The spending review will widen the jobs and wealth gap between London and the regions – and will hurt property, experts tell Damian Wild.
The Comprehensive Spending Review will fuel unemployment in regional markets and make occupiers think twice about taking space in many towns and cities across the UK.
That was the unambiguous view of a panel of property experts convened by Estates Gazette to discuss the fallout from last week’s announcements and the findings of the latest EG/BNP Paribas Real Estate Sentiment Study (16 October, p68).
Mark Anderson, Whitbread’s commercial and property director, admitted that he was cautious about investing in some parts of the country after chancellor George Osborne’s speech.
“To secure the right properties in the right markets, this is arguably our best time to be pushing ahead with expansion,” he said.
“At the moment, we are debating how fast we expand and in which locations we expand. We have our target growth list, which takes us into 350 different new markets in the UK. We are bringing regeneration and jobs into some of those areas. But equally, we need some form of confidence and certainty over those markets.
“We’ll expand anywhere in London, because we’re so confident that London is in great shape for the next few years. But outside London, we see a very different picture.
“I was looking at a couple of sites in Essex, where there is great dependency on local authority jobs. Those places are going to be hit hard. That will mean less business in the area, particularly for our hotels, and it will weaken our confidence.”
Mark England, chief executive of BNP Paribas Real Estate, warned of the review’s expected consequences for regional occupier markets.
“Half-a-million job losses is a very significant number, and that’s going to hit people very hard,” he said. “Saying that job losses in the public sector are going to be replaced by the private sector is very neat. But are they going to be replaced with the same type of job in the same place? In my view, clearly not.
“I see a lot of these job losses happening outside London, and the new jobs being created in London – and that’s not good news for the regional markets.”
Liz Peace, chief executive of the British Property Federation, said: “Inevitably, there is going to be a huge number of knock-on effects. People are greatly influenced by what they read in the papers, and that’s bound to have an effect on our industry because we’re the basis of just about every activity in the country. You have to have property to do it.”
John Burns, chief executive of Derwent London, saw some good news for developers in the government stock likely to be released on to the market.
“Looking at it from a selfish point of view, from our shareholders’ perspective, we like to buy government buildings with three or four years left on the lease,” he said. “Why? Because we can improve them and do things with them.”
But he added: “We’ve made 170 lettings in the past 22 months, which is pretty good by any standard. But what concerns me – and looking at it away from the selfish perspective – is what’s going to happen out of town, with the cutbacks to the regional office market.
“Unless a building has got an alternative use for residential, I really would be very, very concerned.”
Full discussion at estatesgazette.com/videos
