As featured in The Journal, 19 March 2019
Keith Taylor, managing director of UK Land Estates
Brexit is going to impact business in the region, but that doesn’t mean there aren’t opportunities.
We speak to a lot of companies that are being careful about investments and cautious in making commitments.
But that said, Brexit is being blamed for all the world’s ills.
The realities around the decisions of Nissan and Honda show there are many more market-specific issues at play.
In both cases the decline of the diesel car market and the faster than expected take-up of electric vehicles have been cited.
In UK Land Estates’ sector – commercial property – business has been good.
You could argue it’s a barometer sector for the shape of the wider economy.
Demand has been constant, kept up by an undersupply of high quality commercial property across the UK and the rise of retailers – particularly the online giants – that need warehouse and logistics facilities as well as localised distribution hubs.
A report from estate agents Savills showed 2018 saw the strongest levels of demand on record for industrial and logistics properties in the North East and Yorkshire.
In fact 9.5m sq ft of property – more than 1,400 football pitches – was taken up during the year.
The increase was down to a number of large deals – such as Amazon’s move to Durham.
But overall that level of demand suggests confidence in the market.
While some might be predicting that 2019 will mark the start of a downturn, with all challenges come opportunity to disrupt. It’s actually a very exciting time to be doing business.
The North East is well positioned to take advantage of uncertainty in the market.
Businesses that ordinarily would have plumped straight for London and the South East might pause to make sure their investment is working hard.
Our regional offer is strong. It includes high quality skills and property in highly connected locations.
Coupled with competitive living and business costs, it means all is to play for.
The last point is even more pertinent given the weakening of the pound since 2016, which favours our manufacturing exporters.
Demand for office space over the last two years has remained steady – in fact the amount of new regional office space hit a new high in 2018.
A report from Knight Frank last year showed flexible office space aimed at entrepreneurs and small businesses was becoming increasingly popular in Newcastle, and technology and telecoms businesses were fuelling growth in the market.
Further research from Knight Frank showed the North East has around 4.2m sq ft of commercial property space available – only 485,000 sq ft of which could be considered “modern”.
For the last ten years we’ve not seen significant industrial speculative building within the North East.
Intersect 19 – a UK Land Estates development – used North East LEP funding to create high quality manufacturing and distribution units in North Tyneside which have attracted manufacturing systems specialist Pryme Group.
Without grant support this type of development is not viable.
And for that to change we’d need much greater collaboration between local and national businesses.
UK Land Estates has successfully attracted multinational businesses because its estates sing. We’ve invested heavily in the environment, connectivity and property.
The region must do the same.
Disruption caused by Brexit could lead the way to significant policy changes to benefit the North East.
For example, Tees Valley Mayor Ben Houchen’s campaign to bring a “free port” to the region is the right type of thinking.
Through tariff and tax incentives the free port concept – of which there are already 83 operating in the EU – could help us capitalise immediately on increased international trade.
Respected businesses like car parts manufacturer ElringKlinger have already acknowledged it would give flexibility on importing and exporting goods.
It’s easy to see how the setup could encourage more manufacturers to move to the region to take advantage – particularly if the free port also comes with enhanced planning conditions.
The idea has earned support from across the political spectrum as Redcar MP Anna Turley has also called for the Government to make the free port a reality.
Another important opportunity is the Northern Powerhouse brand.
Love it or loathe it – it’s a golden opportunity to sell the North, including our region, to overseas investors. It’s encouraging to see some of the cynicism about the Northern Powerhouse being parked as leaders work on strengthening the northern voice in demands of better transport investment and enhanced powers.
At the recent Great Northern Conference in Leeds, Siemens UK chief executive, Juergen Maier said confidently the Northern Powerhouse could lead the next industrial revolution – but it requires a clear and compelling strategy.
That’s where the collaborative effort is needed.
The North East Local Enterprise Partnership’s own Brexit study shows there are opportunities in reducing administration around funding programmes.
We know the North East has the right ingredients to achieve post-Brexit success.
For workers, it’s much more affordable than London and the South East. Add that to a great living environment that boasts stunning countryside and vibrant towns.
For businesses we have a wealth of highly skilled workers, great colleges and universities providing first class research and training and supply chains investing in innovation.
It all adds up to a great investment prospect.
Since Lehman Brothers failed we’ve lived in fascinating times for business.
There is a myriad of new trends and issues going on and you need to be agile to negotiate them.
Right now we see international companies including the likes of Dutch transport giant Mammoet and German commercial vehicles firm MAN investing in our region – drawn here by the excellent skills and connectivity on offer.
This month property professionals from across the North East will meet with developers, agents, financers and investors from across the world at the MIPIM property conference.
With Brexit just around the corner we need to make sure more companies like Mammoet and MAN commit to the North East.