What should property professionals make of the government’s levelling-up agenda? Should the industry be supporting a concept that is already seeing big occupiers leaving London and the South East? If we stand back, what is best for the country as a whole?
At Palace Capital, we own a portfolio of buildings predominantly in university towns and city centres, with over half in offices and industrial. We own assets in the Northern Powerhouse cities of Liverpool, Manchester and Leeds, which together with our sites in York, Southampton, Brighton and Newcastle mean we are well-placed to talk about regional inequality.
According to research published in 2019 by IPPR North, the UK is more regionally divided than other comparable countries, such as France and Germany, on vital areas including health, jobs, disposable income and productivity. For example, in Kensington and Chelsea as well as Hammersmith and Fulham, disposable income per person is £48,000 higher than Blackburn, Nottingham and Leicester.
London to Leeds
So, levelling up is 100% valid as a concept and it is being put into action. The government has already committed to a Treasury North hub in Darlington, and the new National Infrastructure Bank, chaired by former British Land chief executive Chris Grigg, will be in Leeds.
The Ministry for Housing, Communities and Local Government has committed to moving some operations to Wolverhampton and the Department of Transport will relocate staff to Birmingham.
Perhaps sensing the mood, Goldman Sachs and HSBC are also moving people to Birmingham, Amazon is locating staff in Manchester and Channel 4 has relocated to Leeds. With both the public and private sector embracing the regions, this should be the catalyst for new homes, schools and local transport improvement.
For many years, the London-centric focus has been dominated by where people live and work. The levelling-up agenda will balance this out. I studied real estate in Bristol and, of the 60 people on my course, I know the significant majority didn’t stay in Bristol, even if they were born there.
This could be because many large corporates retained their focus on London, so students were encouraged to move there to achieve their goals. This cycle continued.
However, the biggest single reason I believe levelling up will work is that graduate retention within the regions has soared over the last decade.
According to the Dataloft, Knight Frank/UCAS Student 2020 Student Accommodation survey, although London retains 70% of its graduates, other cities are coming up on the rails, with Manchester at 52%, Bristol at 51%, Sheffield at 45% and Leeds at 44%.
Covid-19 has also had a significant impact on the decisions that students have made when choosing where to live and work. When asked, 36% of graduates said that being closer to parents, grandparents and siblings was a main influencing factor.
Graduates stated that schemes and internships incentivised them to stay (27%) while almost a quarter said that factors such as cost of living, housing and rent prices influenced their decision. A similar number stated that a relationship they were in was also an influencing factor.
Changing rents and rates
Each city has its own merits, atmosphere, lifestyle and appeal, but what is clear is that the levelling-up agenda is only going to benefit the UK.
Central government and the BBC are setting the agenda for decisions made by the private sector. The more public sector organisations move out of London, the more it will inevitably encourage the private sector to follow suit, highlighting that companies do not need to be based in London to be successful in the UK.
Covid-19 has created seismic changes in the way we live and work – and companies and public sector employers are now thinking hard about whether they need to be paying expensive rents and rates to stay in central London.
The quicker these organisations examine the benefits of fanning out across Britain, the better. It will be graduates who are rethinking their whole lifestyles after the pandemic and who will ultimately change the make-up of Britain’s workforce and emerging communities.
Richard Starr is executive director of Palace Capital
