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'Better value investments' driving construction recovery in UK regions, experts say

Out-Law News | 08 Feb 2017 | 10:13 am | 2 min. read

Better value returns on investment, as well as the UK's devolution agenda, is helping to drive record levels of regional construction activity, according to experts at Pinsent Masons, the law firm behind Out-Law.com.

Their comments came after Deloitte Real Estate reported "a significant uptick in development" in Birmingham, Manchester, Leeds and Belfast; the four cities in which it regularly monitors construction activity as part of its 'crane survey' series. Birmingham has seen a particularly impressive surge in activity, with more new office space currently under construction than since Deloitte first began monitoring the market in 2002, according to its report.

Deloitte's reports measured the volume of development taking place across each city centre during 2016, and the impact of that development. Property types covered by the reports included office, retail, leisure, residential, student accommodation, education and hotels.

Real estate expert Tom Johnson of Pinsent Masons, the law firm behind Out-Law.com, welcomed Deloitte's findings.

"It is reassuring to see that, despite recent seismic political changes at home and abroad, the levels of development activity in our core cities reflect a growing demand from major occupiers and investors," he said.

"The city centre environment in Birmingham, for example, is being radically transformed, with major new schemes such as Arena Central and Paradise Circus now coming out of the ground to accommodate the demand from blue chip corporate occupiers such as HSBC and PwC, and further redevelopment opportunity in the wings with landmark schemes such as Birmingham Smithfield coming to market soon. With investors and corporates increasingly looking outside London for value - and with the prospect of even shorter travel times to and from the capital – there is perhaps little surprise that we are witnessing a welcome economic reconnaissance across certain of the key towns and cities in the UK regions," he said.

The volume of new office space under construction in Birmingham increased by 50% in 2016, up from 969,000 square feet (sq ft) of space to 1.4 million sq ft, according to Deloitte. Residential construction increased 10-fold over the survey period, with 2,331 city centre units starting construction in 2016.

Construction activity increased in the northern cities of Manchester and Leeds also increased in 2016, with residential developments in Manchester and retail developments in Leeds highlighted by Deloitte in their respective reports. A record-breaking 22 new residential developments comprising nearly 7,000 units broke ground in Manchester last year, comfortably beating the previous record of 14 in 2007; with four of these projects being residential towers over 25 storeys high. Residential construction remained "modest" in Leeds, with only three new developments among the 20 major construction schemes delivered in 2016.

Construction in Belfast is "healthy", with 19 schemes under construction and 11 completing last year, according to Deloitte's first ever crane survey of the city. This included four new educational facilities, seven new student accommodation projects, six office developments and eight new hotels. Deloitte recorded growth in hotel and student accommodation developments across most of the cities it surveyed.

Nigel Blundell, a construction law expert at Pinsent Masons, said that there was a "perception of there being better value for investments" in the UK's regional cities.

"Certainly, the prospect of HS2 appears to be driving growth and investment in areas along its route," he said.

"In addition, the devolution agenda and the setting up of housing growth partnerships is beginning to enable investment in a greater variety of sizes of projects. This ability to unlock more land is vital to the continuing growth and prosperity of the regions," he said.

HS2, the planned new national high speed railway line, is expected to cut the journey time between London and Birmingham to 49 minutes when its first phase opens in 2026. The line is planned to connect Birmingham and Crewe by 2027, before progressing to Manchester and Leeds by 2033

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