NEW TRANSPORT INFRASTRUCTURE WILL BE KEY TO GROWTH FOR UK REGIONS
- £60m Portsmouth road plan will allow for major city redevelopment
- 2 million sq ft of office space has been developed in UK regions
- Devolution likely to be a strong impetus for economic growth
Cities which carry out careful strategic planning and budgeting and actively reflect the potential for private finance and investment of infrastructure as the economy grows, will be the UK’s most successful regions. This is one of the findings revealed in global real estate advisor CBRE’s Core Cities 2nd edition report, which examines the property market opportunities in the UK’s main cities outside London.
Infrastructure across the south is beginning to play a significant part in development plans. Portsmouth City Council has recently announced its intention to invest £60m in road infrastructure to allow better access and traffic flow both into and out of the city. This is turn will lead to significant redevelopment of the northern end of the city following the shelving of the Northern Quarter.
High levels of accessibility will facilitate specialisation, a key contributor to the provision of higher-order services agglomeration and clustering, which allow related services to support each other and drive innovation through collaboration. It will also allow for access to suppliers and customers. These increased connections will ultimately deliver more growth.
The UK’s core cities face an unprecedented opportunity. Whatever the relative position of individual cities, the ongoing economic recovery provides an opportunity for them all to maximise the hand that they have been dealt. Southampton, in particular, is on track to benefit with prime office rents forecast to grow by almost 3%, the greatest increase of any of the cities included in the report. This coupled with one of the lowest employee/real estate costs per head, is making it a popular destination.
However, this growth is, in part, fuelled by the continued lack of available space. Between 2014 and 2016, Southampton had 85 permitted development notifications, only Bristol had more, which coupled with new developments becoming student accommodation, has led to a substantial reduction of new prime office stock. The last two years has seen landlords opting to invest in existing space, undertaking substantial refurbishment programmes to provide flexible workspace in quality environments.
Figures from the report reveal that property investment outside London saw a solid start to 2017. Investment in the regions has been healthy since the recovery from the financial crisis of 2008. Investment volumes increased up to pre-crash levels in 2014, and are set to have a healthy 2017 after a strong start to the year. Overseas investors have become much more interested in non London city markets since 2014, now accounting for 37% of all such investment.
The recent business rates revaluation has provided a boost for retail occupiers across the UK. Southampton, has benefited in recent years from an additional and enhanced retail and leisure offer, notably Westquay South, an extension of Hammerson and GIC’s existing Westquay Shopping Centre, which opened in December 2016. The extension is dedicated to leisure and food and beverage provision, with a Showcase Cinemade-Lux, Hollywood Bowl and numerous branded restaurants, many opening in Southampton for the first time.
The development scene in regional cities has been extremely active and 2017 is likely to be the most significant year in the office development market since 2009. The quality of space is improving all the time, as demands from occupiers increase. However, the volume of new starts on office space has slowed over the past year, resulting in a tail-off in expected completions in 2018 and 2019.
While the availability of Grade A space in many regional cities has remained in steady balance, with the delivery of new space reasonably well aligned to occupier demand, the concern now is that Grade A choice may once again be more limited in some locations.
The UK regions are looking stronger than ever, with high levels of investment, active development and a wide variety of planned infrastructure. 2018 will be a year for regional mayors to really prove their worth. They have the ability to develop a powerful and (literally) single minded vision about the place they want their city to become. However, the power and deliverability of that vision will depend on the political clout that city leaders can muster at the ballot box.