The government’s commitment to wiping out regional inequality through its ‘levelling up’ agenda finally translated into action just after Easter, when it gave formal approval for construction work on the HS2 rail project to begin.
The prime minister’s plan to move the Houses of Commons and Lords to York has been rejected, but as a long-term investor in offices in regional cities, I find it difficult not to see the regions playing a stronger role post-Covid than prior as the twin economic engines of supply and demand gradually power up.
Our regional investment thesis is based on research showing steady and growing occupational demand prior to Covid-19, with few regional offices built in the past decade and existing stock converted to housing through permitted development rights.
Our forecasts suggest new regional office supply will remain constrained, while occupational demand will be driven by organic growth from local occupiers as well as multinational corporates recognising the benefits of ‘north-shoring’, with regional cities offering a highly skilled talent pool, top universities and research institutions, transport hubs, an attractive quality of life and significantly lower costs.
This attraction will grow as government and the private sector invest in infrastructure connecting the regions.
Key lesson for policy makers
One key lesson from Covid-19 for government policy makers and industry is the fragility of international supply chains and the importance of domestic self-reliance (think medical ventilators, critical medicines, protective equipment and essential foods).
This is likely to spur a new generation of innovative manufacturing businesses that will recognise the attraction of regional cities. Several of our existing tenants are preparing to scale up existing divisions or address new business opportunities.
The past few months have been particularly challenging for commercial landlords and tenants in the quarterly rent collection cycle. Our approach has been to engage with tenants in financial difficulty and seek mutually beneficial solutions – so far, it has worked, as we have collected 99% of our due rent.
In these uncertain times, landlords need to balance a duty of care to a wide range of stakeholders, including banks, equity partners and local communities.
While the next few quarters will be equally challenging, working together for the common good will ensure regional cities not only survive, but once again thrive from the opportunities presented in the recovery from this crisis.
Nadav Livni is the founder and managing partner of Hillview Group