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Manchester Is Coming On Strong As An Investment Location

Manchester Is Coming On Strong As An Investment LocationLocated in the occasionally bleak northwestern corner of England, Manchester has long been considered London’s poor sister. Historically industrial with major growth spurts in the late 1800s, the city suffered its shared of downturns (particularly under Margaret Thatcher in the 1980s) but slowly and surely it’s has been regaining its pride as urban regeneration continues. Now the lynchpin in the so-called Northern Powerhouse, Manchester is making an investment case for itself — one with potentially more room to grow that certain other cites in the UK.

Rethinking the North
Nestled between the Cheshire Plains and the Pennines, Manchester has a history dating back to the Romans and its metro area is currently home to 2.5 million people. Though perceived primarily as London’s working class counterpart, the city has contributed its share of cultural touchstones: actor Ian McShane, Marks & Spencer, Rolls Royce, professional football, Joy Division, masters of mope The Smiths, writer Anthony Burgess (A Clockwork Orange), Coronation Street and the computer (Alan Turing’s early work was at the University of Manchester) among many others. True, the city has yet to apologise for Oasis, but it can be forgiven in light of its other feats.

It could be argued that the UK is a single engine country; that London is the sole motor that moves its economy. Other councils would disagree, as does the central government, which has plans to spread the wealth around. A Transport Department report from March 2015, titled The Northern Powerhouse: One Agenda, One Economy, One North, laid out a clear plan for the area, with Manchester at the heart of it all. “We have a vision for a North with a vibrant and growing economy that builds on the existing strengths of Northern city regions, attracts and retains the brightest and best talent and attracts investment from overseas. The North could be one of the world’s most competitive regions, playing host to successful and innovative global companies, offering its leading talent to businesses and using its state-of-the-art transport connections to clusters of thriving businesses,” the report stated.

That idea for a pan-northern economy is gaining traction. The Northern Powerhouse also includes Liverpool, Leeds, Sheffield and Newcastle upon Tyne and transit infrastructure that will serve as its backbone will include rail connections in all directions (high speed and commuter services), smart ticket structures, airport connections and a comprehensive freight and logistics strategy.

“I think London has an absolutely fantastic brand. It has the ability to draw people that know absolutely nothing about it,” begins David Percival, managing director for China international business development group with Deloitte & Touche and chair of the Manchester-China Forum. “However an investment decision, in terms of a business, is to look beyond London. When you start to look at the numbers, Manchester begins to stack up. It does need someone to ‘go first’, but I think the move has started. London is very expensive and, let’s face it, overheating. I suspect Manchester ticks more boxes than any other city in the UK.”

Most of the investment into Manchester right now is institutional — like the new Chinese-built airport that’s officially underway. In addition to that and new rail links that will eventually connect with London’s Crossrail, the new BBC Centre will be in Manchester, instantly making the city a creative industries hub. The University of Manchester is already a well-established education and research centre. “The key to investment from China will be a global economy and Manchester being a good place to do business, the connectivity by rail into London and the excellent education options which feed into the business community,” says Percival. “Manchester University is the biggest university in Europe, with world-class facilities. Key sectors are being looked at, including life science, advanced engineering, automotive and aerospace, and companies are investing to be close to those. It’s also going to be a really nice place to live.”

Moving In
Naturally these incoming professionals need someplace to live, and that’s why Manchester makes a good investment at this stage. “The huge amount of investment into Manchester is increasing the demand for residential property, and unfortunately since the financial crisis in 2008 developers had to mothball many of their big residential towers,” explains Hamish Pound, investment manager at IP Global in Hong Kong. “Their planning permission collapsed, they had to reapply and now we’re not seeing enough supply coming back online to meet that demand. That’s why we’re really excited about it.” Pound calls Manchester an equal opportunity to London.

And Manchester’s relative bargain status makes it an appealing purchase. In prime London, prices start, on average, at £1,500 per square foot, and elite addresses can hit £7,000 and beyond. “In prime central Manchester we’re looking at anywhere between £300 and £500 [HK$3,600 to $6,000] per square foot. In London yields are 2 to 3 percent. In Manchester they’re about 5 or 6 percent,” argues Pound. “It’s much cheaper, you get much better yields, and capital appreciation, we think, will accelerate and match anything in London. The reason is because they’re affordable and there’s a strong pool of buyers.”

One of the newest projects to come on the market in Manchester is IP Global’s The Assembly by developer Renaker. Located between the university and the historic city centre The Assembly is a contemporary building that’s walking distance from most of the amenities residents — professionals and students — could want or need. It also sits near the 20-acre First Street regeneration, loaded with retail, dining and leisure facilities. The Assembly features 250 one- to three-bedroom units starting at roughly 550 square feet. Prices begin at approximately £185,000 (HK$2.2 million).

Some may argue that Manchester is too unpolished and too “edgy” to appeal to investors, but Pound disagrees. “Edgy for us isn’t necessarily bad. Anywhere that isn’t polished means there’s room for improvement and where there’s room for improvement there’s room for growth. Manchester does exactly that,” he claims. “The stage we’re in right now is the transformation from that slightly edgy alternative to something more mainstream.” Which doesn’t mean Manchester has lost the character that makes the city what it is; there are plenty of quarters and corners that remain funky. “If it was all polish I don’t think it would be as interesting,” Pound sums up.

Ultimately Manchester is setting itself up to be one part of a larger machine that will serve both residents and investors without being antagonistic. In other words, it won’t be Hong Kong versus Shanghai. “What we want to get away from is competition,” finishes Percival. “The policy of the Northern Powerhouse will not be competing, city against city. We’re trying to connect city to city so they become much more powerful than their parts.”