In the days before the recession, now a distant memory, London seemed to be an integrated part of England/ UK in property terms. It’s always performed extremely well, but comparisons were still made with ‘the regions’, i.e. other UK cities. More recently London has continued to grow at a phenomenal pace – throughout the recession, whereas the regions have all but stopped in relation to investment/ property development. Thankfully the regional cities are waking up again now and the future is certainly looking brighter for the UK as a whole. However, the spectrum between London vs The Rest is probably the widest it’s ever been.
At MIPIM recently and also in the press, particularly in relation to the strong recovery we are seeing in the residential sector, comparisons are still made between London and the regions. This continual comparison is starting to frustrate me as I think the relevance of this has diminished. I work in both the regional cities and London on a weekly basis so I’d like to think I can see this from both perspectives here. Londoners are only really focused on London – so too are international investors. The regional cities seem to take the view that London is over heating and that the regions should get ‘their share’ of investment/ property development activity. Why?
Evan Davis recently presented an insightful two-part programme on the BBC which considered this very issue. This was a good review and was very much focused on investment/ real estate comparisons. Looking back at history he illustrated that at the peak of the Industrial Revolution, the middle of England; cities like Liverpool, Manchester, Leeds, Sheffield, Nottingham and Derby were significantly higher than the rest of the UK, including London, in economic terms.
Today, London performs substantially better than the rest of the UK. To give a sense of this, Residential values in Central London are peaking at levels of £3000ft2 – or in extreme cases up to £6000ft2. Whereas the regional average is around £350ft2. The average house price is the UK is £180k and it’s size is typically between 800-1000ft2. Therefore a house of this size in London would probably fetch around £2.7m. Values have risen in the last year at a UK average of 9.5%, whereas as London has increased by 18%.
London is unique in the context of the UK, now more than ever. It’s a global city; THE global city in fact. It attracts substantial international investment, but why is it so unique? There are many reasons, here’s a few;
– It sits geographically and timezone wise ‘in the middle’ of the global money markets.
– It is politically stable/ safe.
– It has the most universally used language.
– It’s offers a wide range of lifestyle/ cultural diversity.
– It has a strong sporting offer.
– It’s has a wealth of English heritage/ history.
– It’s incredibly well connected on both local and global levels.
– It has a strong and diverse concentration of people/ demand.
– It attracts the best talent in most sectors, both domestically and globally.
– It has a substantial number of educational institutions.
London is an incredible success story and I have no doubt it will continue to perform well for the foreseeable future.
But, it my view the UK regional cities should not try and compete with London. They can’t. There is definitely a lot to learn and observe in terms of what London has done well, but regional cities need to focus on defining themselves on a more domestic level. Connectivity into/ out of London is clearly really important for the regions.
MIPIM saw most regional cities flying banners with the usual message; ‘We’re open for business’, but is that enough? Accepting that London is now a firmly established global city, perhaps there is a strong argument to suggest that a National/ Domestic capital city should be identified. Would this help promote the wider UK? In my view Manchester is the only contender and is already the UK’s second city. If Manchester were to be named the national capital, would this give middle England some stature?
Most cities have pretty poor quality office provision today, with a lot of 1960’s stock – most of which is being pushed down the Permitted Development route to convert them to Residential. Will these be sustainable? (in commercial and environmental terms – and in the context of the city fabric), or are we just creating a bigger problem for the future? These buildings should probably be demolished and replaced. I accept that this is challenging financially, but it’s probably one of the biggest nuts to crack. In terms of Residential dwellings, getting people back into the cities IS important. And not just that, providing a strong mix of dwellings to suit all ages is important – along with facilities like well performing schools (this being a big influencer in house purchases/ values). The UK, again linking back to the Industrial Revolution, has a mentality/ habit of the wealth pushing out to the green areas. This seems less of an issue in mainland Europe. City living is far more common out there. Can the UK accept that City Living works? It should certainly be affordable which references another issue with younger people trying to enter the market.
This is a complex and never ending subject. My point today is two-fold;
– London is distinctly separate from UK regional cities and people need to accept that.
– The regional cities need to find a way to make their cities work and provide the ingredients that London boasts; City living for all and the very best commercial offer. The latter should not, in my view, be concentrated on Local Enterprise Zones if these are outside of the city centres. This will make the social/ economic problems worse by making the commercial centres ‘suburban’.