The Subplot

The Subplot | Chinese investment, Gove’s white paper, self-storage

Welcome to The Subplot, your regular slice of commentary on the North West business and property market from Place North West.


  • Chinese investment: no big deal?
  • Announcements pending: what the jungle drums are saying about Northern Powerhouse Rail and levelling up
  • Self-storage: after a Widnes deal, one to watch

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China Flag On Brick Wall The Subplot 16.11.21The China moment passes

George Osborne’s Northern Powerhouse idea relied on Chinese money and new infrastructure. The rail infrastructure now seems doomed (see below), but did Chinese investment deliver as planned elsewhere?

Last week GMI Construction appeared to be on the brink of replacing Beijing Construction & Engineering Group International as contractor for Salford’s £1bn Middlewood Locks. Having delivered the first two phases (and 1,116 homes) BCEGI departed for “commercial reasons,” as Place North West reported. The developers are Scarborough Group, Metro Holdings of Singapore and Hualing Group of China.

Friends in the east

BCEGI’s 2013 debut in Greater Manchester was trumpeted at the MIPIM property convention in Cannes. The firm was rapidly associated with some monster projects. There were chats with Liverpool’s Mayor and Peel L&P about the Liverpool Waters and Wirral Waters schemes, with Manchester Airport Group and the city council about Airport City, and with a host of other local councils and private developers, with the Gary Neville-fronted St Michael’s development in Central Manchester top of the list.

Coming and going

It didn’t quite work out as expected. BCEGI has had some big wins, including the recent completion of Moda’s 35-storey Lexington at Liverpool Waters. With partners Cityheart, the company is progressing the £135m Galleries redevelopment in Wigan. But there have also been causalities. It would be tedious to run through the list of schemes BCEGI was associated with but is no longer, and unfair to pick on them in the fraught world of contracting. That it figured in the never-ending carousel of names involved in Airport City, which began with Argent and Carillion and now hangs on Columbia Threadneedle (Subplot26 October), is about par for the course.

Earning not spending

Contractors are not generally investors – not if they wish to remain solvent and in business. A few too many people got fired up by the China love-in during the Osborne/Cameron years and convinced themselves BCEGI were here to spend. It would provide the leverage to get some big schemes going, so the narrative went, and would draw in some big Chinese partners.

Opportunities missed

The truth is BCEGI were here to earn (about £220m-£300m in five years, it said at the time). In projects where it is more than just contractor –  recently at Wigan, for instance – funding has come from other sources, as Subplot reported (12 October). Chinese money is not involved. That bringing-in-other-Chinese-names thing didn’t go so well, either. TusPark, a Beijing-based science park developer with schemes in most major Chinese cities, was long-listed for the £2bn ID Manchester development being promoted by Manchester University. The firm was reported to be partnering with BCEGI, but neither won the gig.

Near miss

Whatever the reason, TusPark was a no-show and one mustn’t unfairly pick on BCEGI. Among the other big Chinese interventions that fizzled out was Sam Wa Resources Holdings involvement in Wirral Waters, announced in 2013 but soon gone without a trace. That one is worth googling if you’ve five minutes to spare.


None of which is to say Chinese money hasn’t mattered in the region. Plainly quite a lot of it has – via fractional sales – funded high-rise city centre residential development. Industrial & Commercial Bank of China was part of a consortium with lending approaching £300m to develop MediaCity Salford in 2019. Hualing Group has 25% of the 25-acre Middlewood Locks, with 1,100 apartments and much commercial floorspace still to deliver. Chinese-owned but Hong Kong-based Far East Consortium has been undaunted at Manchester’s 350-acre Northern Gateway.  Just a few days ago the city region’s Manchester China Forum launched a new series of conversations about sustainability, the trading relationship and tourism. A modest initiative, but it keeps up the momentum.

Too much, too soon

Real Capital Analytics reckons Chinese investors spent about £1.57bn on UK commercial property in 2020, making it their globally most-favoured destination. Trophy assets in London are the main target, the regions less so. The London spree hasn’t turned out as well as the developers hoped: over the years Chinese investors succeeded in bidding up prices to the point where they probably aren’t sustainable, and in the meantime face a funding crisis of their own (Evergrande and Fantasia have default red flags all over them, and they are not alone). The list of mainland China developers who have had a cheerful experience in the UK is short.

Why it’s over

The yet bigger picture is that China is turning inward once again: the Communist Party narrative today is less about global outreach, more about developing and controlling home markets. Restrictions on private investment overseas, and on the amount of debt Chinese developers can amass, also promise to curb spending on UK real estate. The Great Financial Wall of China isn’t yet an imminent reality, but the foundations are in place. There’s a lot of politics here, much of it not very savoury. Chinese investment in North West real estate has probably not been the game-changer some hoped in 2012 and 2013. The moment when it might have been now seems over.


Take out the trash week?

The moment of truth for the government’s levelling up agenda is about to arrive, as both Michael Gove’s white paper and the Integrated Transport Plan are published.

The end of the parliamentary term is a famously good time to bury bad news. The last few weeks before Christmas, with Russians massing on the Ukrainian frontier, the COP26 deal unwinding and yet more Covid anxiety makes now an even more distracted moment. If the government were expecting applause for the Levelling Up white paper and the Integrated Transport Plan they would probably choose another time to publish them, a time when lots of people might notice.

Forget it

The odds on the £39bn Northern Powerhouse Rail now making it into the Integrate Rail Review seem very long indeed, worse even than when Subplot reported the state of play a fortnight ago (2 November). The HS2 link from Birmingham via Crewe to Manchester looks safer. The Ashton to Stockport line will be re-opened, and Bolton to Wigan electrified, but the big rethink at Piccadilly seems to have vanished. Piecemeal improvements will be promised between Manchester and Leeds.

And yet maybe not

Subplot hasn’t yet found anyone of any political persuasion who doesn’t think this is ridiculous. However, one source, reading the weekend’s latest gush of leaks, suggested the best advice was to watch Yes Minister’s “Bed Of Nails” episode: as this comedy classic shows, leaking really damaging transport plans creates a backlash. We may find we’ve all been played.


The Levelling Up white paper is more complicated and harder to fathom. Meetings are happening and Mr Gove is asking lots of penetrating questions. Subplot has spoken to several property people that have been invited in for a chat, and none of them is clear which of these meetings and ideas contribute to the white paper, and which don’t, or what Mr Gove has in mind. Subplot can’t offer much clarity except to say that skills, devolution and town centres keep cropping up in the feedback.

Deja vu

Generally, though, the property industry remains worried this will be another rehash of the UK’s half-hearted regional policy, with old perennials like enterprise zones and city challenge-type competitions back in fashion, not because they work but because really significant intervention is difficult and costly. The growing consensus is that the white paper may not lead to a mighty new workstream for developers or consultants, at least not in the short term.


Mayfair comes to Widnes

Mayfair Capital bought the Wigan, Widnes and St Helens self-store facilities of Widnes-based self-store business The Storage Team. The 80,000 sq ft portfolio is the kernel of a new business platform for Mayfair, which acts as the UK asset manager for Swiss Life.

Self-storage is one of those handfuls of business sectors that thrives because it trades on human weaknesses: in particular, we horde stuff and postpone decisions. Get someone into self-store for two months and the chance is they will stay put for two years. Mayfair Capital – which, unusually among businesses called “Mayfair” is actually based in Mayfair – wants to get into this business and has bought out the folk who run Widnes’ Storage Team. It has already added three more units taking the total to more than 200,000 sq ft and plans to refurb two more opening next year. They promise a “portfolio of scale” fairly soon.

Ebay explains it all

This isn’t just about domestic self-storage – from renters, downsizers, and the habitually disorganised – although that is significant. The surge in online commerce has left a lot of growing businesses under pressure to keep large inventories. Garages and spare rooms are full, and self-store is a cost-effective alternative.

Local angle

A business that stands on both human frailty and red-hot trends is one investors cannot ignore. The North West is a market ripe for attention. Data from JLL shows the volume of self-store floorspace per head of population in the region is about on a level with the national average, but appreciably lower than it is in London (about 50% less).

Chaos out there

The trouble is the market is spectacularly fragmented. The Self Storage Association and Cushman & Wakefield together estimate there are now just shy of 2,000 self-storage ‘stores’ in the UK (1,997) operated by 998 brands. The entire market adds up to a shade over 50m sq ft, which is not a lot. Only Safestore have the kind of scale investors like (around 130 units nationwide), with Big Yellow and Access a long way behind.

The solution

Specialists have been arguing for years that consolidation among small-time providers was the cost-effective way to go. “With continued high barriers to entry and limited availability of sizeable portfolios across the UK, we have been a big advocate of a northern consolidation play for some time,” says Tom Caines, JLL director of alternative capital markets and an advisor to the Widnes team. Occupancy is at record levels, and turnover is shooting up (16% annual increase). Mayfair’s move won’t be the last as national money targets local North West operators.

The Subplot is brought to you in association with Cratus and Oppidan Life.

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There are many reasons why Chinese investment hasn’t materialised as expected, let me try to put a few of them across:

1) Unrealistic expectations – many UK projects just expects Chinese investors to through money to it. With Manchester being a relatively matured market (compared to African cities and South East Asian cities), the return a Chinese investor can get elsewhere is sometimes 5-6 times better.

2) Incoherent strategy – despite endless rhetoric about Northern Powerhouse and Levelling Up, it is often only the local governments and local businesses trying to push for growth. In China, when the central government developed a strategy to grow a certain region, they put transport, incentives, a vision and a loose framework in and allow the investors to fill in the rest. Chinese investors probably didn’t (and still don’t) understand it will take 30 years to build high speed rail where China got faster trains some five ten years ago.

3) Lack of cultural understanding – British business culture is relatively more transactional and Chinese business culture about relationship building. Until a Chinese investor feel they can trust their partners, they are not going to put any money on the table. Often British side think the Chinese side is just time wasting

4) Lack of ability to do DD – Some very senior business leaders in the region seem to be very stuck in their own impression of something. The Chinese community in Liverpool and Manchester are very loyal to their cities and many has called the Northwest their home, it is incredible businesses don’t use this rich and reliable resource when it comes to investment from China.

By Another Manc

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