UK Cities DNA | What defines and shapes our towns and cities?
Exploring the evolving DNA of UK towns and cities
4 minutes to read
UK Cities DNA. What defines our towns and cities, what shapes their identity, what makes them tick? What is the lifeblood for local employment, what provides the livelihood for their residential base? What makes them unique? And what does the real estate market need to do to not just reactively reflect, but to proactively support, nurture and drive these genetics?
Welcome to a major new Knight Frank, Research-led initiative: UK Cities DNA. Over the course of 12 Insight papers, we’ll be exploring the very broad theme of the evolving DNA of UK towns and cities and juxtaposing this with existing and future property supply. Essentially, balancing the equation between macro-economic dynamics and real estate need and requirements – where there is equilibrium and harmony, and perhaps more tellingly, where there is discord and mismatch.
Our Insight papers range from the macro, through the regional, to the more micro. From the general to the more thematic.
At the most macro level: why invest in the UK at all - from both a macro-economic and real estate perspective? On both issues, we present a new, more compelling case than the somewhat lazy catch all of merely being a “safe haven”. Economically, the country is undergoing a strong revival and the UK’s position relative to other countries has improved. This, coupled with high exposure and commitment to growth sectors (e.g. technology, life sciences and green energy) and a pipeline of structural reform, infrastructure development and productivity improvement is providing a generational opportunity for the sector.
How does this opportunity percolate beyond the obvious haven of London? It’s worth stressing that over recent years, an average of 55% of inbound capital has flowed into regional markets, compared to an average of 38% in the pre-pandemic years. In turn, the major regional cities contribute some 61% of annual GDP. On the residential side, more than two thirds of the current build-to-rent (BTR) pipeline is located outside of London.
Levelling up or levelling down? Semantics aside, how will a change in government influence policy particularly around major regional infrastructure projects and what might the real estate implications be? It is fair to say that addressing regional inequalities is still high on the agenda – arguably even higher than before – but the perennial question will always be whether these ambitions are supported by adequate funding.
The UK’s economic DNA is demonstrably changing. We’re seeing ongoing explosive growth in industries such as Information and Communications and Professional, Scientific and Technology Services, the former forecast to account for over 11% of national GVA by 2050, compared with a tiny 0.8% back in 1991.
Of course, each town and city is underpinned by its own unique DNA. Our towns and cities have all evolved from different economic starting points, their current economic composition will vary dramatically, as will their future direction of travel. Not all will grow at the same rate, nor necessarily down the same industry paths.
Specialist industry clusters will emerge, perhaps in unlikely locations – they are already. Where will what is now incubator space ultimately scale up?
On a more cautionary note, this process of constant evolution and DNA mutation will no doubt also bring challenges for property markets, with some assets rendered obsolete as the world moves on from what formerly made them fit-for-purpose. We can’t be blind to the two big ‘O’ threats – oversupply and obsolescence. In fact, we go as far to as identify and explore four obsolescence risk categories – regulatory, functional, physical and financial.
What to do with obsolete stock or an obsolete asset? A key takeaway is that there can be no one size fits all solution, but there are a host of options, be that around refurbishing, refitting, repositioning or repurposing. We explore the considerations around all of these in search of asset optimisation.
Repositioning and repurposing are massive industry buzzwords at the moment, but the reality is the whole process is far more complex than most realise and many potential repurposing projects are simply not viable for any number of reasons, be they planning or, more likely, valuation-based. Nevertheless, we map out the various stages of the repurposing journey, the barriers that need to be overcome to make repurposing viable, the keys to the proverbial kingdom.
Ultimately, understanding the changing DNA of a town or city holds the key to mapping out its changing real estate requirements. DNA is complex, as is the process of DNA profiling. Actual genetic engineering of the real estate is an ambitious but necessary mission.
We look forward to engaging with you as we embark upon this journey.
Download our first insight paper now