The COVID-19 pandemic may have boosted the Government’s regional rebalancing strategy, according to the UK chief economist at global commercial property services company Colliers International.
Speaking at a South West & Bristol Regional Economic Briefing webinar, the first of a series of events around the UK regions focussing upon his paper ‘Regional Revolution III: Rise of Cross Border Investment’, Dr Walter Boettcher said: “Regional rebalancing that lies at the heart of Government economic planning may have just received an unexpected, but decisive boost.”
He explained that while many investors viewed the coronavirus crisis as a temporary interruption of pre-pandemic trends, others perceived ‘the beginning of a large-scale change in the patterns of commercial activity and use of real estate”. Some central London occupiers may seek to grow their existing regional footprints or establish a new regional footprints altogether, in order to reduce the density of their existing office use.
Dr Boettcher, whose paper explores cross border investment into the UK regions and possible future trends, told the webinar audience that while Government investment in the regions would be an essential part of the Covid recovery, this could be ‘supercharged’ if supplemented with private investment, especially cross border investment. Furthermore, the positive signs are already evident.
He highlighted the fact that the COVID-19 emergency measures included a substantial fiscal stimulus designed to work in tandem with monetary stimulus, and that this was in addition to the £600 billion of investment over five years in the regions announced by the Government shortly before the pandemic reached the UK.
“In net terms, public investment is set to be the highest since 1955 in real terms,” he said, although he cautioned that until the delayed National Infrastructure Strategy was published, details of capital allocations would remain uncertain.
Dr Boettcher added: “Let us hope that the resolve to push these plans ahead is not dissipated by any further delays. In many ways, the years of austerity were years of lost opportunity. Now is the time to push forward. Regional Revolution!”
In his paper ‘Regional Revolution III: Rise of Cross Border Investment’, Dr Boettcher pointed out that prior to the coronavirus pandemic, the UK regions were attracting increasing attention from commercial property investors, and in particular cross border investors.
He said: “In the early to mid-2000s, regional investment was the province of large UK pension and insurance funds, as well as the odd German fund, but by the late 2010s, the regional investor base expanded to include a wider range of investors, especially cross-border investors.
“While the COVID-19 pandemic suggests that these regional gains could be reversed as transactions decline and risk perception rises, in fact, the regions are well positioned for a post-pandemic recovery.”
Dr Boettcher added: “Clearly, UK government resources are limited and the scale of the necessary investment required to ‘rebalance the UK economy’ and to ‘improve productivity across the regions’ goes well beyond central government’s financial capacity to deliver.
“The heavy lifting in the regions, as contemplated by central government, can only be achieved in tandem with cross-border investors and UK institutions who have the required depth of capital. The task of central government is one of direction, seed funding and focusing on providing an adequate infrastructure framework to support the necessary development.
“Perhaps the most crucial and indispensable task is left to local governments and, especially local stakeholders, to envision and bring to market projects of sufficient scale to attract investors and to enable their engagement. It is in this way that the UK regions will benefit from the much vaunted regional rebalancing, that is at the least, one generation overdue. Furthermore, general investment in the UK, unlike Government investment, is not a zero-sum game. Given the weight of global and domestic institutional capital, there are sufficient resources to float all the boats across London and the UK regions without any region being left behind.”
Richard Coombs, Bristol-based National Capital Markets director, who hosted the South West & Bristol Regional Economic Briefing webinar, told the webinar audience that the Bristol Arena project illustrated the importance of partnerships between the private and public sectors, and also of cross border investment.
He said: “The island site where the Arena was to go is a good example of public-private partnership, with Bristol City Council teaming up with Legal & General to make possible a major redevelopment of the five-acre site, to provide 500 new homes, a conference centre and a hotel.
“Meanwhile, the new location for the Bristol Arena, the former Brabazon hangar at Filton is to be developed by Malaysian investment company YTL, with South Gloucestershire Council and Bristol City Council jointly responsible for infrastructure improvements in the Filton area.”