Terrorism, oil prices and the soaring Swiss franc dominated the agenda in Davos this week. All will affect property, but none more so than another topic near the top of the World Economic Forum agenda: infrastructure.
Fresh from his significant intervention in the Scottish independence debate, it was former prime minister Gordon Brown who put the “I” word at the heart of his address, urging countries to invest in infrastructure to boost the global economy.
It’s a message much mentioned in the hallowed halls that Brown used to stalk.
For domestic and international investors alike, infrastructure is an ever more important factor in their decision making. More than anything else in property it requires a government-led solution.
And there are welcome signs that it may be on the cards.
If there is a poster boy for developer-led regeneration it is Nigel Hugill (p56). Having revamped White City, Greenwich Peninsula and Stratford in London, he is now taking his transformative powers national. He and long-time partner Robin Butler are targeting six major strategic development sites. Not lost on either of them – especially Hugill, as chair of Centre for Cities in his downtime – is the fact that good infrastructure will be at the heart of their success.
It’s the same for international investors. Asian funds and the continent’s high-net-worth individuals are showing a real appetite for UK opportunities outside London. If you ask any of property’s many investment midwives after they step off a flight from Shanghai, Hong Kong or even Jakarta, they will tell you that questions around infrastructure are now routine.
Writing her first column for EG this week, new British Property Federation chief executive Melanie Leech takes up the theme. “Investment in real estate will be crucial to boost the recovery, to give businesses – our customers – space to grow, to deliver new homes and regenerate our towns and cities,” she writes. “And it can do a huge amount to meet the UK’s infrastructure challenge, from roads and rail to social housing and healthcare, and to future-proof the economy from financial and environmental shocks. And, of course, it shapes the environment in which we all live.”
And the public sector is making a financial difference. This week the Greater Manchester Pension Fund and the London Pensions Fund Authority announced the joint allocation of up to £500m to invest in infrastructure opportunities.
The GMPF is a long-standing investor in infrastructure. This joint allocation will increase funds available, with an initial focus on Greater Manchester and London.
But that’s only a local solution. In December’s autumn statement George Osborne linked national productivity to the need for “a major investment in our nation’s infrastructure”. He needs to put his money – or rather his covenant – where his mouth is.
Already cities minister Greg Clark – and his able assistant Lord Heseltine – has delivered on a promise to devolve financial power to cities. Again infrastructure investment is at the heart. Some 39 local enterprise partnerships are benefiting from the £2bn first round of the government’s regional growth fund. And almost all of the year-one deals involved investment in transport infrastructure. Expect more noise here ahead of round two.
Legal & General Property is poised too. Last summer the investor wrote to England’s 39 local enterprise partnerships as it sought to invest £15bn in infrastructure projects. This week the firm brought its direct investment capabilities in property and infrastructure together in a new real assets division. Significantly, it appointed head of property Bill Hughes to run the division. Said Hughes: “With an indebted public sector, institutional investment in this area will be a differentiator for future UK economic growth and success.”
Hughes will want to make a splash too. The momentum is there. It needs to be maintained.
