based there, and they're going to bring people over that are going to need our services.
Also, to a certain aspect, the places where we can use that option of having a shorter term corporate let if we need to.
Robert Jones: That's important to make sure you've got a lot of the plans and uses of that particular asset, isn't it?
Paul Winder: Yeah.
Robert Jones: If for whatever reason the market changes, corporate's an option, but there are other avenues that you have as exit strategies if you need to, but I guess from a location point of view where is it you guys are currently focusing on at the moment for the service?
Paul Winder: We started in Chester.
We started in Chester around about 2008. Manchester. We got our first ones now in here, and we've got another eight, I think, in March, and then around about another 20 the end of next year.
After that, we'll then judge what we want to do, and our new project is Luton, which we're very excited about.
Robert Jones: Chester's probably an unusual one for some people because they might see Manchester as a massive city, a million plus, whatever it might be population.
Chester might be perceived as smaller in terms of a location.
It certainly is, but it's still, going back to the business aspect, there's lots of industry, isn't there, around that particular area, which is why it works.
Paul Winder: There's lots of industry and they're very good apartments where they're based, as well.
There's a lot of clients out there that use this. You don't just think of international businesses.
Robert Jones: It's not your blue chip PLCs all the time.
Paul Winder: It can be anything. HSBC is one of our big clients and they do a lot of entertaining in Chester, weirdly enough.
So, we've got a few properties on the racecourse, et cetera, and they're just booked out constantly.
They will have people coming for a month on contracts, et cetera. So IT specialists, et cetera.
It doesn't have to be a massive place.
It doesn't, but we are talking places that do have a good business hub.
So you can think of quite a few towns around this area where it wouldn't work because it's just more ... It just doesn't fit.
Robert Jones: It's more residential ...
Paul Winder: It's more residential.
Robert Jones: ... or a different type of business in that area.
Paul Winder: Yeah, or very small businesses, just one, two-man firms, et cetera. They don't work.
Anywhere where you've got an influx of people coming in and it's attractive, it does work.
Rob: Like with any property investment strategy, location is going to be very important.
Serviced accommodation obviously paramount that it's near ... It's not just in those areas but it's near the right things, near the right amenities, near the right transport links, all of that kind of good stuff.
Paul Winder: Yeah. It's central.
Robert Jones: When you're looking at a serviced accommodation model, if it were, with properties, location is absolutely key, and bigger cities, fantastic, but again, it's not always the case.
We looked at some cities we were talking about the other day that although they're big in terms of population, it's not necessarily the corporate market, is it? It's more hen parties, more stag parties, that type of thing.
Paul Winder: Liverpool being one. We have a good portfolio in Liverpool, but it's not something we're interested in putting a service model on because it is very much aimed at a weekend short stay, and all the research we've done is we've found that's what it is, and that's not the model we have now.
I'm not saying that if you did want to source your own and have it as a full-time job, you've found something there, you could probably do quite well. For what we look for and the clients we look for, we don't find it does right now.
Robert Jones: Those markets might change all the time. In two years' time, it might be ...
Paul Winder: It might be different.
Robert Jones: ... a different city. I think some people look at serviced and try and think, "Well I can do it in any area. I can do it any location."
I think with some holiday lets maybe it can work. In some areas it can work if you've maybe got one apartment and it's a smaller aspect, but if you want to do a portfolio... If you want to add a couple of properties to your portfolio, then the location is massive.
Paul Winder: You're not going to get a guy who's on a three-month contract who wants to then travel into a city centre or a town centre to get on public transport to come into the city centre. They want to be able to walk out their door and access all ...
Robert Jones: Everything on their doorstep.
Paul Winder: ... the pleasures that are available. Yeah. Absolutely.
Robert Jones: Hopefully that just gives you some context guys, in terms of the locations and how serviced accommodation fits in with that respect.