EDITOR’S COMMENT I feel the need for a little bit of drum banging this week, so for those of you who aren’t up for it, perhaps move on now. But this time the drum banging isn’t for our planet, it isn’t for women or the LGBTQ+ community, or the under-represented ethnic communities in our industry. It isn’t about purpose or creating social value. I’m going to bang the drum for capital investment.
At MIPIM this year I teased minister for investment Dominic Johnson for not quite landing his message to a room full of real estate professionals. He had asked them what the point of real estate was. The audience came back with worthwhile things such as job creation, regeneration, delivering homes, etc. All worthy and all true. “No,” said Johnson in response, “it’s return on capital”. There was silence.
Later that evening at dinner, I pushed him on it. Return on capital is important, I told him, but this industry has been working hard to show that it can deliver other types of return too. It can create jobs, it can make people feel safe, it can save the planet. Yes, he said, but it is really about money.
By the end of dinner, he was convinced he’d turned me into a capitalist. I was less convinced.
But I do have to confess that there is a bit of me that thinks capital does need to be the driving force, because without it we really can’t achieve any of the other stuff. The money needs to flow into this country, into businesses if we are to create jobs, level up, save the planet, house everyone.
The UK is currently lagging. And not insignificantly. The Harrington Review, published last week alongside the Autumn Statement, laid bare how vital it is that the UK does better at attracting capital.
It outlines how the UK needs a more state-backed business strategy to attract investment and that currently our competitors have some 12% of GDP in foreign and domestic business investment, compared with our 10%. Now, two percentage points might not look like much on paper, but many of you in this sector will know the financial impact of even the slightest movement. In this case, those two percentage points represent some £50bn.
So here comes the drum banging.
I believe the real estate industry should be a facilitator to bridge that £50bn gap.
Let’s look to this week’s Global Investment Summit, where some £29.5bn of investment into the UK was announced. Whether that investment was really new is a moot point. Where that investment was coming from and what it was being ploughed into felt more significant to me.
Aware Super, the giant Australian pension fund, said it wanted to invest more than £5bn in the UK (and Europe). Much of that investment will go into real estate and infrastructure, specifically housing, life sciences and energy transition. Patrizia wants to pump £100m into the development of “highly sustainable” affordable and social homes. The Royal Bank of Canada and Canadian pension fund Caisse de dépôt et placement du Québec have provided £525m to Blackstone-owned developer St Modwen to enable it to build out its 5m sq ft logistics pipeline.
Real estate can and should be that capital attractor. If the UK is to stop lagging and start leading, our politicians need to start showcasing how this sector is a real catalyst to grow our economy.
And as the investment – domestic or foreign – starts to flow into our cities; the places and spaces we create; the buildings; the connective infrastructure that enables communities to thrive, only then do we have the ability to do all the other stuff. The job creation, the levelling up, the ability to save the planet and create equitable places.
So, yes Mr Johnson, maybe I am a capitalist, after all.
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