Tale of two cities: UK rivals go to the polls with implications for real assets
Mayoral elections in two major UK cities this week could affect real estate and infrastructure in the short to medium term.
The devolution of power from Westminster to Birmingham and Manchester is expected to encourage investment beyond London. Decision-making processes should – in theory – be sped up and Manchester itself is often cited as an example of the success such devolution of powers can bring.
Manchester City Council’s longstanding chief executive Howard Bernstein has been widely credited with the regeneration of the northwest city. His replacement, Joanne Roney, will work with a newly-elected Greater Manchester mayor.
For Manchester’s Conservative and Labour candidates, Sean Anstee and Andy Burnham, transport and housing are key issues.
There is no doubt that the latter is garnering interest among investors. Manchester’s residential sector has attracted LaSalle Investment Management, M&G Real Estate and Patrizia Immobilien, with all three bringing their private-rented sector strategies to the city in recent years.
In Birmingham, Andy Street, the Conservative candidate and former managing director of UK retailer John Lewis, and Labour rival, Siôn Simon, have both made pledges to increase residential development on brownfield sites. Simon wants to double the number of affordable homes in the West Midlands region.
The battle for the keys to Birmingham’s mayoral office is, according to polls, too close to call.
Whoever emerges as winner will have several major schemes to look over from the city’s Victorian council house windows.
The demolition of the adjacent Paradise Circus library is making way for a phased office development by Argent and Hermes, asset manager for the BT Pension Scheme.
Further across town, Hammerson – which, alongside Canada Pension Plan Investment Board, is already invested in Birmingham’s 1.3m sqft Bull Ring centre – has also invested in the Grand Central retail scheme above New Street station. The recently completed 200,000sqft mall is regarded as the ‘front door’ to the city.
The centre, which includes a John Lewis department store, was sold by Birmingham City Council and Network Rail, proving the need for a mayor with the ability to engage with national and international capital on both commercial real estate and infrastructure projects.
Despite lagging Manchester in, for example, the implementation of a tram network, Birmingham has made strides.
“Generally, cities where highly-skilled workers want to live, learn, work and play are likely to have more robust demand,” says Aviva Investors’ head of global research Chris Urwin. “Over the last two decades, Birmingham has transformed itself into such a location.”
Hammerson director of retail development Robin Dobson last year told IPE Real Estate that Birmingham has the “best infrastructure of any city outside of London – and that’s before the much-anticipated arrival of HS2”.
HS2, the high-speed rail link, will connect London, Birmingham, Leeds and Manchester, but is not due for completion until 2025.
However, its construction is already having an effect on sentiment, as the Curzon Street area around the new train terminal evolves.
“Ten years from now, this should facilitate business interactions with London and should provide a spur to regeneration in and around the Curzon Street area of the city centre,” Urwin says.
Overseeing such schemes will provide Birmingham’s new mayor with both a challenge and a chance to shine.
Birmingham and Manchester, rivals in their efforts to be recognised as the UK’s second city to London, have both made major efforts in recent years to raise their profiles and attract international investment.
Greater Manchester has enjoyed stronger population growth than Birmingham, which, given its proximity to London, is often regarded as being ‘too close’ to the UK capital to stand alone. However, Birmingham is now the most popular destination for those moving out of the capital.
The annual MIPIM trade fair in France in March this year provided evidence of the intense nature of the cities’ respective charm offensives, with retired professional footballers lending a hand in the process against the backdrop of the UK’s vote to leave the European Union.
Despite rival Manchester’s renewed appeal in recent years, Birmingham was the most investable UK city – as well as the sixth most investable in Europe – according to ULI and PwC’s Emerging Trends in Real Estate report in 2016.
Moves by HSBC staff and Deutsche Bank employees to Birmingham are often cited as a sign that the UK is finally experiencing “life beyond London”.
Back in the northwest, Liverpool is also going to the polls to elect a mayor to replace Joe Anderson.
It is a good few years since former Goldman Sachs economist Jim O’Neill coined ManPool, a portmanteau for Manchester and Liverpool to float the idea of pooling resources and thinking more coherently about infrastructure.
Liverpool’s Labour candidate, Steve Rotheram, wants to work with the future mayor of Greater Manchester towards a northwest powerhouse. Improved transport links between the two cities are part of his plan.
The idea, of course, is not new, with Anderson and Bernstein jointly promoting their respective cities at MIPIM in 2014.
Rivalries may run deep, but working together will be key in all three cities as the UK goes it alone outside the EU and without future European funding for regeneration.