Final Draft_Britain's Valuable Property CREdentials - BPF Report_withAllEdits

TOSCAFUND December 2015
Authors: Dr Savvas Savouri, Toscafund Chief Economist, and Professor Richard Jackman, London School of Economics
Research Assistants: Boris But, Nas Christodoulopoulos, Katie Orlandi and Vikram Lopez Y Royo
BRITAIN’S
PROPERTY CREDENTIALS
A British Property Federation commissioned report
prepared by TOSCAFUND

TOSCAFUND BRITAIN’s PROPERTY CREDENTIALS
2 December 2015
The report was commissioned by the British Property Federation (BPF) and prepared by
Toscafund Asset Management LLP (Toscafund).
The BPF is the membership organisation for the UK real estate industry. It represents all those involved in real estate
ownership and investment. It works with Government and regulatory bodies to help the real estate industry grow and
thrive, to the benefit of its members and the economy as a whole.
Toscafund, based in London, is a leading multi-asset management firm founded in 2000. Toscafund currently manages
over $3bn on a fully discretionary basis in a variety of strategies that include Commercial Real Estate.
Authors
Dr Savvas P. Savouri
Chief Economist – Toscafund Asset Management
Since 2008 Savvas Savouri has been a partner and chief economist at Toscafund Asset Management, having headed
economics and strategy departments at a number of investment banks. Before entering financial services Savvas taught
at the LSE, Oxford University and Moscow State University. Savvas was awarded a doctorate in Econometrics and
Mathematical Economics from the LSE where he also obtained masters and bachelor degrees in the same discipline.
Professor Emeritus Richard Jackman
Professor of Economics – London School of Economics and Political Science
Professor Richard Jackman joined the LSE teaching staff in 1968 after his MA in Economics from Cambridge University.
Richard has co-authored four books and has over 80 articles in refereed journals. During his time at the LSE, Richard’s also
been a visitor Professor in Economics at the University of Iowa and worked as a consultant with the World Bank. He has
worked with the London Boroughs’ Association (now known as London Councils) and the Department of the
Environment in connection with its studies on local government finance.

3 December 2015
Executive Summary
We believe that the conventional ways of quantifying Commercial Real Estate (CRE) are ineffective, and that the
‘economic’ definition of CRE is wider and more complex. Nor is it correct to identify CRE with the Blue Book category
‘non-residential property’ as some non-residential property is not commercial, while some CRE is classed as ‘other
structures’.
Our current estimate of CRE is £1,662bn, which is just over 20% of net wealth, in 2014.
In this report we define CRE as property whose main function is to generate income for its owner. Therefore we
consider the Private Rental Sector (such as buy-to-let, student hostels, etc) as an integral part, contributing £42bn
market rent in our estimate for 2014.
According to conventional national income accounting procedures, the contribution of CRE to GDP is measured by
the rent (actually paid or implicit) generated by such properties. This amounts to around £94bn or 5% of GDP in
2014.
For comparative purposes we have included the yield for 10 year Gilts, the most conventionally used risk-free or
swap rate for CRE.
Chart A: Capital Values of CRE and PRS Chart B: Yield comparison between CRE and 10 year Gilt
Source: VOA, Scottish Assessors (Scottish Government statistics), IPD (MSCI), DCLG (ONS), Stats Wales, NI Housing Executive, Wriglesworth Consultancy (part of Instinctif Partners), LSL
Property Services, Bloomberg, Toscafund
Whilst all this income percolates down to households, much of it is hidden rather than apparent. For example, most
pension funds are invested mainly in equities, but the value of equities derives to a large extent from the CRE that
they finance.
The main contribution of CRE to economic welfare lies not in its contribution to GDP, but in its contribution to the
built environment, to employment and to economic development.
The growth of real wages depends on the growth of capital, of which CRE forms a large part, at least keeping pace
with the growth of population. This requires substantial investment in CRE over the coming years.
The greater flexibility of CRE means that it is no longer so much of a barrier to the revival of depressed regions: new
industries can flourish in premises vacated by the old.
CRE is much more heavily taxed than other factors of production or types of wealth. One consequence of this is that
some buildings are left empty or remain in unproductive use. Notably, the tax on CRE is much higher than the tax on
dwellings, in particular owner occupied housing. This leads to a correspondingly enormous misallocation of savings,
which is poured into domestic housing rather than productive investment.
0.0
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2005 2009 2010 2011 2012 2013 2014
Trillions
Commercial real estate Private Rented Sector
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2005 2009 2010 2011 2012 2013 2014
%
CRE yield 10 year Gilt yield

4 December 2015
Preface
In the second part an orderly sequence is followed as we try to establish quantitative values for what Britain’s Commercial
Real Estate (CRE) means to the economy. Ahead of that, Part 1 of this research paper covers an assortment of topics,
issues and themes relating to the UK’s CRE. Since the section's elements do not flow in a sequential narrative we have
opted to present the contents page rather differently from the convention, using a circle rather than a table (we return to
tradition in Section 2).
The use of a circle makes the point that whilst sections can indeed be followed around the ‘circumference’ in THAT
sequence, readers may wish instead to shift across the diameter, or indeed travel to the centre and then move radially in
whichever direction their thematic interest may choose to take them.
The over-arching point of Section 1 is that the UK’s CRE is a cornerstone (sic) asset, not a sector per se, as it is all too often
narrowly seen. Just as our manufacturers and exporters demand built space to function so to do our business service
sectors. For its part agriculture has been transformed by CRE, green houses amongst an assortment of buildings which
have improved our productive capacity and freed up labour and land for other productive uses, for which property once
more has been an essential element. Across in residential markets the expansion once more in the Private Rental Sector
(PRS) is contributing to the UK having a more mobile labour force with all the positive economic and indeed social
externalities which follow from this. As well as we perform productive functions CRE is essential for us during recreational
time, with of course recreational time for some productive and commercial valuable time for others; our vignette on the
use of CRE for the manufacture of goods facing one another on our contents clock.
To reiterate CRE is a crucial factor input without which the UK economy could not possibly function, and without whose
continuous development the UK would not have the economy it has today. This is not hyperbole but an irrefutable
axiom. Moreover this is not to say that certain sectors and industries do not directly ‘serve’ the UK’s commercial space;
construction and maintenance activity, building product making, property services and agency sectors, just a handful. In
fact were we to collect together these, and other sectors which are recognised as serving the UK's CRE, we would come to
the ‘conventional’ conclusion its CRE only somehow represents a rather modest c2% of the UK’s GDP. The reality is that
were one to fully account for all its tangible contributions, the figure would, in fact, rise to over 5%. Moreover, even this
figure does not do proper justice to the wider economic importance of CRE. The crucial point is that NO other sector
contributing to the UK’s GDP could function without the nations CRE which also contributes to large parts of the UK
balance sheet. To repeat we should cease to view CRE as a sector and instead honour it as one of the pillars (sic) of the UK
economy. It is a crucial factor input working alongside our nation’s human capital. Indeed, we should see property as we
do labour as over-arching all elements of the economy, not a particular ‘segment’ within it.
In Section 2 the point is made more formally that the ‘economic value’ of CRE should be viewed from the perspective of it
as a factor input and provider of balance sheet wealth and income extensively across the UK. This first section is instead
made up of vignettes relating to CRE, presenting ideas surrounding its often overlooked contribution to our lives and
how exactly it impacts us. It also tries to expose misunderstandings which often arise concerning the contribution of CRE.
Section 1 is in no way exhaustive of these, simply illustrative. And to repeat the topics, issues and themes covered in
Section 1 are not presented in a top-table manner, where sections are sequenced in some inviolate order, but as a ‘round
table’, where all face one another as complements and part of a whole, or put different illustrating that its CRE is not
simply part of the UK's economy but the latter is nothing without it.

5 December 2015
Contents
Introduction 7
Part 1. Evolution of Britain’s CRE sector 8
1.1 The externalities (social benefits) of Britain’s CRE 8
1.1.1 The ‘direct’ externalities of CRE 8
1.2 Infrastructure and transport 9
1.2.1 Construction and the Growth of GDP 9
1.2.2 Bringing derelict CRE back to economic life 10
1.2.3 Britain’s CRE is better connected 11
1.2.4 King’s Cross Central: A case study in inclusive regeneration 13
1.2.5 CRE: Walking on water 14
1.2.6 CRE flying high 15
1.3 Offices and IT 16
1.3.1 CRE in the clouds 16
1.3.2 CRE and the internet 16
1.3.3 Google: search for a real presence 17
1.3.4 Sometimes developing Britain's CRE does not quite reach The Pinnacle 17
1.3.5 Global purpose & competitiveness 18
1.3.6 A real second home in Britain 19
1.3.7 A Central Point: CRE unchanging on the outside but evolving within 20
1.4 Educating CRE 21
1.4.1 British universities 21
1.4.2 An educated CRE case study: The University of Buckingham 21
1.4.3 Britain's Real Commercial Education Industry 22
1.4.4 Education, Education & Education 23
1.4.5 Case Study: Students, UNITE-d 23
1.5 Great retail developments 24
1.5.1 The Amazon story: Reading between the real estate lines 24
1.5.2 CREacting commercial space in a flash 25
1.5.3 All change: The moving story of Aldwych Station 25
1.5.4 CREating new Markets from old 26
1.5.5 Gateshead's MetroCentre; A Real development turning point 26
1.5.6 Ring in positive change: Birmingham's Bull Ring Centre story 27
1.5.7 High street Real estate, the butcher, and baker and... 28
1.5.8 Betting on a continued real estate need 28
1.6 Hospitality & Leisure 30
1.6.1 Center Parcs building its fifth British resort, creating 2,700 jobs 30
1.6.2 Licensed to change 30
1.6.3 Hotels: A home from home 31
1.6.4 Who could have accurately pictured that? 31
1.6.5 Britain's built ReCREational space 32
1.6.6 A Real Olympian effort 32
1.6.7 Giving CRE a Sporting Chance 33
1.6.8 Britain’s winning CREw 34
1.7 Private Rental Sector 36
1.7.1 Britain's Modern Work Houses 36
1.7.2 The welcome growth of commercial residential (née private rental) 37
1.8 Manufacturing CREativity 38
1.8.1 Real estate’s Food for thought 38
1.9 Flexibility 38
1.9.1 Property arriving from above 38
1.9.2 Protean property 39
1.9.3 Our future is in the clouds but still very real 39
1.9.4 The regeneration of Nine Elms & Battersea: a case study in regeneration and relocation 40
1.9.5 Time to open up Britain's CRE 41
1.9.6 Mixed and change of use property: all for the better 41
1.9.7 Productive Property 42
1.9.8 Self-contained property 42
1.9.9 Moving buildings: It's elementary 43
1.9.10 Britain's sustainably eco-friendly built-scape 44

6 December 2015
Part 2. Analytics of Britain’s CRE sector: concepts and numbers 45
2.1 Definition and Value 45
2.1.1 Definition 45
2.1.2 Some taxing concerns over CRE taxonomy 46
2.1.3 Valuation 47
2.2 Rental Value (Contribution to GDP) 49
2.2.1 The Value of “Non-Domestic” CRE 49
2.2.2 The Value of Private Rental Housing 51
2.2.3 CRE and the generation of household income 53
2.3 The Asset Value of CRE (CRE as an investment class) 54
2.3.1 The value of Britain's CRE: AcCREdited and AcCREtive 54
2.3.2 The Asset Value of CRE 54
2.3.3 CRE as a proportion of national wealth 56
2.3.4 Who owns Britain’s CRE? 58
2.3.5 Ownership – the significance of foreign capital 59
2.3.6 Understanding the reason for foreign capital 60
2.4 Employment 62
2.4.1 A CREator of jobs 62
2.4.2 ‘Multiplier’ externalities 63
2.4.3 The employment value Britain's CRE construction 64
2.5 CRE and Taxation 66
2.5.1 The burden of taxation on CRE relative to other factors of production 66
Appendix 1 – England & Wales rating list, VOA, as of Sept 2014 67

7 December 2015
Introduction
In this report, we argue that commercial real estate (CRE) makes a great, if not always fully recognised, contribution to
Britain’s economy, its environment and to the well-being of its people. But that contribution could, and should be
greater. The report identifies some factors hindering CRE from achieving its full potential, in particular fiscal arrangements
that discourage investment and thereby reduce its contribution to economic activity and growth.
We define CRE as property that generate income for its owner. This is not, however, the only function – on the contrary,
CRE makes an important contribution to the environment, to employment and to economic development – but we
suggest that without income generation real estate cannot be defined as ‘commercial’. This definition, based on function,
is wider than those sometimes used and includes, for example, property such as airports and buy-to-let housing. We
argue that the best measure of the contribution of CRE to GDP is the market rent generated by commercial property. In
2014, this amounted to just over £94bn in the UK - about 5.4% of GDP, or around one-quarter of the contribution of ‘non-
human’ inputs to national output.
But the economic value of CRE is not just an input to current production; it also constitutes a significant component of
marketable wealth. We estimate the current market value of CRE at around £1,658bn, which represents 20.6% of total net
wealth. Often, commercial development is financed through debt, equity or other financial instruments that are
themselves held by pension funds, banks or other intermediaries, so the claims on the income generated by CRE are
much more widely dispersed than might otherwise be expected.
Whilst income generation is a crucial part of the puzzle, CRE brings value in other ways too. Our towns and cities are
largely made of CRE, and confer wider benefits on the community. These wider benefits are, known as ‘externalities’.
There are other effects on the wider economy too. The construction and maintenance of CRE is a significant sector of
economic activity that contributes to the range of employment opportunities. CRE also contributes a substantial amount
of tax revenue. Indeed this report argues that, being immobile, CRE is an easy target for taxation and in consequence is
overtaxed relative to other factors of production.
The report is structured as follows. Part 1 illustrates CRE’s contribution with some striking examples taken from different
sectors, some better known such as the great developments in retail, hotels and leisure, but also many less obvious
where CRE has played a crucial role including transport and infrastructure, professional services and IT, universities and
private rented housing. From this wide range of examples we draw out a number of themes, for example flexibility,
allowing buildings designed for one purpose to be easily converted into another.
Part 2 turns from illustrations to statistics. We provide detailed information and sources for the estimates and claims
made in this introduction. We set out our definition of CRE and show how it can be measured using Valuation Office
Agency data on rateable values and housing data, and indicate why it differs from measures used elsewhere (for example
the Office for National Statistics’ Blue Book category of ‘non-residential buildings’). We derive estimates of the asset value
of CRE from these rental values. We note that despite all this, remarkably, the value of CRE has lagged behind that of
other assets such as dwellings. So lastly in this section we investigate the burden of taxation on commercial property. In
the UK the tax system is somewhat unbalanced and imposes higher rates of taxation on commercial property than on
other forms of investment, in particular owner-occupied housing (which now constitutes the bulk of the nation’s stock of
wealth).

8 December 2015
Part 1. Evolution of Britain’s CRE sector
1.1 The externalities (social benefits) of Britain’s CRE
Let us begin by considering forms of property that, whilst only existing to facilitate the flow of people and materials –
bridges and tunnels – are a crucial built part of Britain’s commercial economy. After all, there can be no denying these
built features contribute towards GDP and that without them GDP would be materially lower, but by how much? The
answer lies in the realm of measurement of which good Jeremy Bentham termed felitous calculus. Before we begin our
attempt to quantify the value of property, we must illustrate its essential worth.
1.1.1The ‘direct’ externalities of CRE
Whilst the concept of externality is widely recognised, there are disputes as to what should be included, and how such
elements should be measured. Our focus in this section is on the latent economic value of built infrastructure, and in
particular, the role of CRE.
There is considerable debate surrounding the cost-benefits of HS2. Whilst its critics argue that HS2 cannot possibly justify
the economic and environmental costs, its supporters present an argument based on the benefits of improved
connectivity and capacity, externalities which whilst impossible to precisely measure, will prove considerable all the
same. The argument behind HS2 is that the whole rail link, including new stations, will produce both a direct commercial
return along with much more important externality benefits. We will look at the HS2 project later in Part 1.2.3.
Externalities exist where some activity leads to direct benefits to some third party from which the person providing the
activity cannot or does not receive any payment, such as a silencer fitted to a car exhaust where the manufacturer cannot
recoup the cost from all the people who experience the less noisy environment. When considering CRE, there are two
major types of externality, which might be termed ‘amenity’ externalities and agglomeration externalities. Amenity
externalities exist when CRE creates a more pleasant built environment and thus enhances the quality of life for people
living and working in that area. These externalities are difficult to measure but clearly important: every developer knows
that local planning committees require a high quality of design in any new development and indeed the visual impact of
new buildings can play an important role in the regeneration of an area. Of course, the developer can hope for a higher
price for a more attractive building but much of the benefit accrues to local residents and those working in the area, who
cannot be made to pay for it. In Part 1 of this report we describe many examples of commercial development leading to
the regeneration of an area, from the refurbishment of the Victorian station hotels at King’s Cross and St Pancras to
Birmingham’s Bullring.
Externalities can also be created through relationships between firms rather than from firms to consumers. These are
known as ‘agglomeration economies‘, they exist when the productivity of one enterprise is increased by the proximity of
others. An example near to hand is London’s ‘silicon roundabout’, at the junction of Old Street and City Road. As with
California’s ‘silicon valley’, having a large number of small firms enables each to benefit from the ideas and developments
of others so that all are more productive but none is able to charge for the benefits it provides for the others. London
provides many examples of agglomeration of more traditional professional services also, such as the lawyers in the Inns
of Court.
We can also identify ‘co-ordination externalities’, which arise when businesses provide complementary services near to
each other, for example coffee shops and cafes located in shopping streets or in retail parks. Each contributes to the
overall experience, the cafes benefit from the trade brought in by shoppers, while at the same time providing rest and
refreshment to enable the shoppers to keep going for longer.
In all these cases, the economic contribution of the particular property may exceed the rent the landlord can charge.
Large-scale developments can sometimes ‘internalise’ a part of these externalities, most often however, it is not feasible.
In some cases, there will be insufficient investment by the developer in activities generating positive externalities
because much of the benefit goes to third parties. With commercial developments, much of the potential development
gain in land values can be effectively taxed away by planning authorities wanting to ensure as large as possible benefit to
the community as a whole from the commercial investment.
While specific examples can convey the importance of these effects, actual measures are more difficult to obtain. One
approach is to measure the appreciation of local property prices, in particular of housing, on the basis that if a
development improves an area people are willing to pay more to live there. Again this has to be done on a case study
basis.

9 December 2015
1.2 Infrastructure and transport
Before looking at examples of CRE, we must look at the physical and organisational structure of the UK. Without
investment in this key area, there will be bottlenecks as the growth of UK’s production and distribution of goods and
services increases. In this section, we consider transport hubs and their networks.
1.2.1Construction and the Growth of GDP
Economic growth depends on investment but investment takes many forms, not only physical capital but also research
and development and the education and training of the workforce. Within tangible physical capital we see investment in
plant and machinery, vehicles and infrastructure as well as into commercial and residential property. After years of
stagnation following the financial crash of 2008, growth has returned to the UK economy and with it, we will argue, the
need for greatly increased investment in CRE. Consider just one example: airports. Most major airports in the UK are now
privately owned (albeit heavily regulated) and generate profits for their owners. The VOA rateable values for England &
Wales for airports come to £0.5bn (0.8% of the total, current prices, as of September 2014). According to our definitions
we have characterised Britain’s airports as elements of its CRE asset base. The gross income they generate derives from
charging airlines for landing slots (and in charging retailers for retail sites in the terminals) and their contribution to GDP
consists of these rents or charges less any material input costs (such as heating and lighting). In all these respects they are
equivalent to other commercial companies and thus properly part of CRE.
And clearly airports play a crucial role in economic growth. Every day we hear from business leaders how economic
growth is being held back by lack of airport capacity and this is even though passenger figures for Heathrow and Gatwick,
for instance, are regularly breaking new highs. In fact, between them these airports catered for well over 110m
passengers in 2014. Whilst terminals have enjoyed considerable investment, runway capacity has been slow to increase.
Rising passenger numbers are edging Britain’s main airports towards their capacity, with the Department for Transport
forecasting that London’s main airports could be “full” by 2025.
Keenly-interested observers such as the CBI suggest that lack of investment in runway capacity has restricted growth in,
for instance, Heathrow (53%) to one-third the rate enjoyed by Paris Charles de Gaulle (142%) over the past 20 years, and
slower also that the 84% recorded by Frankfurt. The inference is that failure to increase airport capacity damages Britain’s
competitiveness. The CBI cited a survey of large multinationals in which 85% considered air connections to both
established and emerging markets a significant factor in their decision over where to invest.
The 2014 CBI report which examined airport activity warned “Our network offers spare capacity where there is little
demand [for flights to emergent nations] and no capacity where demand is greatest”. It concluded that “a hub airport
with spare capacity offers the greatest chance of new routes to emerging markets. UK businesses want to see additional
hub capacity prioritised as the best prospect for supporting new trade”. The CBI was categorical in its statement that once
the Davies Commission had published their report, “it is imperative that the government of the day acts immediately to
create the necessary planning policy statement and statutory instruments to get building by the end of the parliament”.
Addressing the Commission directly, the CBI report pleaded “it must balance the economic imperative with
environmental considerations and logistical realities to serve the government with a politically deliverable solution”.
For an open-economy capitalising on mobility into and out of it by people and goods airports have, in our view, to be
considered crucial factor in economic growth. In the UK, investment in terminals must now make way for investment in
infrastructure, that is runways, to raise capacity for international travel.
While airports are a clear example of the importance of one type of CRE to economic growth, the commercial sector as a
whole is sometimes characterised as being rather less exciting. Of course people need buildings to work in, but some say
new technologies can manage without it, or at least diminish its importance. In our view this conclusion is misleading.
This report includes examples, from cloud technology to the Post Office, where technological change has led not to a
reduced demand for CRE but a change in the way we use it, the technology leading to new services and different types of
use and with them a demand for different types of CRE.
But nor should one ignore the continuing demand for traditional types of CRE such as offices, shops and hotels. We have
already seen that CRE accounts for a large proportion (more than a quarter) of the capital stock, and leaving aside
dwellings, non-residential CRE accounts for an even larger proportion (close on 30%) of ‘commercial capital’. As the
quantity and quality of CRE improves, work will become more productive and job opportunities, and wages, will increase.
The UK economy is expected to experience growth in the labour force over the medium term; only if this is matched by a
more rapid growth in other inputs including CRE can wages grow and employment opportunities improve.
Our leading example though carries a warning sign. The growth of airports has been restricted largely by planning
controls, which are of course understandable in the case of airports because of their adverse environmental effects (noise
and air pollution). Equally for many other types of CRE, the environmental effects are positive and indeed a major part of
the contribution a new development makes to economic welfare.

10 December 2015
1.2.2Bringing derelict CRE back to economic life
Its new name is no accident, for the St Pancras Renaissance Hotel (which opened its doors in 2011) has delivered an
economic boost to an area blighted for decades because large parts of its real estate remained derelict. Whilst this
particular Renaissance is one of many which have been seen over time, Britain is still home to a great deal of once
economic active real estate which is now moribund. There is great potential for such assets to be brought back to
commercial life and to deliver economic benefits through restoration and then subsequent operation.
The Renaissance has been an impressive restoration of The Midland Grand Hotel designed by George Gilbert Scott and
which fully opened in 1873, only to close in 1935. From 1935, until work began on its revival, the building was largely
derelict and if anything an economic liability. Now with its 211 rooms, 34 suites, numerous restaurants and bars, it is an
impressive and economically-enhancing asset.
In close proximity, neighbouring King’s Cross station stands The Great Northern Hotel, designed by Lewis Cubitt, a
building which pre-dates The Midland Grand Hotel, opening for business in 1854. Like its neighbour and indeed other
grand and more modest station hotels across Britain, the fortunes of the Midland Grand suffered during the period in
which rail passenger numbers fell. The consequences of this decline would ripple out to all those businesses which had
come to rely in some way on its guests.
Having been closed for 12 years – but fallen into a state of near dereliction for a period before – The Midland Grand has
recently re-opened its doors and come back to commercial life and generating considerable economic multipliers. Just as
its fortunes had previously moved in tandem with rail travel so it is again, now benefiting moreover from its proximity to
the Eurostar.
Chart 1: Rail passenger miles on franchised operators’ services, quarterly
Source: ONS (Office of Rail Regulation), Toscafund
Over in Holborn is the Rosewood London Hotel boasting 262 rooms, 44 suites, three restaurants and a handful of bars.
Originally completed in 1914 to a design by Percy Monckton, the building was not intended to be a hotel, but rather as
the headquarters of Pearl Assurance Company. In 1989, Pearl relocated their HQ from Chancery Court to Peterborough,
leaving the building unoccupied and economically idle. This idleness would end as redevelopment began in earnest in
the late 1990s and a hotel opening in 2000. Then in 2013, after £85mn of investment, the Grade II listed building re-
opened as a luxury five star hotel.
Not far away from the Rosewood Hotel is the now idle Bow Street Magistrates Court, a building finished in 1881. Over
time, high profile defendants have passed through the doors including the Pankhurst sisters, Oscar Wilde and Dr Crippen.
The building was finally vacated in 2006 having been sold to Irish developers hoping to convert it into a boutique hotel,
the plan derailed by events of 2008. As long as it remains economically inactive, the opportunity costs of its idleness
increase. Those unsure of the practicalities in converting a court house to a hotel need only look across from Covent
Garden to Soho, where the Grade II listed building which was once Great Marlborough Street Magistrates Court – where
Oscar Wilde was also a defendant, as were John Lennon and Mick Jagger - is now a 112-room hotel.
We could go on and map the locations across the length and breadth of Britain of imposing buildings that once provided
employment and economic multipliers which now lie inactive. One wonders whether the economic benefits of a
commercial revival of dormant or idle real estate are appreciated, or whether the mounting opportunity cost of real
estate inactivity is fully understood.
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11 December 2015
1.2.3Britain’s CRE is better connected
In an age of rapidly-advancing technology, it might seem that the commercial benefits of businesses locating in
proximity to one another are lessening. After all, where once front, mid-and back-office functions demanded closeness,
now the ability to communicate and transmit information instantaneously over large distances has allowed these roles to
be unshackled. Indeed, even in areas of modern engineering the importance of research and development has lessened
the need to actually move goods physically along supply chains. For Britain’s CRE, this unshackling does not make an easy
tale.
For a period, off-shoring was as familiar a sign of the country’s loss of purpose as it was contentious; from call-centres to
manufacturing, it seemed as though Britain was it being evacuated (spurred on by differentials in cost). However, whilst
instances still exist of service providers and manufacturers opting to shift operations from Britain, these are now being
overshadowed by a combination of growing capacity elsewhere as a form of expansion, not substitution. Interestingly,
we are witnessing the return of off-shore capacity, and looking ahead we can anticipate continued ‘near-shoring’ with
firms locating in Britain’s regions, rather than the capital, as cost differentials that are actually favourable to Britain are
exploited. There is also the added benefit of familiar legal and regulatory environments and general infrastructure, very
often absent with once popular off-shore locations. This process is already occurring – for example, Deutsche Bank’s
offices in Birmingham (April 2014), whilst Santander has relocated its call centres to Leeds from India. All this accepted,
one can still argue a pressing need to improve how Britain’s real estate connects across a raft of geographic dimensions;
connecting people with work and businesses with one another.
There are economic benefits of improving links across the Pennines, bringing Leeds “closer” to Liverpool and opening up
mid and north Wales. Trains between Liverpool and Leeds travel at an average speed half that of the existing service
between London and Leeds, suggesting to us that the former needs attention not the latter. Those travelling between
Wrexham and Manchester do so at an average speed almost one-fifth of travellers between London and Manchester.
Figure 1: ‘Tube map’ of commuter zones, 1hr each way Figure 2: Commuter zones 2013 (1hr travel – direct train)
Source: Office of Rail Regulation, Highways Agency, Toscafund.

12 December 2015
Figure 3: HS2 & HS3 plans Table 1: Statistics for selective rail journey across Britain
Time
(hr:min)
Average
Speed (mph)
HS2 Av
Speed
London Manchester 02:07 90.3 169
London Leeds 02:12 84.4 134
London Sheffield 02:05 77.7 123
London Birmingham 01:22 76.3 128
London Nottingham 01:44 72.9 111
Birmingham Bristol 01:21 69.3
Newcastle Manchester 02:23 65.1
London Southampton 01:14 63.2
Middlesbrough Sheffield* 01:56 52.8
Manchester Sheffield 00:48 52.4
Manchester Leeds 00:49 51.9
Birmingham Swansea* 03:01 51.8
Cardiff Liverpool* 03:16 50.6
Glasgow Inverness 03:50 48.4
Manchester Nottingham 01:49 46.7
Edinburgh Aberdeen 02:50 46.0
Middlesbrough Liverpool* 03:36 43.7
Leeds Liverpool 01:50 41.0
Lincoln Manchester* 02:20 39.8
Birmingham Wrexham* 02:09 34.0
Manchester Wrexham* 02:37 21.9
Source: HS2 website, Toscafund. Note: Black line signifies 70mph – National Speed Limit applies - *No direct trains, 1 or 2 stops required.
The table above highlights marked differences in average train travel speeds between regional hubs, some journeys all
the slower because they require passengers to change train. Of course, plans exist to improve the rail network
independently from HS2. The Chancellor, as recently as March 2015, has championed a HS3 high-speed rail link between
Manchester and Leeds, which he argued would reduce the travel time between these cities from 50 to 30 minutes and
help create a “northern global powerhouse”. Following on from George Osborne’s encouragement for improved links
across the Pennines, five cities across the North of England – Leeds, Liverpool, Manchester, Newcastle and Sheffield -
issued a joint report entitled ‘One North’ making the case for major investment in both rail and road links east to west to
improve the economic fortunes of the north by better connecting them. The reality is that the better connection being
encouraged is between commercial centres, and therefore CRE.
Some will throw back at us the argument made earlier that with mobile technology there should be no such thing as
“idle” travelling time. Others will point to “speedy” road links between locations otherwise poorly served by rail. Some will
claim there is no 'commercial' need for rail upgrades to the routes, for example between Wrexham and Manchester. The
argument is that these centres do not have much in the way of a “commercial connection”. Our response is: ‘forge a
reliable and speedy rail link between these, and their commercial connection will become real enough, by far better
commercially connecting their CRE’.
If Britain is to become a truly connected national economy then it demands 21st
century links across its length and
breadth, boasting average travel speeds broadly in line across all its regional dimensions. This achievable ambition
should be the foremost aim of spending on transport infrastructure.

13 December 2015
1.2.4King’s Cross Central: A case study in inclusive regeneration
From the middle of the 19th
century, the Great Northern Railway (GNR) began to develop an east coast mainline service,
with the King’s Cross area of Camden the embarkation point from London. In 1852, the Lewis Cubitt designed King’s
Cross station began operating and two years later the Great Northern Hotel opened its doors. In 1873, the George Gilbert
Scott designed Midland Grand Hotel opened a mile or so from the Great Northern Hotel. The Midland Grand
complemented the newly built St Pancras Station which was the London terminus for the Midland Railway (MR) which
had opened in 1868, boasting the largest single-span roof in the world at the time.
As it was for all their rivals developing railway lines fanning out of London, GNR and MR became voracious buyers of land
to develop real estate assets close to their termini. Both, after all, required goods yards and engine depots and the other
assorted buildings essential for carrying passenger and freight in volumes that seemed destined to only increase with
time. Coal was key to the freight business, arriving into London by rail and then being distributed around London using
the canal network which ran past King’s Cross and not far from St Pancras stations. Added to the area’s real estate was a
gas works. At their height the stations, hotels and related CRE provided the working class neighbourhoods around them
with employment and the ability to earn from the freight and people coming into them. What had seemed to some as an
unrelenting increase in rail traffic was to however not to be the case.
From its halcyon days in the early part of the 20th
century, the neighbouring stations fell into decline, as passengers and
freight were increasingly drawn to roads and as Britain’s industrial activity waned. By the 1980s, the areas around King’s
Cross and St Pancras had become notorious crime spots with stubbornly high rates of unemployment and social
dysfunction, blighting not only the area itself but neighbouring areas.
Figure 4: King’s Cross re-development
Source: Wiki Commons license
Into the 1990s, momentum began to build (sic) towards regenerating the King’s Cross and St Pancras areas. In 1997, after
years of delay, the British Library opened, the largest public building to be constructed in Britain in the 20th
century. Soon
after the British Library opened on one side of St Pancras Station, efforts began at the other to create the new London
terminus for Eurostar. Work on High Speed 1 began in 2000 and the London terminus of Eurostar moved to St Pancras
from Waterloo in November 2007, ushering in the revival of the whole of the station and triggering efforts to redevelop
more widely, not least spurring on efforts to regenerate the neighbouring King’s Cross station and its environs.
The University of the Arts has become notable as the first occupier of King’s Cross Central where its Central Saint Martins
campus is located (unifying a number of formerly disparate buildings into a single, purpose-built and state-of-the-art
college site). The ongoing redevelopment is proving one of the largest construction projects in an already frenetically
building London. A landmark announcement for King’s Cross Central was a 1m square foot pre-let by Google.
More widely across the 65 acres of brownfield regeneration will be delivered office, residential, retail and recreational real
estate. On completion, King’s Cross Central will boast five new squares and connect via the canal to such areas as
Camden Market, Upper Street in Islington, Regent’s Park and London Zoo. As discussed earlier, the grandeur of the Great
Northern and of the Midland Hotel have already been restored and an area for long blighted by its inactive real estate has
come alive again with its redevelopment.

14 December 2015
1.2.5CRE: Walking on water
It is unlikely that many of those walking along the Thames Embankment will be aware it was once marsh land. For it was
only in 1862, after a great many previous attempts had been thwarted, that the Sir Joseph Bazalgette project began.
On the completion of the Embankment, it had reclaimed a total of 22 acres of land from the Thames. Reclaimed too were
the Victoria - again along the north bank of the Thames - and Albert - along its south - Embankments. The embanking of
the Thames was, of course, far from the only way its natural landscape has been complemented over time by man-built
landscape.
We argue that a bridge or a tunnel should be considered Commercial Real Estate. Let us consider this with some actual
instances.
Over the years, bridges and tunnels have been added so as to connect the north and south sides of a rapidly expanding
London. Along the stretch where the Thames passes through the capital, the first fixed crossing was built by the Romans,
where London Bridge now straddles.
More bridges have been added to the London stretch of The Thames quite recently, the Millennium and Jubilee
pedestrian bridges in 2002. There is even talk of a Garden Bridge beginning near Temple Station linked to the Southbank
Centre. In a moment, we will consider another scheme being hotly debated, but before we do, let us return to those
bridges added in the 19th
century.
A railway bridge across the Thames was opened in 1864 by St Paul’s (later renamed Blackfriars). This carried trains of the
London, Chatham and Dover Railway line. Alongside this bridge a second St Paul’s bridge would open in 1886, becoming
Blackfriars Bridge in 1937. The original St Paul’s bridge would however be removed in 1985 with its rail traffic taken
instead by Waterloo Station. Its southern abutment and a series of imposing piers would remain testament to its
existence, and from 1985 until 2009 the piers would remain curiosities to those walking across – the second – Blackfriars
Bridge. They were reclaimed by the railway when a state of the art station was opened in 2012.
The piers of the original Blackfriars (nee St Paul’s) Bridge now support the world’s first station with platforms that span a
river. It is also the world’s largest solar bridge, providing 50% of the station’s energy needs. Whilst we can debate whether
railways stations and tracks constitute CRE, many of those travelling to, through or from Blackfriars Station will be doing
so for commercial good. It is also instructive to reflect on how bridges across the Thames were once lined by shops and
homes with tolls commonly levied on those crossing them.
This section began by reflecting on a particular instance where marsh land has been reclaimed to create London’s
impressive Embankment. We suggested that few of those walking or driving along it would know it was not “natural”, just
as many today may be unaware of other instances of land reclamation around us; for instance the Fenns. With this in
mind and in wondering where else land will be reclaimed it is impossible not to think of the Thames Estuary Airport,
which is part of a far larger reclamation plan for the Thames Gateway.
Much like the Embankment before it, the Estuary Airport idea has been talked about for some time, the first proposals
dating to the 1970s. Most recently those supporting the idea of an island airport point to successful precedents: the
airports in Osaka, Japan and Hong Kong. Proponents also present figures suggesting the value of the economic and
commercial benefits to areas in and around the new airport, bringing windfalls first in its construction and then
operation.
What cannot be in any doubt is the very real London Gateway development at Thurrock in Essex. This ambitious project is
forecast to last another 10 years and generate tens of thousands of jobs as DP World invest upwards of £1.5bn in the
scheme to create 2,700 metres of quay. Alongside the port infrastructure will sit considerable commercial real estate, the
distribution part alone occupying a 300 hectare site with planning permission for 10 million square feet of developed
space across its logistics park. The project comprises, amongst other elements one of the world’s largest deep-water
ports to handle the biggest container ships, a port complemented by one of Europe’s largest logistics parks and another
instance of overseas capital (in this instance from the UAE) entering the UK and targeting commercial infrastructure
projects.

15 December 2015
1.2.6CRE flying high
As affordable air travel took off, so too did an increasing number of holidaying Britons, and as the airports swelled with
those opting to travel abroad, the effects were felt at home. From coastal guest houses and holiday camps, to the
restaurants, bars and entertainment venues which relied heavily on seasonable tourism, a section of British commercial
real estate fell into decline, property which by its nature was regionally concentrated, blighting entire towns.
Although Britons continue to travel abroad with growing frequency and rising numbers, Britain’s tourist industry has
more recently enjoyed a renaissance, doing so as both Britons themselves opt to spend part of their leisure time on their
own shores and as a rising number of international tourists enter the country. Indeed, Britain is now the world’s eighth
most popular destination, with a historic high of 33 million visits1
in 2013, this growth being spurred on by arrivals from
emerging markets.
Tourists coming to Britain bring with them considerable windfalls to the economy, not least to our external account in
delivering valuable foreign income. Improved CRE has been a major contributor to this revival, bringing improvements to
hotel and recreational real estate but also to the transport network, including the development of regional airports.
Indeed, the budget airline model which at first proved so damaging to the fortunes of Britain’s domestic holiday sector is
now contributing strongly to its revival. For along with road and rail travel, affordable internal air travel is allowing visitors
to spend their time in Britain in a variety of different locations.
Budget airlines are also allowing Briton’s to travel around their country more affordably for both leisure and work. Indeed,
entirely new commuter classes have been created and so too inventive new acronyms; notably WILLIE – Work In London,
Live In Edinburgh. As we have already emphasised, such mobility can only help improve the growth mix across Britain,
and improvements to CRE is the structural element that makes this possible.
1
The figures relate to the number of completed visits, not the number of visitors. Anyone entering or leaving more than once in the
same period is counted on each visit. The count of visits relates to UK residents returning to this country and to overseas residents
leaving it.

16 December 2015
1.3 Offices and IT
Despite the impact of technology in creating a virtual economic dimension, built space remains essential not only for
“traditional” activity but for the virtual world to function effectively. Offices currently account for a quarter of all
commercial real estate.
1.3.1CRE in the clouds
As its traditional manufacturing has made way for a wide range of services, Britain’s CRE has been filled less and less by
plant and machinery and more and more by telephonic equipment, computers and all the servers and IT backups
essential to their operations. At first, the spatial demands of this kit was considerable, noisy “comms” rooms, which whilst
sometimes relatively small, often take up a not insignificant share of scarce and costly office space. However, as
equipment became more powerful, it began to shrink, and improved software required smaller hardware. More recently,
cloud computing has proven transformational, growing at 50% annually.
By utilising “The Cloud”, an ever growing number of businesses across Britain are able to do away with a large amount of
their individual computing infrastructure, thus releasing them from hardware which is expensive in both monetary and
floor-space terms. Whilst these changes within offices are relatively small, they are just one of a great many changes seen
across Britain’s CRE, and consequently leads us to another, the growth of data centres.
Across Britain, there are now 210 data centres. These provide their clients with a range of services including data storage,
security and business continuity. The choice of location for these relies on a range of requirements including proximity to
power grids and telecommunication infrastructure. Furthermore, there has to be consideration of transport links and
closeness of emergency services, since these will affect risk and security. In terms of their management, whilst Data
Centres are labour un-intensive, what staffing is demanded is highly specialist and carefully selected.
Just as the internet is altering how we shop, so too does virtual data storage and management. Just as the internet is far
from eliminating the need for retail CRE across Britain but instead changing the precise configuration of property
required to deal with “click and collect” spending, so too with virtual data storage. In place of its proliferated “comms
rooms”, Britain, faster than almost any other economy, is seeing the development of a relatively new type of CRE, Data
Centres. Whilst some may carry the title Cloud Centres, these are all very much Real Estate that the modern British
economy could not possibly function without.
1.3.2CRE and the internet
To satisfy their durable, consumable and particularly food needs, Britons once almost exclusively visited stores to scan
shelves from which we would pick the goods that the customer would then transport home. Now we are increasingly
scanning websites to simply click for delivery. The implications of this behavioural change are proving as profound on the
CRE market as they are being misinterpreted. Whilst the nature of the ongoing shift is unprecedented, it is wrong to
imagine that the built landscape for retail is being altered for the first time or necessarily for 'the worse'.
The ongoing migration of footfall retail custom to the internet is having a profound influence on Britain's CRE. However,
far from reducing the precise floor space required by the grocery and non-food sectors, it is altering the nature of the
property needed, where it is needed to be and what form it needs to be in.
In place of CRE to display wares for shoppers to consider, Britain has a growing need for large central sheds from which to
distribute goods clicked from websites. In some cases these act as large hubs for more local distribution centres.
Behavioural shifts in retail are far from unknown, the superstores and retail parks that we are now so familiar with date
(for the most part) from the 1990s, and just as the development of these formats required an entirely new property
profile, so too do the new generation with the rise of internet-based sales and home delivery. British households are
changing their patterns of consumption and the impact on its CRE has not been confined to goods but services.
Consider the travel agents that were once ubiquitous on high streets. Whilst still present, their numbers have fallen
markedly. There has been a migration of the sector's property requirement, rather than its total elimination. Where staff
occupied relatively small high street travel agencies, they now sit in large call centres, and where once bookings were
almost entirely for travel abroad, Britain is seeing a growth in vacationing on its own shores, ushering yet more change to
its CRE landscape as holiday parks expand to meet this need.

17 December 2015
1.3.3Google: search for a real presence
Google has dramatically altered how we behave and is a service that we can connect to practically everywhere, two
million searches are made in Britain. With £3.4bn and £70.8m in UK revenue and profit respectively, Google directly
employs 52,069 workers around the world and only 1,835 in Britain.
For a time, Google became the symbol of all the threats to Britain's CRE. Many saw a business so dominant across virtual
space that it would confine itself to only a modest physical presence, and concerns over the real estate take-up of Google
and the growing numbers of other web-accessed businesses led to talk of a 'paradigm shift in the need for CRE across
Britain. This idea was summarily quashed when, on 17 January 2013, it was revealed that Google had pre-let a staggering
one million square feet of space at London's King’s Cross.
The Google/King’s Cross letting announcement was made all the more remarkable by the fact that Argent, the
developers behind the area's 2.4-acre regeneration, planned on restricting any single occupier to one 10th
of what will be
delivered to Google. From being the epitome all the challenges to Britain's CRE, Google was recast as a role model for all
the benefits that the virtual world can offer the real estate world.
1.3.4Sometimes developing Britain's CRE does not quite reach The Pinnacle
The development of The Shard and redevelopment of King’s Cross Central in London and Birmingham's Bullring Centre
stand up as examples of Britain's modern CRE being enhanced by perseverance and innovative design combined with
capital and even occupiers from overseas. However, not all planned developments have progressed as relatively
smoothly as these.
Plans for The Bishopsgate Tower were submitted in June 2005 and approved within a year, with demolition of existing
property beginning 12 months later. Preparation for construction started in May 2008, and within six months it was
announced that the originally speculative building had won two pre-lets, one for 80,000 square feet of office space and
the other for the restaurant intended to top the 945 foot, 63-floor tower (scaled down from 1,007 feet because of Civil
Aviation Authority concerns). Even at its reduced height the building, on being topped out, would be the highest in The
City of London and second tallest across the EU. Funding for the project was sourced from Saudi Arabia's Economic
Development Corporation and Arab Investments.
Even after the financial crisis struck work continued on what had by this time been renamed The Pinnacle, but whose
curling design led to it more fondly become known as The Helter Skelter. By the beginning of 2012 the Pinnacle's core
had reached the sixth floor and even uncertainty over continued funding seemed to have ended. Then work stopped, for
reasons, so it was suggested, ranging from a funding shortfall to problems with pre-lets because of the building’s
unconventional and impractical interior specifications. Construction has been suspended since, with speculation at one
point that the part built structure would be levelled and a less ambitious scheme undertaken. More recent talk has
suggested that when the project does resume, following approval of its re-design, it will be with the same eye-catching
exterior but much altered interior floor plans.
The experience of The Bishopgate Tower/The Pinnacle/Helter Skelter, blends a great many themes covered in this report.
The ambition to upgrade 'underbuilt' office CRE with a mix-use skyscraper funded from overseas, built speculatively and
with a wholly unusual and controversial design. It also perfectly illustrates how “events” over the inevitable drawn-out
development time line which large projects demand, can derail and delay. The reality all the same is that this unfinished
building happens to be located at the heart of the City of London’s thriving commercial underwriting and insurance
district, where other proximate schemes, 20 Fenchurch Street (the “Walkie-Talkie”) and 122 Leadenhall Street (The
“Cheesegrater”) having both proven that it is always possible to deal successfully with “events”.

18 December 2015
1.3.5Global purpose & competitiveness
To ensure its success, a large part of Britain's commercial property estate has to compete with international rivals. In this
brief section, we explain why Britain's commercial property estate holds a privileged position explained by a range of
factors. Some are exogenous to the property estate per se, such as Britain occupying a time zone positioned favourably
for around the clock activity for those in the Americas as much as those across Asia. In addition, Britain’s real estate is
located in an English-speaking economy with a long tradition of being home, for some an adopted home, to a highly
educated and skilled work force. Other factors are, however, very much endogenous, such as quality of build and
provenance of ownership. Most important of all, has been the pragmatism needed to deliver the type of property
essential for success even if this has meant a degree of development upheaval, and nowhere has this been more in
evidence than in London and in particular the “Square Mile”.
Around the City, one can identify place names that trace the Gates that once allowed access through the defensive
“London Wall”, and within the historic City of London, there are institutions that have occupied the same “premises” for
centuries. From the imposing Bank of England on Threadneedle Street, to the seemingly timeless George and Vulture
chop house in Castle Court, many date from the 18th
century and some from long before. The idea, however, that the City
of London is unchanging is not something one familiar at close quarters with it would accept. For all its apparent
timelessness, the City of London has in fact been in constant evolution, with its buildings replaced with almost indecent
haste according to some.
Few aspects of the City’s architecture have seemed beyond limits: a large part of the original Bank of England styled by Sir
John Soane was demolished to make way for the Sir Herbert Baker creation present today. Even the “City institution” that
is the George and Vulture restaurant has come close to demolition. The reality is that whilst the names of its streets have
become timeless symbols of its position in global finance, the City of London’s architecture has not simply matched
contemporary design, but defined it. From the “Nat West Tower” opened in 1980, to the Lloyds Building first unveiled in
1986, to the “Gherkin”, 18 years later, London’s skyline has been in constant flux, a rate of change which has only
accelerated over time, creating a sense, in some cases, of architectural disposability. With each new construction comes a
new group of tenants, often including those who could not have been anticipated even a handful of years earlier, hence,
there is a natural evolution in the occupational character of London’s office space.
London is in the throes of delivering noticeable improvements to its transport infrastructure. It can look forward to
Crossrail and other upgrades to under and over-ground rail systems. By 2020, London will boast a number of impressive
new business districts, centred on the transport hubs of Paddington, London Bridge and King’s Cross, the latter being the
embarkation and disembarkation point for Eurostar.
The delivery of HS2, Crossrail, the Northern line extension and other transport improvements are all part of London’s
future. Returning our focus to its past, one could chronicle the City of London’s history in global finance back many
centuries, over which the nature and origin of its occupiers has changed and changed again and so too its property
estate.

TOSCAFUND BRITAIN’s PROPERTY
19
1.3.6A real second home in Britain
The off-shoring of Britain's economic activities, initially across a range of manufacturing industries, and then i
cast for a time a long shadow over the occupational future for Britain's CRE. More recently, and for a number of reasons,
has been suggested that Britain is enjoying re
occupying CRE anew.
It is not, however, this re-shoring phenomenon on which we wish to focus, but an entirely different flow of businesses set
to arrive in Britain, specifically those looking to use it as their main overseas hub. These will be drawn across a r
business service sectors.
We will argue that Britain's cities are set to host operations which complement those already established and growing
quickly in the central business districts (CBDs) of Shanghai, Si
an overseas hub can be understood in terms of timing.
For all the efforts to develop CRE in CBDs across Asia and South America, it’s operation will follow the norm that business
hours will be followed. Whereas it is common in a number of
interruption by running up to three shifts, this is not the norm in business services and extremely uncommon in financial
services. For this reason, the desire to operate through the day will demand tha
the emerging world have as a matter of urgency to establish complementary operations overseas
Figure 5: Working 9 to 5, London’s prime location
Source: UTC standard, Toscafund.
Candidates to be host CBD have to be in a complementary time
force and appropriate infrastructure to be credible. A cursory inspection reveals that Britain sits in an extremely suitable
time-zone, doing as much for economies acr
Language too favours Britain. Indeed, one can draw upon a tradition of already having proven host to those looking for
overseas hubs. It was no coincidence that China Construction Bank acquired the 127,0
111 Old Broad Street soon after it was nominated by the monetary authorities in Beijing to provide settlement services in
the Yuan from London. China Construction Bank should in reality be seen as the vanguard of the arriv
not simply from China, but widely across the emerging world and indeed the resource
not be alone in establishing a presence in Britain, insurers also likely to do so and businesses across a raft of servic
sectors.
London will most likely host the front-office operations for those creating an overseas business footprint in Britain. This
accepted, cities across Britain could easily play host to mid
and this diffusion will help narrow regiona
BRITAIN’s PROPERTY CREDENTIALS
A real second home in Britain
shoring of Britain's economic activities, initially across a range of manufacturing industries, and then i
cast for a time a long shadow over the occupational future for Britain's CRE. More recently, and for a number of reasons,
Britain is enjoying re-shoring, as activities formerly migrated overseas are returned and
shoring phenomenon on which we wish to focus, but an entirely different flow of businesses set
to arrive in Britain, specifically those looking to use it as their main overseas hub. These will be drawn across a r
quickly in the central business districts (CBDs) of Shanghai, Singapore, Sydney and Sao Paolo.
an overseas hub can be understood in terms of timing.
hours will be followed. Whereas it is common in a number of industries for businesses to occupy their CRE without
services. For this reason, the desire to operate through the day will demand that those with operations across the CBDs of
the emerging world have as a matter of urgency to establish complementary operations overseas
Figure 5: Working 9 to 5, London’s prime location
to be in a complementary time-zone and offer a capacity in CRE, suitably skilled labour
zone, doing as much for economies across the Americas as it does for nations across Asia.
overseas hubs. It was no coincidence that China Construction Bank acquired the 127,000 square feet of office space at
the Yuan from London. China Construction Bank should in reality be seen as the vanguard of the arriv
not simply from China, but widely across the emerging world and indeed the resource-rich developed world. Banks will
not be alone in establishing a presence in Britain, insurers also likely to do so and businesses across a raft of servic
office operations for those creating an overseas business footprint in Britain. This
accepted, cities across Britain could easily play host to mid-and-back-office activities, even attracting front offices i
onal imbalances.
DENTIALS
December 2015
shoring of Britain's economic activities, initially across a range of manufacturing industries, and then it’s services
cast for a time a long shadow over the occupational future for Britain's CRE. More recently, and for a number of reasons, it
shoring, as activities formerly migrated overseas are returned and
shoring phenomenon on which we wish to focus, but an entirely different flow of businesses set
to arrive in Britain, specifically those looking to use it as their main overseas hub. These will be drawn across a range of
ngapore, Sydney and Sao Paolo. The motivation for seeking
industries for businesses to occupy their CRE without
t those with operations across the CBDs of
the emerging world have as a matter of urgency to establish complementary operations overseas.
zone and offer a capacity in CRE, suitably skilled labour
oss the Americas as it does for nations across Asia.
00 square feet of office space at
the Yuan from London. China Construction Bank should in reality be seen as the vanguard of the arrival of other banks,
rich developed world. Banks will
not be alone in establishing a presence in Britain, insurers also likely to do so and businesses across a raft of service
office operations for those creating an overseas business footprint in Britain. This
office activities, even attracting front offices in time,

20 December 2015
The reality is that Britain stands poised to be chosen as the preferred overseas hub for a raft of businesses from across the
emerging world. These promise to deliver wide ranging wealth benefits and generate considerable economic multipliers.
For Britain to welcome such arrivals, an expansion in its CRE capacity will be crucial, not simply in London but widely
across all its cities.
1.3.7A Central Point: CRE unchanging on the outside but evolving within
One of the first skyscrapers in London, Centre Point has slid down the list to become the city's joint 27th
tallest building.
This said it dominates the sky line from much of central London, and since 1995 can boast Grade II listed status. Centre
Point is an intriguing example of how so much has changed since its completion in 1966. The 385-ft office tower,
designed by Richard Seifert, stood empty for five years having been built speculatively. Its developer, the controversial
Harry Hyams, hoped for a single occupier for Centre Point, and stubbornly rejected offers to lease individual floors. On
finally receiving tenants, it has seen an evolution in occupiers which illustrates the changing nature of Britain's economy.
From July 1980 to March 2014, the building was the headquarters of the Confederation of British Industry (CBI). Occupiers
now in the building include US talent agency William Morris Agency; the state-owned national oil company of Saudi
Arabia, Aramco; Chinese oil company Petrochina; and electronic gaming company EA Games, a range of tenants who are
notable for being multinational, as much as multi-sector.
As well as a varied group of office occupiers, Centre Point is home to Paramount which opened in 2008, initially operating
as a private members club, this was changed in 2010 with Paramount opening to the general public. Occupying the top
three floors of the building, Paramount includes event space on the 31st
floor, a bar and restaurant on 32nd
and a 360-
degree viewing gallery on the 33rd
floor – the top floor of the building.
In February 2013, the global members club for creative industries, ‘Apartment 58’, launched APT58 at Centre Point. The
members club, on the lower floors of the building, features a night club, meeting rooms, a locker and mail service and a
lounge. The venue also includes a late-license ground floor street-food concept restaurant.
Having passed through a series of owners since Hyams, Centre Point is now in the hands of Almacantar. It has received
planning permission to further refurbish the building. Its occupancy profile will change again, with plans for its
redevelopment into 82 luxury apartments, a pool, spa and gymnasium and 42,000 square feet of retail and restaurant
space.
With Centre Point, we have another example of British CRE unchanging on the outside and for periods economically
inactive on the inside, and whose occupation has evolved rapidly over recent years, spurred on by overseas tenants and
their capital, producing positive economic multipliers and externalities to commercial and indeed residential real estate
around it. These changes have been spurred on too by improvements to transport infrastructure in the vicinity of the real
estate.

21 December 2015
1.4 Educating CRE
Education is one of the UK’s most property hungry “commercial” sectors, we reflect on the recent and prospective
growth.
1.4.1British universities
There may be some curiosity as to why Britain still has a predominance of non-profit making Universities and other
institutions of higher education, which we have identified as quasi-CRE? After all, the enhancement they provide to the
human capital of their students will associate in general with a long-term gain which should attract commercial and
entrepreneurial interest. The reality is that there are many privately and very commercially operated colleges across
Britain serving the needs of students originating mostly from overseas. Their reputations are, almost without exception,
inferior, precisely because of suspicions over their motivation. There is certain to be a suspicion that the motivation
behind the college is less about improving the human capital of students than about raising the financial capital of its
operators. It is for this reason, where reputation concerns are either real or imagined, that so many HEIs remain
stubbornly within the realms of quasi CRE rather than morphing into its direct form.
The University of Buckingham is an institution holding a Royal Charter and has a strong reputational standing, but it
operates with a funding structure outside of the norm; a HEI which could rightly be considered to be in the private sector.
The University of Buckingham operates with charitable status, but it’s model is nonetheless commercial. Looking ahead,
we would not be surprised if established HEIs begin to alter their models to move closer to the funding practice of the
University of Buckingham, and so overcoming reputational risk as they become “more commercial”.
1.4.2An educated CRE case study: The University of Buckingham
The University of Buckingham’s size should not distract from the growth that it has achieved and the potential it
promises, more than doubling its student body in five years, and investing generously to maintain this momentum.
Whilst it may operate with charitable status as a non-profit making body dedicated to education and research, it can
boast being Britain's first independently funded University holding a Royal Charter. It is also unique in offering two year
full-time degree programmes. Its behaviour and experiences perfectly capture how refurbishing existing and building
entirely new CRE is at the core of successful ‘business’ growth.
Whilst we have illustrated elsewhere how a bridge can be economically empowering (in Part 1.2.5), and so be very
commercial indeed, The University of Buckingham has only quite recently shown just how this illustration can be made
very real.
Consider this extract from its annual report and financial statement for the year to December 31st
2012: “we will be
building a bridge this year over the river to link the six acres of the right bank that we now own, to the main campus. We
are applying for planning permission to start the development of the right bank.”
Here we have evidence of investing in property infrastructure being at the forefront of the development of revenue
generating CRE.
We have also reflected on the power of Britain's CRE to generate foreign earnings. With one-third of the student body
originating outside the EU and absolute numbers growing, here again The University of Buckingham provides a real
instance of this favourable trend.
Consider also the idea that refurbishment and refocusing can bring property back into economic life. Let us draw again
from the University of Buckingham's most recent annual report, where the Vice-Chancellor reflects on property:
“We have refurbished all of the Tanlaw Mill, from top to bottom, and it has been transformed as students' building and as
a Students Union. And to further improve the recreational spaces for the students, we are completing the refurbishment
of the cellars in the Franciscan Building. Meanwhile the newly-refurbished Radcliffe Centre, a converted church which
provides a 150-seat venue for lectures, performances and community events, has added significantly to the capacities of
the University. The refurbishment of Prebend House and of its gardens has now been completed [which we] are using as
the postgraduate centre of the School of Humanities, which speaks of our general commitment to upgrading research
within the University.”
In this one passage, we see evidence of a church conversion, cellars being made useful as “recreational spaces” and
evidence further of investment to attract undergraduates by improving the quality of their experience, whilst also
capitalising on how postgraduates can engage (often very commercially) with academics in research. On this note, the
Vice-Chancellor was keen to that that “much of the growth of the University can be attributed to the growth of the
Business School, which now has twice as many students as four years ago. We continue to be proud of our Business
Enterprise programme, which currently has students running a number of intriguing businesses”.
The following extract gives some idea of the University of Buckingham's growth ambition, “we are working with the
Milton Keynes Hospital NHS Trust over the possible creation of an undergraduate medical school”.

22 December 2015
1.4.3Britain's Real Commercial Education Industry
Even though they are not motivated by profit we have characterised Britain's HEIs holding Royal Charter's as quasi-
commercial, and identified their real estate accordingly. Whilst some will contest this intermediate designation even for
the independently funded University of Buckingham (considered elsewhere), they cannot deny Britain's fully commercial
and growing further education industry.
Chart 2: UK HEIs income from tuition fees & education contracts Chart 3: Long term migration to the UK by reason given
Source: HESA, ONS, Toscafund
Britain is home to at least 670 private colleges, almost all run on commercial lines. Whilst mainly concentrated in and
around London, often specialising as English language schools, 50% of these colleges are peppered across the country,
almost invariably in proximity to HEIs carrying a Royal Charter. Indeed, outside of normal term-time there is a trend
amongst the latter to open their doors to foreign students, most notably by operating summer schools operating literally
and financially on commercial grounds.
The reality is that even if we were to exclude Royal Charter holding HEIs, educating fee-paying foreign students is proving
a growth market across Britain and one where its real estate is playing an essential role. True distance learning is a feature
of modern education. The number of overseas students enrolled on fee-paying tertiary courses per annum across Britain
has increased by about 70% since 2002, and trending upwards still. The reality is that face to face tutorials, delphic
learning and the travel experience to other countries all have considerable chargeable value. A few nations hold a more
sought after Positional Product Proposition in education than Britain.
Let us repeat a point we have made throughout this research, commercial and quasi-commercial education sectors are
providing ever more valuable capital streams into Britain's external and internal accounts; external because of the foreign
earnings brought in through direct student fees, and internal because of the consumption, notably on accommodation,
performed by students from overseas during their period of study in Britain.
Students in full time HEI are proving one of the fastest growing markets for Britain's Private Residential Sector (PRS) with
companies such as the two London listed; Empiric and UNITE. Empiric comprises of 29 properties with 11 assets under
development, an aggregate of 3,503 beds. Whilst UNITE has 45,000 beds and is studied in depth in section 1.4.5.
Liberty Living, with its 16,827 room student accommodation portfolio covering 42 residences, considered an IPO in 2014
and was later bought by the Canada Pension Plan Investment Board for £1.1bn. CPPIB Liberty Living acquired a further
2,153 beds for £330m in August 2015.
Developers of purpose built student accommodation (PBSA) have risen to the challenge. One such example is Watkin
Jones Group who have developed more than 25,000 student units since 1999, with a third of those student units (7,800
student units) built in just the last three years.
In short, with fee-paying education one of Britain's fasting growing sectors, it cannot fail to register as an ever-larger
owner and occupier of full and quasi commercial real estate, coincident with its customers (students) representing an
ever more sizeable share of Britain's rental sector.
20
25
30
35
40
45
50
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
%
£billions
Tuition fees and education contracts Total Tuition fees and education contracts share (rhs)
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Thousands
AllMigrants less Formal Study Formal Study

23 December 2015
1.4.4Education, Education & Education
Britain's Higher Education Institutions (HEIs) are expanding, and as they do, they are creating CRE. They are adding
campus capacity for tuition, recreation and accommodation, forging something of a hybrid industry. For whilst in its core
a university sits within the education sector, it is part purpose built student accommodation, part leisure and recreation
and part broader CRE, where the campus extends to business and science parks.
After all, just as it could be argued that hotel rooms can be considered to fall within the private rental sector so too
student accommodation. As student numbers rise, so will the need to add to the PRS element of Britain's CRE, the
demands on which, do not however end there.
As Britain’s education sector continues on its impressive expansion path, a commensurate rise in its staffing levels -
academic and support - will be required.
1.4.5Case Study: Students, UNITE-d
Back in 1991, research carried out by Bristol’s University of the West of England suggested disused inner-city office blocks
could be converted into low-cost student housing. Within a year, the first UNITE property had opened in Bristol. At a time
when the choice was between the draughty, often drab, halls of residence offered by the universities, or to rent a spare
room from an obliging but not always personable landlord, UNITE offered students comfort, convenience and
affordability.
Chart 4. UK student numbers, million Chart 5. UNITE revenues, £ million
Source: HESA, UNITE Group (Bloomberg), Toscafund (forecasts)
Since listing on the London Stock Exchange in 2000, UNITE has expanded considerably, adding to its core Bristol and
London portfolios and expanding into other regional cities, notably Leeds, Manchester, Liverpool and Sheffield. UNITE
has grown in tandem with the rising number of international students seeking easy-to-arrange and reputable
accommodation. The firm currently provides over 45,000 beds in 28 university towns and cities. It recently raised £115m
to fund further expansion, with the aim of funding its development pipeline in key university towns and cities.
Whilst the UNITE model has gone through changes, the emphasis remains redevelopment and conversion of former
commercial properties into student accommodation. UNITE’s story is not unique and highlights one of our core points in
assessing the growth future of Britain’s regional cities and the importance of commercial property in its dormitory form.
Britain's undergraduate accommodation is not simply serving students from abroad but investors too.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1996 2000 2004 2008 2012 2016 2020 2024 2028
Studentnumbers,mn
England Scotland Wales NI
Tuition fees
introduced:
maximum £1000
Top-up fees
introduced:
capped at £3000
Impact of Browne
Review: fees raised
to £7500-9000
0
50
100
150
200
250
300
1998 2000 2002 2004 2006 2008 2010 2012 2014
Revenue,£million

24 December 2015
1.5 Great retail developments
Britain’s evolving retail sector is two-fold, with both large city-centre transformations (Birmingham’s Bull ring centre for
example) and much smaller retail pop-ups adapting to the modern day shopper.
1.5.1The Amazon story: Reading between the real estate lines
Whilst Amazon can boast a considerable 'loyal' clientele, it also has its detractors; the two groups rather curiously not
necessarily mutually exclusive.
There are those who see Amazon as an unrelenting force pushing Britain's independent book shops into extinction. By
changing our reading habits - both in its physical form and through virtual delivery, via the Kindle - Amazon has become,
it seems, a killer in its particular category. As its presence has grown, so it has had a marked effect on Britain real estate.
Britain's once ubiquitous private book shops long provided local employment, generated business rate revenues and
established something of a cultural presence on high streets. As for its public libraries, they too have been loyal local
employers. In addition, they offered a welcoming indoor space for some to pass theirs days in thoughtful comfort. The
reality is that as Amazon has grown, so the number of book shops and libraries across Britain has shrunk. For their part,
authors too have come to see Amazon's competitive pricing model as favouring mass market writing. Criticism of
Amazon has been fuelled further by the revelation that it uses tax inversion to minimise what it pays to HMRC.
In terms of Britain's CRE, there can be no denying the rate at which its book shops have closed in the face of the
onslaught of online buying. There will be those, however, pointing not to the internet as undermining the independent
book shop model, but to the end of the 'price management' governed by Net Book Agreement, which had finally come
under the scrutiny of the OFT from 1994 and was revoked in 1997 (when Amazon was still in its infancy formed as it was
in 1994). Amazon's defenders will point to how many of those sipping cappuccinos in the swelling ranks of Britain's coffee
shops might on close inspection be seen to be reading material obtained via it. They will suggest that new coffee shops
often occupy space where once a book shop operated, and employ staff which a book shop would have drawn upon.
This will all come as little comfort to those who see Starbucks as using the same tax inversion technique as Amazon.
Chart 6: Landscape of UK’s book-selling revamping, publisher sales, £bn
Source: The Publishers Association
This said, Britain's book shops have increasing broadened their offer to become hybrids, adding cafes and in some ways
providing a welcome space for those deprived of a public library. It could be argued that just as Britain's cinemas have
enjoyed a renaissance by becoming protean in their offer, so too can its book shops. The reality is there is a symbiosis or
co-dependency between how Britain's CRE adapts and the changing needs of its occupiers.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
2008 2009 2010 2011 2012 2013 2014
£billions
£billions
Printed Digital (rhs)

25 December 2015
1.5.2CREacting commercial space in a flash
When we once spoke of restaurants, bars and shops having just popped up, it was as an expression of surprise when we
saw a new retail unit on a road along we were walking or driving. Whilst these businesses might not have survived for
long, often their proprietors ventured into them with the hope they would prove durable and so signing long-term
leases. Now, there is an entirely new concept of pop-up business.
The modern pop-up unit involves sales space which by its very nature is intended to be – in the first instance at least -
short-term, possibly just a day, known widely as “guerrilla” retailers. Whilst modern pop-ups might be located in “real”
real-estate, they could equally well be mobile structures, from freight containers to buses. Britain has had a long tradition
of these temporary sales pitches, where, for example, fireworks and Christmas trees have been sold seasonally or longer
still with weekly markets. The modern form of pop-up retail – whose origins in California date back 15 years – is
distinguishable from that of Britain’s past in that the sheer range of what is being offered, with food and beverages is as
likely to be sold as clothing and accessories. Remarkably, the pop-up phenomenon has even involved cinemas. The
nature of the venue is often quite different too, as it is as likely to be a temporary structure as one that is permanent.
Whilst some pop-up units will stand alone, others will be part of transient communities, say farmers markets, and whilst
certain pop-up units will sell goods provided in a cottage industry volume, others may be used to test products by large
retailers with an established physical footprint.
Whilst mobile units do not face business rates, a pop-up retailer in “real” estate does, something which those who see the
potential for pop-ups to fill vacant space and generate economic good argue is an obstacle to the phenomenon’s
growth. Indeed, the Centre for Economics and Business Research (CEBR) in a report commissioned by the telecoms giant
EE estimates the pop-up sector to have produced £2.1bn of turnover, or 0.5% of all retail spending, in 2013, doing so
across 94,000 units and employing 23,000 workers. Moreover, CEBR forecast Britain’s consumers will spend over 8% more
with pop-up retailers in 2014 compared to 2013.
Transport for London (TfL) has woken up to the potential of pop-up retailing, owning as it does over 1,000 retail
properties and the same number again of arches under its railways. The economics are simple. Consider Old Street
Underground located in London’s Shoreditch. Each year, 23 million pass through a station which is open 20 hours each
day. It is no surprise then that Old Street has been in the vanguard of TfL’s launch into short-term or pop-up leasing, an
area transformed by the arrival of technology companies into its once unloved CRE to have it become known as the
“Magic” and “Silicon” Roundabout. On the theme of regeneration and under-utilised transport real estate, it was recently
revealed that TfL has started to sell “unused” tunnels and “Ghost” stations. TfL has awakened to the potential of its
property assets as tourist attractions, hotels, bars, shops and museums. Tunnels below Clapham North are home to a herb
farm, and a deal has been signed with Waitrose to run a service where customers pick up goods from lockers at Chalfont
& Latimer, on the Metropolitan line. Here again is an instance of economically-empowering property under our very feet.
The reality is that what might at first be planned to be a short-term venture could easily take root. Rather than considered
a rival or threat to Britain's long-lease CRE, pop-up commercial units should be viewed in most cases as a welcome
complement. After all, customers who travel to pop-up units as a destination, provide foot-fall for neighbouring
permanent retailers. Pop-up businesses are more than likely to occupy units which have suffered long spells of inactivity
and have blighted the surroundings for neighbouring retailers. The pop-up phenomenon has also been one of the most
positive developments for Britain’s high streets, helping in part to mitigate the challenges they have faced in other
dimensions, and helping not simply to contain vacancy rates but also helping to soften the recent fall. In order to make
leases more attractive, it is critical to ensure that a prospective pop-up can be connected with its essential utilities.
1.5.3All change: The moving story of Aldwych Station
The story of Aldwych station straddles a number of the real estate themes that we have covered elsewhere; property in
the public sector finding a new lease of commercial life, a property having earned listed status (Grade II) and a story of
unfulfilled development plans and ambitions. It is also a story of a property whose name has changed as has its role from
transporting people across a relatively short distance back and forth from Holborn, to transporting cinema and TV
audiences back and forth over fictional time.
Descending from where the Royal Strand Theatre had once stood, Strand underground station opened in 1907 and
finally closed in 1994. Over that period, and in the years since its closure, plans have been presented to link Aldwych
station with Waterloo and so onwards to the City (as well as with the DLR), so as to connect the Strand with The
Docklands. Aldwych Station was also part of the original plans for the Fleet Line proposed in 1965, the template for what
would become the Jubilee Line, which has bypassed Aldwych (nee The Strand station). During both world wars, the
station was used as shelter for Londoner and treasures from the British museum including the Elgin or Parthenon
marbles, closing to trains in 1940 and reopening six years later.
Passing the building, it has the unmistakable red-glazed terracotta blocks of the Underground Electric Railway Company
of London (UERL), with a two-storey steel framed building following the familiar design of architect Leslie Green. As
already noted, the station has since its closure become a favoured location for film and TV shoots in addition as an event

26 December 2015
venue, as well as hosting regular tours of the station and its environs, the curious able to see a platform not used since
1914 and architectural sites of a bygone age.
Aldwych station is far from being alone as a “ghost station” - there are 40 - neither too is it the only one to have taken on a
new tourist destination. Indeed, plans are being presented to enliven these sites or to economically move on these pieces
of transport related real estate. TfL is hoping to raise £3.4bn in non-fare revenue from their disused stations and tunnels,
whatever any realised value might be there can be no doubt the assets have considerable intrinsic worth located as they
are in key locations across the UK capital.
1.5.4CREating new Markets from old
London's Covent Garden market has come to epitomise commercial urban redevelopment and regeneration, utilising
character rich listed property in the heart of a metropolis for modern purposes.
From housing Britain's largest dedicated wholesale fruit, vegetable and flower market, the Covent Garden area in central
London has, since 1979, increasingly become home to a mixture of residential and commercial tenants. Now, it spans a
range of retail, leisure, creative and business service sectors and is one of the most visited tourist areas, not only across
London but Europe too. Covent Garden is home to one of the largest Apple store in the world, whilst also being a
favoured location for the growing breed of pop-up food and retail stalls in its modern market incarnation.
Over the years, Covent Garden’s success has encouraged the redevelopment of its environs, commercial revival now
clearly evident across Seven Dials and most recently the area around St Giles. The end of horse drawn delivery and rise of
cold storage transit has allowed wholesale markets to move out of central urban areas and thus free them up for modern
economic purpose.
As much as Covent Garden provides clear evidence of the protean nature of Britain's CRE, it also illustrates the economic
potential that exists widely elsewhere. From the neighbouring wholesale meat market at Smithfield across to Nine Elms,
the metonym home since 1974 of New Covent Garden, the Covent Garden 'model' highlights the redevelopment
capacity and regeneration potential for CRE within a London that has far from exhausted its development potential. Just
as New Covent Garden Market came to life in Nine Elms, so the peripatetic onward journey of London's main wholesale
fruit, vegetable and flower market will create economic multipliers at its next stop, as indeed will the relocation when it
happens of Smithfield Meat Market.
Further afield from London, many cities across Britain have their own proven redeveloped equivalent of Covent Garden.
There can be little doubt that across Britain's cities there are central urban areas whose property was developed originally
for wholesale activity but which has long offered the potential for redevelopment and economic regeneration. Whilst
these will obviously not be of the size of Covent Garden, they conceivably could prove to actually be more important on
their revival in terms of economic benefit to the city or large town they nestle in.
In short, it would be no exaggeration to claim that the cumulative economic multipliers from redevelopment compare
extremely favourably with the financial concessions that local authorities may need to offer as an incentive to catalyse
change. It could be argued that domestic and overseas investors are keen enough to commit capital and so are not in
need of actual financial inducement, but rather only require more certainty around the planning process.
1.5.5Gateshead's MetroCentre; A Real development turning point
In the next section we reflect on the transformation of Birmingham's Bull Ring Centre from a 1960s white elephant into a
successful and economically empowering city centre shopping and recreational complex. In considering its regeneration
we reflect on the site having been a market of some sort since the 12th
century and how an originally poor design had
been followed by one which had unlocked the areas potential in a way the original clearly had not.
In this section we focus on an out of town shopping and leisure complex which opened almost thirty years ago in
England's North East, one developed on land unaccustomed to the use it would be put to, but which has performed its
new role with such success it can now boast being Europe's largest covered shopping and leisure centre. Indeed, the
opening in 1986 of the MetroCentre in Gateshead was a turning point in the fortunes of not only the immediate area but
a defining economic moment for Newcastle and indeed Tyneside.
The opening and extension of Gateshead's MetroCentre, with its 340 stores extending over two million square feet of
retail space, has come to symbolise a turning point in what had been an extremely troubled economic time across the
North East. The complex was developed on a brownfield former industrial site once alive with activity but which fallen
victim to Britain's changing fortunes. The area’s revival was to crucially prove the economic merit of dynamic evolution in
land use.
The creation of the MetroCentre also illustrated how collaboration by the most unlikely of groups could realise a major
real estate transformation and economic revival. Those aware of the importance of Sir John Hall's vision in delivering the
MetroCentre, might not be so clear as to how crucial the funding from the most unlikely of sources, the Church

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