Improved infrastructure investment, devolution and overheating in London has drawn never-greater investor interest to the north of England, delegates at Estates Gazette’s National Development Summit heard earlier this month.
“Ten years ago the big debate was, is the UK’s second city Birmingham or Manchester? Now there is no debate,” said Ken Knott, chief development officer at Select Property Group. “That is a direct consequence of the economic power that devolution has brought already.”
Greater Manchester was awarded control of a £300m housing investment fund in last year’s Autumn Statement and will have committed close to 50% of it to developments by this week’s Spending Review.
The speed with which that money was allocated can be attributed to the local authority already having a pipeline of projects, said Salford council development director Karen Hirst. “We are just the enablers, we are not going to do the delivery ourselves – so it is about being ready to grasp those opportunities”, she said.
Sir Howard Bernstein, chief executive of Manchester city council, said powers to transform the region’s housing market and connectivity would have a direct impact on economic growth. “If you go to China, you see how connectivity has transformed their national infrastructure, productivity and competitiveness”, he said.
A significant next step in the rise of the northern powerhouse will be the Greater Manchester Spatial Framework – a detailed analysis of how housing will be delivered over the next 10 years alongside a comprehensive investment framework. Working with developers and strategic partners, the framework will also be an opportunity to debate the scale of growth the region is shooting for.
“This is a hugely powerful statement about not just our ambition but how we can do things,” said Bernstein.
“It will enable us to make those big decisions around the balance between employment and housing; the balance between green belt and brownfield, and how all of those clear outcomes should be performed by an evidence base about how far we can grow over the next 10-15 years.”
However great the scale of further devolution powers awarded to Manchester, Allied London chief executive Mike Ingall believes the city is already too prominent to be considered a “regional city”.
He said the creative classes now drive his development schemes in Manchester. Sought-after occupiers are no longer law and accountancy firms, but TMT companies.
The refurbishment of Tower 12 in 2010 was Allied’s first venture targeting creatives. “All the agents told us the city wasn’t ready for this and we went ahead,” said Ingall. The 250,000 sq ft building was leased in three months.
That success gave it the confidence to start building speculatively and the 160,000 sq ft XYZ Building at Spinningfields was fully leased in just four months.
In Salford, Peel Group’s MediaCity has also attracted TMT occupiers, including the BBC, ITV and the University of Salford. And the Soapworks scheme, developed speculatively by Carlyle Group, Nikal and Abstract Securities, has secured a 106,000 sq ft letting from TalkTalk.
Nevertheless, speakers at the summit delivered a note of caution too.
Mat Oakley, head of European commercial research at Savills, said that while there had been a demand-supply imbalance, which had benefited commercial developers, a future boom was unlikely given the macroeconomic background.
Rising rents, house prices and staff costs could affect profit margins and small markets mean there is a small window for speculative development, he said.
Government policies such as permitted development rights and retention of business rates also cause confusion and are likely to slow down the planning process, said Oakley.
“I am cautiously positive,” agreed Lynda Shillaw, divisional chief executive at Manchester Airports Group, which recently received Chinese investment in its £860m Airport City project. “I am very positive about the product that we are able to create and the internationalisation of that product. Where I am cautious is where we are in the cycle. The regions tend to lag what is happening in London by 18 months, and you are starting to see some breaks – whether it is capacity constraints or the supply chain in terms of who is going to be there to deliver some of these schemes.”
Aligning airline and land infrastructure is crucial, she added. If a more efficient east-west and north-south rail link were created, it would connect development opportunities with university talent pools. Failure to do so could hold back northshoring and investment.
A more positive outlook was offered by Shoosmiths real estate partner Vaqas Farooq, who urged developers to push through speculative schemes, including in “lagging” cities such as Wolverhampton and Preston.
“We need to find ways to unlock those places,” he said. “We are not sure where we are in the cycle, and we should make hay while the sun is reasonably shining.”
Estates Gazette’s first annual Development Summit took place on 11 November in Manchester, in association with Conveyancing Risk Solutions, Shoosmiths, and Savills
