The Subplot | Mayoral methods, investment zones, offices

Welcome to The Subplot, your regular slice of commentary on the business and property market from across the North of England and North Wales.

THIS WEEK

• Mayoral methods: are mayoral development corporations the future of high-profile urban regeneration?
• Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way

MAYORAL METHODS

Political ambition meets economic reality

Can mayoral development corporations deliver the economic transformation that city region mayors – and Michael Gove’s Levelling Up Department – want to see? Or is Stockport a standalone success?

City region mayors are under pressure to produce economic results, so they are throwing regeneration strategies at the wall to see what sticks. Greater Manchester, Liverpool City Region, West Yorkshire, South Yorkshire, and Tees Valley have gone down different routes. So far only one approach has been tried in more than one region: mayoral development corporations – bodies with statutory powers to guide development and investment in their areas. Is the experiment working?

This is tricky

Answer: it’s complicated, as a glance at the existing MDCs in Stockport and South Tees quickly reveals. South Tees MDC has spread much happiness so far. The touted £3bn opportunity at Teesworks attracted criticism, and is now enduring a government-commissioned review into how it shuffles assets around. The project itself has a long way to go: the Teesside Steelworks was demolished only a few weeks ago. The site is also a Freeport.

Stockport meanwhile is scooping up deals and developments like every day’s a birthday. The latest are a 15-storey apartment block and a commitment to another 65,000 sq ft of offices.

Why the contrast?

There are two theories. Theory one says it’s largely about the political context. In Teesside, the corporation is part of fierce party-political conflict, but in Stockport it was born in cross-party consensus. Cllr Mark Hunter, the recently reinstalled Lib Dem Leader of Stockport Council, says: “I’d reject any comparison with Teesside, but from the get-go – and never underestimate this – Stockport’s MDC had cross-party support, and that’s crucial for developers and investors. Without it they might have had second thoughts, but we all lined up behind it and that is a distinct advantage.”

Or maybe this

Theory two is that MDCs are simply not well adapted to monumental tasks like turning wastelands into economic powerhouses. What they are good at is promoting sensible opportunities to which the market was already rather taking a fancy. Put this another way, MDCs struggle to handle market failure on a large scale, but are ideal for managing market movement on a smaller scale.

Hunter isn’t so sure about this theory, but doesn’t completely reject it. “Stockport was already going places before the MDC – but what the town centre regeneration needed was a spark, which the MDC gave us,” he says. Hunter agrees infrastructure spending is key – and recalls the pledge to send Metrolink trams to Stockport.

Very rare

If MDCs had proved their value outside of a fairly limited set of circumstances – eg well-defined (in time and space), oven-ready commercial opportunities – we’d expect to see lots more of them in the North. But we aren’t seeing them.

Maybe Labour politicians can’t overcome long-held antipathy, but in West Yorkshire there are enterprise zones, of course, and individual projects in “spatial priority areas” but there’s no separate delivery vehicle or governance structure like an MDC. South Yorkshire is heading towards a government-backed investment zone for the Sheffield-Rotherham corridor but again nothing like an MDC. Liverpool City region has a Freeport and a management board to run it. Most telling of all, the Greater Manchester Combined Authority has no current plans to create another MDC (Subplot asked). The focus now is on Bury-Rochdale-Oldham’s Atom Valley and Tameside’s Ashton as “mayoral development zones.”

Instead, let’s try something else

Will mayoral development zones like Atom Valley make a good alternative to MDCs? Ashton and Atom Valley will have boards to run them, but it’s all very homemade: no separate statutory power is being used, the board has no special powers of its own, and when the project needs some legal or financial oomph the combined authority will provide it. The fact that landowners are already working with Bury, Oldham, and Rochdale councils – so this isn’t about marketing sites, it’s more about infrastructure – seems to be at the root of the choice to create something resembling a forum or clearing house, and not a delivery vehicle. Read the GMCA’s rationale.

Bit old-fashioned?

MDCs share the strengths and weaknesses of urban development corporations experimented with in the 1980s and ’90s. Creating a development corporation involves a statutory process leading to the conferral of independent powers from an ‘a la carte’ menu of options: planning, compulsory purchase, money, and so on. It is the exact opposite of light touch. In contrast, MDZs are whatever the mayor and council leaders want them to be. They are very 2020s.

Puzzling enthusiasm

Which makes it perplexing that Levelling Up Secretary Michael Gove has a retro-chic enthusiasm for development corporations – and has championed new MDCs in Hartlepool and Middlesbrough. If Cllr Mark Hunter is right – and political consensus is necessary for a development corporation to work – then the Middlesbrough plan got off to a rocky start. A lot of Labour councillors are unhappy. Is this why hardly anybody else in the North is creating MDCs or aspiring to do so?

Stockport begins to look like the exception, unless MDCs can transform Hartlepool and Middlesbrough soon.

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ELEVATOR PITCH

Going up, or going down? This week’s movers

Manchester city centre office take-up is going down, and the anxiety-laden world of co-development is heading the other way. Doors closing, going up!

Co-development

Are you familiar with the principles of co-development? You’d better be if you want to submit a successful bid for £80m investment zone funding, according to government guidelines published this week.

The technical note explains that this means “locally led” proposals where “co-development will be genuinely iterative.” This seems to mean councils suggest ideas, and then there’s lots of back-and-forth with Whitehall on whether the ideas are any good. Once something is agreed the government “will set broad but clear criteria and agree specific outputs and outcomes against which to hold places to account for progress.”

All in all, it reads like HM Treasury fears the whole thing is a value-for-money disaster waiting to happen, and a tight grip must be maintained. It also comes with a big warning: “We reserve the right to reject an investment zone proposal even after it has passed through all the gateways.”

The first sifting comes this summer to determine “if we consider agreement unlikely in good time ahead of the financial year 2024/2025.” Note the upbeat positive tone.

Manchester offices

Too soon to declare this a slowdown, but there’s a modest slackening of pace in central Manchester’s office market. Second quarter data from Manchester Office Agents Forum shows take-up down to 179,000 sq ft, from 211,000 sq ft in Q1 2023, and down almost a third compared with the same period last year (251,000 sq ft in Q2 2022).

None of this is a disaster, but bear in mind that in Birmingham things are heading the other way. After a few years of sluggish take-up, the market is on a charge. In a smaller market, central Birmingham also scored 179,000 sq ft in Q2 2023. The first half total was 331,000 sq ft, more than double the H1 2022 total and well up on H1 2021, and comparing well with Manchester’s H1 total of 390,000 sq ft. Straws in the wind, perhaps.