On 29 July 2011, the public consultation period for the first stage of the UK’s proposed national high-speed rail network will end. While there has been some opposition to the initial London to West Midlands route, the government has hailed the construction of a national high-speed rail network as “a once-in-a-generation opportunity”. This means that we are likely to see Parliament sign off on the project in early 2015 with construction scheduled to begin later this decade.
High Speed 2 (HS2) is a Y-shaped rail network linking London to Birmingham, Manchester and Leeds, with stops in the East Midlands and South Yorkshire, and will have direct links to Heathrow Airport and to the High Speed 1 (HS1) line (the current Eurostar route out of London’s St Pancras International station to France). The initial emphasis on the need for a high-speed rail network has focused on easing the UK’s overcrowded and overburdened railway network while creating a modern, efficient and reliable transportation system.
However, it is the second part of the equation – the creation of economically enhanced regeneration zones in northern England – that will create even greater investment opportunities. By bringing Manchester and Leeds closer to Birmingham and London, people looking for a quieter life will be able live further away from major cities, which will result in the need for major infrastructure transformation in these areas. Additionally, many businesses will be attracted by the potential of establishing offices in more cost-effective regions without having to worry about their ability to attract the best talent.
It is these dramatic demographic changes which will be the catalyst for new developments in all sectors including transportation, commercial, retail, logistics, residential, hospitals, education and venues. Set against the backdrop of the government’s austerity measures and public sector spending cuts, there will be a greater need for public-private partnerships (PPP) than ever before.
The most immediate opportunities which will arise will be around the core elements of the rail network with plans for new stations to be built in Birmingham, Manchester, Leeds and further potential stations along the northern forks in the East Midlands and South Yorkshire.
With direct government investment likely to be a much smaller percentage than on previous major infrastructure projects, the opportunities and requirements for private investment will be much greater and cover a wider number of projects. For example, Birmingham City Council will likely be given responsibility for the funding of the city’s new high-speed station and the facilities within its immediate vicinity. While a number of sponsors are likely to be involved in the various projects, each of them will need to source significant funding – presenting a number of attractive possibilities for infrastructure investors.
As previously noted, there will be investment opportunities within every sector and they will include everything from major new-build developments to the renovation and expansion of existing structures. Within the transportation sector, additional stations will be required to manage the changing demographics and new transport patterns of the regeneration zones. These include new transport interchanges, the expansion of the existing regional rail lines and car parking facilities. As the suburbs and number of commuters grows, there will be a greater need for more park-and-ride stations to counteract the potential for additional congestion on highways.
London’s sixth airport
Furthermore, Birmingham International Airport will in essence become the sixth London airport as high-speed rail will effectively bring it ‘closer’ to central London than Stansted currently is. This will lead to new retail opportunities and its likely expansion to meet increased capacity demands. Likewise the NEC, already an extremely popular event and conference venue, will become an accessible concert and sports venue for the London market as people will be able to make the return trip in a single evening.
Within the commercial sector, businesses will find the potential for commercially connected offices attractive as they will increase the ease of connections between customers, employees and other cities. This will spark interest from businesses wanting to engage closely with all of their stakeholders.
The new high-speed rail network will provide exciting retail opportunities similar to those currently found in airports, motorway rest areas and retail malls for both new and existing retail destinations. Additionally, the immediate area around each new high-speed station will become prime development space for major high street retailers like Selfridges and Harvey Nichols as well as high-end designer boutiques.
The potential for growth within the logistics and infrastructure markets presents a seemingly infinite number of possibilities. In addition to the creation of new high-speed stations, new power sub-stations, control centre depots and regional stations will be required, all of which will need sponsorship. The additional capacity that high-speed rail will create will open up a variety of options for manufacturers and distribution centres. Both the Irish and North Seas will become accessible, making property along the network in the Midlands and North West England useful for logistic centres and manufacturing bases where connectivity is vital.
As the demographic changes lead to the growth of existing communities and the development of new towns, new social infrastructure facilities including residential developments, hospitals and education institutions will offer significant investment opportunities. Evidence of the attractiveness of these for investors can be seen in the recent investment by fund manager HICL in the South Ayrshire Schools PPP. Finally, the new transport links will also support local employment growth by bringing employees closer to their offices.
The most dramatic example of how high speed can transform a city and region can be witnessed by the rapid regeneration of the city of Lille in North East France. The Eurostar high-speed rail line was first opened in Lille in 1993 and has provided the driver for moving the city’s economy from its historical industrial and agricultural base to one that is financial and service industry focused and thrives on its centrality to the major European cities of London, Paris, Amsterdam and Brussels. There are now more than 30 major multinational companies with headquarters in Lille and its population has grown by nearly 25 per cent in the two decades since high-speed rail first arrived.
Gateway to Europe
Within the UK, the potential for growth which high-speed rail offers can be seen in the ambitious plans for the town of Ashford in Kent. As the major hub for HS1, Ashford has commissioned leading architect Sir Terry Farrell to design a £2.5 billion (€2.8 billion; $4.0 billion) master-plan for the town’s development strategy to establish it as Britain’s gateway to Europe. The masterplan focuses on developing Ashford as an exciting, prosperous and sustainable place to work, live and do business while striving to double the town’s population within 20 years.
With the government predicting that the high-speed rail network will deliver benefits of £44 billion and further revenues of £27 billion, now is the time for infrastructure investors to act before property values increase as the network becomes a reality.
Lindsay Noble is head of rail for global construction consultant Davis Langdon, an AECOM company. AECOM is a global construction consultancy, providing managed solutions for clients investing in infrastructure, property and construction