Real Estate Investor Magazine South Africa February/March 2019 | Page 52

UNITED KINGDOM
As property investment in global primary
cities becomes expensive - property in
secondary cities is booming
BY LISA BATHURST
T
hanks to real estate outperforming most other in-
vestments for some time, the international property
market has become increasingly competitive. Most
investors have traditionally looked to investing in primary – or
capital – cities, leading to higher prices and lower yields in
these main areas. This has resulted in a booming property mar-
kets in secondary cities – like Manchester, Dublin and Porto.
Global property specialist, and founder of Hurst & Wills,
Lisa Bathurst, says international investors considering global
real estate have traditionally looked to the largest property
markets such as London, Paris and New York. “Over time
these markets have become expensive to access with limited
opportunities,” she says. “The high prices make them
unsustainable and this has forced investors and businesses to
look outside of these traditional areas. Consequently, secondary
cities are on the rise. These cities are yet to receive the same
investment as the primary city, but due to their potential for
growth, planning and development they often offer higher
yields and better investment opportunities,” she says.
Toulouse, Eindhoven and Manchester - all second-tier
cities in their countries - have outperformed their respective
capital city in terms of GDP over recent years.
Bathurst cites Manchester, a city Hurst & Wills has had
much success with, as a case in point. The UK government’s
Northern Powerhouse initiative was launched to boost the
economy in Britain’s Northern regions. The aim was to do
so by investing in skills, innovation, transport and culture in
the Northern British cities, especially Manchester, Liverpool,
Newcastle and Sheffield. There was also a move to decentralise
the significant powers and budgets directly to elected mayors,
ensuring that decisions in the North are made by the North.
The British Government and investors invested upwards of
£13 billion into Manchester’s’ transport, redevelopment and
education. Particularly into universities, creating centres of
excellence and putting the North on the map for science and
technology. This, of course, led directly to increased student
accommodation required in these Northern cities.
Bathurst says, “This resulted in Manchester being cited the
best city for property investment this decade, with substantial
growth, yields averaging 6%, and an impressive occupancy rate
of 96%. Manchester now retains 70% of its students after they
graduate, and the plan is to turn these sharp new minds into
the leaders of tomorrow.”
Business is booming up North, and the economy is growing
rapidly. Financial, creative, digital, research and development
businesses are moving to Northern UK cities. Manchester now
boasts the presence of 80% of FTSE 100 companies. KPMG,
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FEBRUARY/MARCH 2019 SA Real Estate Investor Magazine
Freshfields and DLA Piper, Ernst & Young, and PWC are all
based in Manchester, and the BBC and ITV have relocated to
Media City in Manchester, says Bathurst.
“The high cost of property as well as the higher life-style
costs in major cities is seen to have reached unsustainable
levels, making secondary cities more appealing in terms of
investment and living,” says Bathurst.
“With the relatively weak pound and euro, international
investors have been more likely to consider investing in real
estate as a way to diversify and achieve a global portfolio,
adding to the demand in primary cities. This is where
secondary cities offer opportunity, thanks to their relative
affordability and potential for growth and returns,” she says.
Secondary cities have the added advantage of being able to
be designed from scratch as part of greater masterplan. “This
means better planning that is inclusive of new trends. It means
planning around businesses, sustainability, infrastructure and
technology, resulting in vibrant, modern developments that are
very cosmopolitan and focused on lifestyle,” she says.
“Increased infrastructure investment, the creation of high-
skilled jobs and high levels of foreign direct investment are
all characteristics that define secondary cities,” says Bathurst.
Like Manchester, some second-tier cities already attract and
retain more educated people than their capital city. Some of
these cities even get an international positioning through the
development of specific industries or excellence centres.
JLL’s European City Momentum Index tracks a city’s
short-term, socio-economic and real estate momentum in
combination with measures of whether a city has the longer-
term foundations for success. According to this index, the top
12 European cities include Dublin, Manchester, Edinburgh
and Barcelona, all historically less-fancied residential
investment locations that are now going through something
of a renaissance.
“We advise our South African investors to look to
these more affordable secondary-city markets to hedge or
complement their current investments and grow their offshore
portfolio,” she says.
Bathurst says, “Hurst & Wills works hard to stay ahead of the
curve in trends and property hotspots, looking outside of the
conventional areas for worthwhile property investment. Aside
from the predictable cities, like London, we visit new markets
regularly to seek out new opportunities for our South African
clients that offer stable growth and returns.” 
SOURCE Hurst and Wills