Developers and agents have been warned they risk holding back the North West’s technological renaissance because of a failure to accommodate new business needs.
Mills & Reeve partner Anne Fairhurst said: “I sometimes fear that developers don’t take account of what the end user wants”.
Her comments were heard by almost 200 people from the Manchester property community, who packed out the Engine Room in the People’s History Museum in the city’s Spinningfields quarter for Estates Gazette’s latest Question Time debate on 6 November.
Warning of a potential oversupply of space for large internet retailers and an undersupply of SME space, Fairhurst added that she’d be “enormously disappointed if loads of capital was tied up in units that weren’t fit for purpose, for the people who were going to come to Manchester and generate the growth we’re so desperately seeking”. But Savills’ head of northern planning, Jeremy Hinds, contested the point, claiming that it was “manifestly wrong” that developers didn’t understand their clients.
However, he conceded that there had been a “collective failure” to keep up with a swift-moving market with new entrants operating on untried business models.
“We don’t know what the demands of the Twitters and Facebooks might be tomorrow, largely because they don’t know,” he said.
And Capital & Centric co-founder Tim Heatley said the industry had been slow to respond to the changing needs of the occupational marketplace, though a lack of funding had hampered efforts.
“There’s a big disconnect between what occupiers want now and what was built in 2007. Nothing has been developed to cater for the TMT market, that’s the opportunity for us. It’s partly down to developers, but also agents. Some of the old school agents will tell the developer to do whatever he just let yesterday – if that’s suspended ceilings, fluorescent lighting, raised floors in a glass box, he will say that’s what you need to build.”
The debate, chaired by EG editor Damian Wild, came just days after Manchester scooped the EG City of the Year Award at MIPIM UK, as well as being granted a £1bn devolution deal by central government.
While the devolution settlement was warmly received, several on the panel were cautious over its implementation.
Fairhurst said: “We’re lucky being the second man up the mountain [after London] in that we can see where the man ahead lost his foothold. In London the most negative consequence of their growth is the unaffordability of property – I would be very upset if those people partially responsible were allowed to come here and render us unaffordable.”
Manchester city council chairman Sir Howard Bernstein, also on the panel, warned that the deal should not be seen as a precursor to a single “northern powerhouse” – a concept proposed by chancellor George Osborne.
This approach, he said, had failed before through the Regional Development Agencies, and that a precise local analysis of each city’s strengths and needs was required instead.
“We want to be able to intervene in a housing market which enables sites to be remediated and passed over to the private sector,” said Bernstein, referring to a £300m housing investment fund diverted from existing housing streams and devolved to Greater Manchester.
“What we’ve had so far are a collection of housing policies that relate to London and the South East. This enables us to come in as a co-investor to secure the leverage that will make so many unfeasible schemes practical going forward. We’ve got to be able to adapt our overall model to suit the changes in our population.”
He added that the powers would be used to foster growth sectors such as life sciences, advanced materials, creative content and cultural industries – with more announcements set to follow on the latter.
While Bernstein insisted he supported devolution and revaluation of business rates, he added that he had not pushed for control over the levy during devolution negotiations, due to Greater Manchester’s £5bn annual taxation deficit.
Talking points
The handing over of powers and £22bn worth of spending from Westminster to Greater Manchester, under the government’s historic “northern powerhouse” announcement a fortnight ago, are expected to have significant ramifications for the property industry. Some of the key powers to be devolved include:
Planning
Including the power to create a statutory spatial strategy to guide investment and development
Housing
Control of a new housing investment fund of up to £300m which will deliver an additional 15,000 homes across Greater Manchester over 10 years
Business support
Devolved business support budgets to help businesses grow and innovate
Earn back
A revamped earn-back deal will see the GMCA rewarded for economic growth as a result of investment in infrastructure, to the value of £30m a year over 30 years
Private sector key to housing schemes
Housing was a hot topic at last week’s Manchester Question Time, with a key part of the discussion the need for the public and private sector to work together to deliver previously unworkable schemes. The latest figures from Savills show there have been significant levels of buy-to-let activity in the city.
Big projects have recently come to the fore, including the delivery of 2,000-plus PRS housing units across the North West in a collaboration between Gatehouse Bank, Sigma Capital and Grainger.
And Manchester city council has entered into an alliance with Abu Dhabi United Group to deliver housing stock to the city’s east.
Research from Savills also paints a healthy picture of city centre office investment in the city.
Volumes in the first seven months of 2014 were up 179% on the same period in 2013,with some £920m transacted.
Manchester recorded the lowest prime office yield of any of the regional cities at 5%, and the biggest inward yield shift of any of the regional cities so far this year.
