In recent years, increasing numbers of businesses are upping sticks and relocating their operations to UK cities outside of London. In a trend known as ‘northshoring’, companies are moving to northern cities such as Manchester and the Midlands, with the aim of trimming operational costs and finding new ways to maximise spending power. Several FTSE companies have resolved to northshoring at least a portion of their business, with Brexit uncertainty likely acting as a catalyst to their decisions.
Firstly, which businesses have moved where?
Source: Hurst & Wills
These moves have had a significant impact on regional property investment and house price growth.
How is northshoring impacting residential investment?
Regional cities such as Liverpool and Birmingham have seen office space development and sales surge over the last few years. In Manchester, more than 1.5m sq ft of office space has begun construction while London falls behind, according to Deloitte’s Regional Real Estate Crane Survey 2018. Naturally, the significant uplift in commercial development and coinciding population rises in the regions mean that the demand for quality accommodation is unprecedented.
Overseas investors have paid close attention to the economic shifts in regional cities – a survey by Property Wire states that “almost 70% of investors agreed that rental yields in northern cities are greater than London, with over a third of investors revealing that they choose UK cities based on where capital growth is strongest”.
Broader development is taking place in UK regional hubs, gentrifying areas with new bars, restaurants, cafes and shops, which in turn bolster the attractiveness of regional city living to dynamic young professional audiences. Apartment prices in Manchester increased 52% in the six years between November 2011 and 2017 and show no sign of slowing, making residential investment an appealing prospect for both local and global investors.
Buyers are recognising the capital growth potential in Manchester and other regional cities. Competitive pricing and higher anticipated yields of 6% at developments such as The Hallmark, Manchester and proven rental yields of up to 7% in Liverpool at sites like Orleans House are tempting buyers away from the capital and further fuelling regional growth.
Why has northshoring soared in recent years?
Businesses and people who are feeling the pressure of London’s high property prices are moving elsewhere and London’s price growth is stalling, making property investment in the capital less attractive.
In an article for Property Week earlier this month, Johnny Caddick, director of Caddick Group, observed:
Regional cities are successfully creating their own propositions to attract serious investment and retain graduates. Recent devolved powers from central government mean this is only the start. Already we’ve seen a trend for northshoring [with big name businesses solidifying the movement’s popularity].
Manchester is the most popular choice for businesses moving out of London. It is the fastest growing UK city with a population increase of over 50% between 2001 and 2011, 80% of FTSE 100 companies have offices there with more expected to come and it is second only to London in terms of student retention at 51.5%.
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