Northern England cities’ promise attracts wave of property investment
Ian Simpson, an architect, recalls how only 400 people lived in Manchester city centre in 1996, at the time of the bombing by the IRA of the Arndale shopping centre.
Now the city centre is home to 20,000 people, but Mr Simpson believes “we should be pushing 200,000”.
The billions of pounds of property investment that have flowed into Manchester over the past two years mean this vision may not be so far-fetched. Tower cranes now bristle across the city’s centre as new office and residential buildings spring from former industrial soil.
‘We need more people’: architect Ian Simpson says Manchester city centre should be ‘pushing 200,000’
Manchester attracted £2.3bn of commercial property investment in 2014 and 2015, say Cushman & Wakefield, the property agents — more than any other English city outside London.
Next was Liverpool with £979m, followed by Leeds with £958m and Newcastle with £842m. The cities are expected to benefit further from rising prices in London, which are pushing property investors to look further afield, some of them for the first time.
Mr Simpson, who was instrumental in Manchester’s regeneration after the 1996 bombing, sees the latest wave of property development as a catalyst for further population growth.
“What’s really important in the northern cities in particular is that we need more people,” he says. “London doesn’t need any more people — its infrastructure is struggling to cope. In a city like Manchester we are getting the infrastructure in place to encourage an increase in the population.”
Projects under construction in Manchester include office complexes such as One Spinningfields and Two St Peter’s Square, as well as a rush to build institutionally-funded housing blocks for private rental. There are three such developments under way and another eight expected to begin this year, according to JLL, the estate agency.
More new homes were started in Leeds in 2015 than at any point in the past nine years, according to Deloitte, the professional services firm. The population of Liverpool’s city centre grew in the past decade for the first time since the second world war.
Bill Hughes, head of real assets at Legal & General Investment Management — which bought a 50 per cent stake in Salford’s Media City and committed £162m to a Leeds regeneration project last year — says there are “several cities in the region with untapped potential, that have been underinvested for years”. But he adds, “you can only make sense of these opportunities if you are in for the long term and willing to invest at scale.”
Economic recovery has helped to spur development, as has infrastructure put in place with public sector money after the financial crisis, such as tram lines.
Some investors are in part betting on the lure of northern cities for Londoners and London businesses as they tire of the capital’s high rents. Manchester scored a major coup last year with the arrival of Freshfields, the law firm, which opened an office in the city for the first time and by the end of the year announced it was leasing 80,000 sq ft in a new development, with room to expand if needed.
Such moves remain comparatively rare, with companies such as PwC struggling to fill graduate roles in regional offices, but there are still more businesses currently seeking 20,000 sq ft or more of office space in northern England than at any time since 2008, says Tim Cameron-Jones, head of the north at Cushman & Wakefield
Leeds and Manchester have succeeded in attracting private sector-funded developments and in enabling speculative building, but other cities in the region, such as Sheffield, rely on public sector underwriting to make projects appealing to commercial developers, says Mr Cameron-Jones.
Even Manchester’s property investment total is dwarfed by the capital’s £43.1bn in the past two years, illustrating the scale of the challenge in providing a counterbalance to the lure of London.
Miles Gibson, head of UK research at CBRE, the property services company, says: “International investment into the UK is heavily skewed towards London; overseas property investors in particular often don’t know the regional markets as well.
“Often all they know about these markets is the name of the football team. But increasingly investors are asking ‘Where else can we put our money? We like Britain — what have you got?’”
The Port of Liverpool building, a celebrated Grade II-listed Edwardian office space, was sold last year to a Middle Eastern family office in search of “returns significantly better than in London”, says Mr Cameron-Jones.
The property industry has given a cautious welcome to government-led initiatives to promote the region, such as the High Speed 2 rail line — due to reach Leeds, Sheffield and Manchester by 2033 — and devolution initiatives such as allowing local councils to keep proceeds from business rates.
For Mr Simpson, who is also involved in big London projects such as the conversion of Battersea Power Station, there are advantages to working on development projects in the north beyond the aim of rebalancing the UK economy away from the capital.
“Projects in London take much longer and there’s an immediate reaction at local government level to change — ‘we have enough people, we’re quite happy as we are’. There’s also a challenge with the lack of joined-up thinking between the boroughs,” Mr Simpson says.
“But in a city like Manchester you feel that change is embraced. People are holding out their hands and welcoming that investment.”