Property Investors Look North


Henry Columbine, Property Team

Positivity spreads to the regions

Property Investors Look North

The London property market appeared, for the most part, to defy the recession.

With the whole world in turbulence, investors looked for a safe haven for cash and, although nowhere was immune to the effects of the global financial crisis, London – with its position as an international center for business – felt like an obvious place to stash money.

Recession in the regions

By contrast, the regions had a harder time. London’s success was down to its global reputation. Those not investing in London looked to New York or Paris for example, rather than Birmingham or Manchester.

Our regional cities saw large jumps in unemployment, shrinking demand for residential property as mortgages became harder to get, and higher vacancy rates for commercial property as public sector organisations looked to cut costs.

Against this tough economic backdrop, property values - both residential and commercial – plummeted, and the construction of new buildings ground to halt. 

Renewed regional confidence

Over recent years, however, the outlook for our regional cities has brightened considerably.

An influx of investment, such as:

These investments mark a new confidence in the regions from investors, particularly those who might previously have focused on London for its lower risk profile.

These investors’ renewed interest in the regions is hardly surprising: a recent study by the Urban Land Institute and PwC found that Birmingham offers the best property investment potential in the UK – not to mention the sixth best in Europe, ahead of London, which was in tenth place.

With economic positivity spreading, and increasing competition for London assets having sent prices rocketing and returns diving, the regions suddenly look rather attractive.

Birmingham’s potential

Birmingham’s investment potential spans more than merely affordable land assets, with the report identifying the city as an increasingly attractive destination for entrepreneurs. 19,000 businesses were formed in the city in the past year alone – putting it second only to London.

Knight Frank’s Birmingham report notes that the city’s economic output in 2014 was £16.8 billion, which equates to more than the figure produced in the same period by several entire European countries, including Estonia and Iceland.

Birmingham’s attraction for property investors has been increased by its Big City Plan, laid out in 2010 with the aim of expanding and improving the city centre by 2031.

As part of this, and adding to Birmingham’s existing reputation as a shopping mecca, one of John Lewis’s largest stores is set to open in the new Grand Central shopping precinct, and the £500 million redevelopment of 17 acres at Paradise Circus is set to transform the city with up to 11 new buildings.

The city’s transport links are also improving, notably with the £600 million upgrade of New Street Station and the much-anticipated HS2 project, which will ultimately cut journey times to just 49 minutes, enabling Birmingham to be as connected to the capital as many London suburbs.

According to a KPMG/DfT 2013 Regional Impact Study, the HS2 project will see the West Midlands metropolitan region enjoy direct productivity gains of between £1.5 billion and £3.1 billion per year.

Manchester development

The UK’s regional positivity is not just confined to Birmingham, however, with prospects for Manchester also looking good.

In line with George Osbourne’s 2014 commitment to develop a ‘Northern Powerhouse’, Manchester is developing rapidly.

In its recent Manchester Office Market Report, Savills suggested economic output in Manchester will grow by 4.6% over 2015, outpacing the UK, with this trend of better than average output growth expected to continue for the next five years.

The private sector in the city has also seen rapid advances, with more professional services jobs created in the North West than in Greater London over the last 12 months.

The city is home to businesses including:

  • RBS
  • The Co-operative Group
  • JD Sports
  • Google
  • KPMG
  • Deloitte
  • Moneysupermarket
  • Thomas Cook

Further businesses are being attracted by considerably lower office rents than in London and access to quality buildings and a highly qualified and entrepreneurial labour pool.

 From Birmingham and Manchester to Leeds and Liverpool, the future has never looked so bright for the UK’s regional cities.