Property and the EU

With the UK’s in-out referendum on EU membership in the offing, it is worth considering just how much the outcome might impact North West property and regeneration.

Neil Tague looks at some of the key areas of the market and asks ‘what have the Europeans ever done for us?’

Development finance

For the EU

A science park, an arena and a cruise terminal in Liverpool. The Lowry complex in Salford and Manchester’s new National Graphene Institute. Burnley Bridge Business Park and Widnes Waterfront. All these and many more have European Regional Development Framework funding in common. As Dr Ricardo Gomez, director of economic consultancy Regeneris, points out, oft overlooked are the improvements in road networks, broadband infrastructure and business support also aided by Europe to the benefit of the property industry. In Liverpool, European money allowed English Cities Fund to raise standards – and headline rents – with new office developments at St Paul’s Square, pictured right. Director Phil Mayall says: “We needed to spec, and we needed the grants to give us confidence.” Even in Manchester’s Spinningfields, the new XYZ building has ERDF logos on its hoardings.

Against

Has European funding depressed office rents? Headline rents in Liverpool are still bobbing around in the late teens and the office market looks flat. Is the grant culture to blame? DTZ director Ken Bishop says: “When gap funding was available I was strongly of the view that this held back development as developers would not proceed without this ‘comfort blanket’ in place.” However (Business Premises Renovation Allowance excepted) grants are no longer available, replaced by a variety of public sector loans. These cheap loans help tackle the lack of bank interest in development finance without an occupier story to tell. Rents stay low, requiring gap funding to make development viable, and so the Catch 22 continues.

Construction labour

For

In March this year, the Chartered Institute of Building said “the construction remains an industry that simply does not train its own people in sufficient numbers” – first year construction trainees, according to the CITB Training Survey, stood at 40,000 nationally in 2007 – that figure’s now 20,000. Although North West contractor Seddon employs no EU operatives directly, managing director Jonathan Seddon, pictured right, says: “The wider industry relies on qualified workers from other EU countries. If we were outside the EU, it would without doubt add pressure to capacity, slowing output and forcing labour prices up”. EU workers provide brains and brawn: the Centre for Economics Business Research reports that 37.4% of workers in the UK from EU14 countries (longer established EU members) are classed as ‘managers,’ as opposed to 27.7% from the UK, while workers from the later accession countries fill lower income jobs. The CEBR added “economic growth is higher under scenarios with more net migration than lower net migration”.

Against

There exist concerns that the increase in migration from newer member states will see further pressure on lower-skilled roles, creating downward pressure on salaries and making those jobs unappealing for British workers – could skills be lost? There remains a sense too, that although Eastern Europeans in particular are increasingly prevalent among jobbing builders and those working in housing, much of the commercial work in the North West is done by skilled, well-established “home teams”. A well known Greater Manchester builder and fit-out contractor flatly said “the EU’s irrelevant to us”. Contractors will hire the skilled people they need regardless of freedom of movement laws.

Environmental improvements

For

The River Mersey: a huge asset for the North West, but in the 1970s its filthy state represented a huge image problem. Then the European Community (as was) pumped in £40m to kickstart its clean-up, this being among the regeneration priorities zeroed in on by Michael Heseltine in the wake of 1981’s riots. The European Commission drove the adoption of the Blue Flag certification scheme (started by France-based Foundation for Environmental Education in Europe) for clean water in 1987, triggering clean-ups from embarrassed public authorities. The UK holiday has bounced back – Blackpool remains in the UK’s top five beach holiday destinations, according to Expedia’s Beach Report. Much of the UK’s legally binding commitment to reduce carbon emissions will be delivered through the EU Emissions Trading Scheme, which covers around 111,000 energy-intensive industrial installations.

Against

European money triggered the Mersey clean-up, but also important were Heseltine, North West Water/United Utilities, the Environment Agency, industry itself and the Mersey Basin Campaign. Then there’s the bill-paying public who ultimately forked out £8bn over 25 years for the Mersey improvements made by the utilities giants. Improved water quality has been vital to seaside resorts and urban canalside areas, where heavy industry was once so financially enriching but damaging to water and air, before those big manufacturers shrank from view. Pioneers like Jim Ramsbottom (Dukes 92 in Castlefield, Manchester) and Tom Bloxham (Urban Splash), who drove the leisure-residential market, are also due praise. Of the green watchers in commercial markets, Mark Rawstron, regional senior director of GVA says “from investors we speak to, it’s those from the US that are red-hot on sustainability.”

Opening up investment markets

For

New, job-creating development is driven by profitable exits provided by investment markets, so the easier you make it for a wider pool of investors, the better. And European money has played a key role in Manchester in particular, German investors in particular. In May, Patrizia Immobilien bought Ask’s First Street, pictured, the latest example of European money continuing to flow, keeping the city on the development track as rivals falter. And for all the talk of Eastern money, it doesn’t always come to fruition. Will Kennon, director at CBRE, observes that despite interest from Chinese and Middle Eastern buyers, “there are still relatively few transactions” as their preferred lot size is the £50m-plus bracket, while locals are more fleet of foot on smaller deals.

Against

For major financial institutions, whether headquartered in Berlin, Paris, Dubai, Beijing or even London, membership of the EU is an irrelevance. If an institutional investor wants an asset, they’ll buy it. Senior GVA director Mark Rawstron says even outside the EU “the UK would still be a home for international capital – there’s political stability, we’re respected for ethics and our legal system.” The largest single international relationship Manchester has developed is with Abu Dhabi, now the funders of East Manchester regeneration that nobody else has managed to complete. Up to £1bn of housing investment could follow the £150m City Football Academy opened in December 2014.

Cultural openness

For

Ease of travel to and from European neighbours has made the building of relationships that much easier. Architects, engineers, and more have found work abroad, while European ideas have found a home here, opening minds – look at the work done by Mecanoo (HOME in Manchester) or 3XN (Museum of Liverpool, pictured). Europe is also the biggest provider of foreign direct investment to the region, with 46% of those coming to Manchester originating in Europe. There are 7,000 exporters in the North West being encouraged to grow in size here, fuelling property requirements, by exporting more. For all that China, the US and the Middle East are important, why close yourself off to local relationships?

Against

Globalisation, rather than EU membership, is the key here. Might this not all be happening anyway? Yes, architects and consultants work in Europe and European architects work here – but is it not also true that relationships have been built with the UAE, the US, India, China and the rest? BDP designed the ABC shopping mall in Beirut and was commissioned in 2007 to design ten university complexes in Libya. BDP teamed up with local firm SYNA to open an Abu Dhabi office in 2010. This is not to say that European relationships aren’t important – just that leaving the EU needn’t close off avenues.

Plus ça change

This isn’t so much a case of fervent pro- and anti-camps, more that the ‘in ‘camp says “It’s fine, it’s working, we can build open relationships, why change?” The “out” argument, such as it is, doesn’t seem to be anti in the sense of self-serving politicians talking of migrants and red tape, but more a reasoned voice pointing out the things that stand the UK in good stead internationally – steady economy, stable currency, globally respected legal system and respect for the rule of law – would stand regardless.