Oversea Investment Here Comes Brum | Text : Elizabeth Kerr | Photo : www.istockphoto.com | 34 Birmingham is beginning to demand — and receive — attention as more than just England’s second city Most of us might not know it, but the city of Birmingham brought the world to where it is today. Once the engine of the industrial revolution, a tradition of innovation and artisanal craft led to city’s economic boom and served as a beacon for industry around the world. Technological advancements we take for granted today — clinical x-rays, microwave ovens, the pacemaker, the postal service — have their genesis in Birmingham. Now an economically and socially diverse city of over one million Brummies and Britain’s second largest, Birmingham is starting to garner global investor attention. Hyperbole aside, new infrastructure and increased control over its own destiny have put it at the top of consideration lists. “Birmingham is at a transitional stage at the moment and it’s hugely exciting. We have massive infrastructure investment coming into the city in terms of transport; last year we opened a new £600 million central train station,” begins Andrew Dunbar, head of international relations for China for marketing the city of Birmingham. “We have some of the biggest financial companies in the world committed to Birmingham,” including HSBC’s retail banking, Deutsche Bank and RBS. “The city is not being seen as the manufacturing hub it was for many years but as a truly diverse economy.” Contrary to popular belief, it is Birmingham (with Brighton and Bristol) that has become the prime destination for inbound residents, not the better-branded Manchester. “We’re nearly three times the size of Manchester by population,” Dunbar points out. “Our household income is among the best in the UK. If you’re an investor, you’re looking for scale … Our economy grew at twice the rate of London’s in 2014.” Over 100,000 new residents arrived between 2003 and 2013, a growth rate of 10 percent, upwards of 6,000 of those each coming from London, which is just one hour away. The infrastructure Dunbar refers to includes airport runway extensions, increasing accessibility to the west coast of the US and China (Beijing and Hangzhou), and a high-speed rail link to London. “We’ll effectively be Zone 4 of the London Underground,” says Dunbar. The city’s central Curzon area near the new rail station and 140 hectares encompassing Digbeth and Eastside is set for one of the UK’s most ambitious urban regenerations, and 14 hectares at Smithfield will include a tech hub. All of it means the climate for investment in Birmingham is nearly ideal. One of Europe’s youngest cities is currently running approximately 80,000 units short of its supply demands, and it’s becoming a real option for London commuters and professionals with burgeoning, mobile careers. The potential tenant pool for investors is a strong one, as Birmingham is more cost-effective for blue chips by 50 percent per worker than London. “Then if you take the personal side of that into account, which is the personal debt of a mortgage, living somewhere nice and commuting then our offer’s even more attractive.” Dunbar’s goal is to educate investors at all levels on what makes Birmingham such a smart call, and developers and funds from Hong Kong and China are high on his list of institutional investors go complement perennial favourites from North America and other parts of Europe. It’s a two-way street though. “It’s not just about the capital investment and up front cost. It’s about the fact that Hong Kong and China have experience building on that scale,” says Dunbar, recalling that 80,000-unit shortfall. Associate Stuart Eustace at Knight Frank Birmingham agrees. “Interest in Birmingham from institutional investors and individuals from overseas, as well as domestic purchasers, is strong and has been for several years now. We have seen this interest drop slightly as we head towards the referendum, yet Birmingham continues to perform well when compared to the capital on price and yield.” City centre residential property capital appreciation has grown up to 15 percent over the last 18 months. And Eustace concurs on the city’s connectivity being one of its strengths. The eventual high-speed rail link will put London just 40 minutes away, and in addition to the runway expansion, Birmingham already offers direct connection to 140 destinations. The airport is only eight minutes from the city centre. “From Birmingham you can reach 98 percent of the UK population within four hours. From Birmingham airport you can reach almost 40 million people within two hours,” states Dunbar. “We are the logistics hub of the UK and becoming more so.” Still, individual investment comes down to supply. Birmingham’s affordable pricing and potentially sterling yields and capital gains put further pressure on that supply and according to Eustace, little in the way of significant new stock has come onto the market since 2008. “This will be eased slightly by late 2018/2019 as some of the new schemes currently in the market or about to be launched near build completion,” he says. “But with 1 million square feet of Grade A office space also under construction there are still doubts about the supply chain keeping up with demand for good quality city centre accommodation.” There are several private rented sector deals in various stages of planning under consideration, and if they are approved, Eustace estimates those projects could deliver approximately 3,000 units to the rental market through 2020. For buyers, however, existing residential stock in prime central locations ranges from roughly £150,000 to 1.5 million (HK$1.7 million to $17 million) — which represents excellent value for a strong Hong Kong dollar. Birmingham also has a healthy supply of industrial buildings primed for redevelopment. Lastly Dunbar doesn’t see April’s 3 percent stamp duty hike as a source of turmoil. Eustace echoes him, noting a buying surge ahead of the March 31 deadline, which has since calmed. The June 23 referendum on the UK’s place within the EU, conversely, is on everyone’s mind and is having an influence — investors are in wait and see mode. Though a consensus as to what the fallout would be remains unanimously undecided, the wisdom of investing in Birmingham is unchallenged.
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