A round table hosted by Estates Gazette and GVA at MIPIM earlier this month asked property players in London about what the capital needs to grow its economy
Do developers have access to the financing they need to operate in the capital?
Ross Blair, UK managing director, Hines
The most aggressive capital seeking a home in central London is from the likes of Malaysia and Korea.
From the conversations we have had with people from that part of the world, their focus is very much on the traditional areas of the Square Mile and Mayfair and St James’s.
It’s the areas they feel most familiar with, and it’s the areas where there is most written on them, so they can get to grips with the information quickly.
As the community that is active in London right now, it’s our job to make sure that some of the more peripheral areas don’t get forgotten, and receive the investment that they require.
And the more UK-based capital works hard to make sure some of those projects happen, the more interest ultimately we’ll see from some of these overseas capital sources to start focusing on some areas which at the moment they’re less familiar with.
Of course, what is crucial to keeping London as a global city is making sure we continue to deliver the right sort of buildings that tenants want to be in. And the way the economy’s been over the past couple of years has meant it’s been very difficult for developers to bring developments to a head. So we need to find innovative ways of financing developments.
We’re spending lots of our time looking at ways of harnessing capital from overseas sources, which perhaps up until now have been very much focused on existing dry investments, and trying to demonstrate to those sources that development is a way forward for them to get their hands on a building – buildings of the quality that they want.
How can a growth plan for London be funded?
David Marks, co-managing partner, Brockton Capital
London is one of only three or four truly global cities. There are probably thousands and thousands of cities around the world that would be desperate to be in the position that London is in right now. And the growth plan for London has to embrace that fact, as opposed to resenting it.
If people can embrace London’s growth, it will flow out to the regions, be it physically through infrastructure or metaphorically through further growth in the UK. But the reality is that London is not really tied to the UK so much.
We’re in a very fortunate position that the world wants to be in London; not just visiting, not just playing or living but investing. I don’t mean to be blasé about it. The UK government budget and finances are under huge strain, but we don’t need to afford it all ourselves. There are trillions and trillions of dollars, euros and pounds sterling that are desperate to invest in London in projects that earn a return commensurate with their risk.
So it doesn’t matter if you’re talking about infrastructure investment for a mid-to-high, single-digit total return – which will eventually start flowing into the sector because the returns are mispriced relative to the risk – or equity for new projects, be it residential or further commercial space.
If you take all the global stock markets, all the bond markets and fixed-income markets, all the commercial real estate markets and so on, there is well over $150trn worth of global assets in total. And London property is pretty much at the top of the shopping list for many, many investors.
So if we’re welcoming overseas capital in, and we’re not taxing it to the extent that it’s unwelcome, the money is there. It doesn’t all have to come from the UK government or the UK taxpayer.
How should public policy change to spur growth?
Stephen Brown, executive chairman, GVA
We need a positive statement on development in the National Planning Policy Framework. And we also need a positive approach to releasing public land.
We need publicly held land to be released into the market place, and for that to happen in an orderly fashion but at a much greater rate than has happened to date.
We need infrastructure investment, particularly investment in transport hubs and stations, and we need to step that up.
We’ve got some good successes to celebrate, but we need far more investment in transport hubs particularly. And we seem slow to react to the market preferences of those who would occupy property, particularly recognising the needs of the technology, media and telecoms sector.
Bringing together those three things [the NPPF, releasing public land and investing in infrastructure] in alignment would create much better growth prospects.
There are places to watch in London: Park Royal, Old Oak Common, White City, Tottenham Hale, Royal Docks, Deptford Creek and Croydon, which is a very good example in its retail focus and its residential focus.
It’s important that one uses the resources not too thinly. One actually needs to focus the public sector’s resources and the policy-making resources in locations that can really make a difference.
It will be difficult for some peripheral locations in London that have traditionally hosted corporate back offices to see themselves as having very significant office futures. They’ll need to reconsider a number of their strategies going forward. They will still have office locations, but not of the scale that’s been previously anticipated.
Do public spending cuts and tax increases risk derailing growth?
Faraz Baber, executive director for policy, London First
We’ve got to make sure we balance the costs and economic viability for development to proceed. A really big point that we must remember is that, as part of the government’s spending review, we have seen sweeping cuts in the planning departments that are here to deliver the major applications.
One of the challenges for all of us, whether in the public or private sector, is to make sure we have the skills and the resources to make those planning departments operate effectively in order to make those major applications come to fruition.
That’s one of the biggest risks to seeing growth coming forward in London. It’s also important to remember how the community infrastructure levy will operate. It will have a cumulative impact in London where you have the mayoral CIL and the boroughs now thinking about what rates they want to set.
It’s important that they take account of what the mayor is actually doing so they don’t overplay the amount that they want in their rate settings, because you also have the existing s106 agreements for housing and on-site mitigation. That cumulative impact has got to be balanced correctly.
The panel
Ross Blair, UK managing director, Hines
David Marks, co-managing partner, Brockton Capital, and junior vice-president, BPF
Stephen Brown, executive chairman, GVA
Faraz Baber, executive director for policy, London First
Damian Wild, editor, Estates Gazette (chair)
