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Remember when the biggest HS2 debate was if Manchester could get an underground station (pictured) or not? Credit: Bennett Associates

The Subplot

The Subplot | Trains and beds

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  • HS2 decision day: the property industry isn’t losing sleep
  • Elevator pitch: your regular rundown of the ups and downs from this week


The doubtful future of HS2 raises questions

Real estate is not seriously worried by the potential implosion of plans for Northern high-speed rail lines. But there are real worries about wider infrastructure spending and the danger of complacency.

By the time you read this, maybe it will all be clear. Or maybe not. This week, the government’s plans for the HS2 line to Manchester from Crewe (phase 2b), and the potential revival under Labour of the Yorkshire line to Leeds, were both as transparent as mushy peas. Just a few weeks ago the debate was all about a lovely new Manchester terminal and whether £5bn was too much to pay to push it underground (see image). Today that all feels very deckchairs-on-the-Titanic.

How we got here

To recap: The FT calculated HS2 costs have escalated from £70bn to £91bn, maybe a lot more, while official watchdog the Infrastructure and Projects Authority warned it could be undeliverable. The Birmingham to Crewe leg is already on a two-year hold. On Monday a transport minister, answering an urgent question in the House of Commons, went to enormously inventive lengths to avoid committing to the Manchester leg, which isn’t due for completion until 2041. Talking to the media, a Labour spokesperson seemed to commit to reviving the Leeds leg axed by Boris Johnson in 2021.


Everyone who’s looked at the figures agrees that what is already under construction – a high-speed line from Birmingham to a West London freight depot (Old Oak Common) – is an expensive chocolate teapot. The Oakervee Review of 2020 made it clear that the whole scheme works together, as one package, or not at all: just building part of HS2 makes no economic sense, unless you think £35bn-£45bn to improve the commuter service out of Milton Keynes is money well spent.

No one will go bust

First, the good news. Nobody believes that Northern property investment or development decisions will turn bad, or investments will slip underwater, if the plug is pulled on HS2 North. One senior agent answered Subplot’s question with a big smiley emoji and a festoon of exclamation marks, which captures the mood perfectly. Only a blind optimist would have been silly enough to gamble today on a politically uncertain project due for completion in 2041. To be sure, HS2 helped with the mood – cherry on the bun, icing on the cake – but it was a plus, even in big area-based redevelopments obviously in the HS2 slipstream like Piccadilly East or Ardwick. We can probably forget this aspect of the problem.

Yorkshire grit

Leeds and Sheffield readers will be feeling exhausted by this point because they’ve been here before. The Eastern leg of HS2 was wobbly for years, and finally chopped off by Boris Johnson in 2021. The result: life goes on. Indeed, both cities have had a good few years.

“I’m not aware of anyone, HBD included, who has acquired anything that relies solely on HS2 arriving in Manchester,” says HBD executive director Adam Brady. “This is the same for Leeds. HS2 has been part of the overall investment story but in my opinion a ‘nice to have’ and, in reality, too far in the future to rely upon or carry real weight. Our investment decisions focus on many factors, the loss of HS2 will not stop us investing in either city.”

More pressing matters

Brady’s view is widely shared. “I’ve been sceptical for a long time about the commitment and delivery of HS2 to the North of England and am not surprised by the recent coverage around its potential demise,” says John Ogden, CBRE managing director for the North.

“What is really needed to ensure economic growth in our region and Northern towns and cities is a reliable, integrated transport system that connects East to West as well as North to South and has the capacity to carry many more passengers speedily and efficiently,” he says. “Does the potential collapse of HS2 cause immediate damage to our region other than loss of faith? I’d say ‘no’. We have more pressing matters such as improving connectivity and capacity across the North.”

Amazing but true

Nerdy point: the government’s economic case for HS2 never went beyond so-called “level 2” impacts meaning nobody worked out what the effect would be on property and regeneration, despite this being the main selling point in the North. “The benefits of changing land use are not quantified in the HS2 benefit-cost ratio,” said the Oakervee Review in 2020 (head to section 11). In the meantime, the review judged that the cost-benefit ratio would be between £1.30 and £1.50 return for each £1 spent over the first 60 years of operation. It called this “low-medium” value for money. The scheme would need to cost £138bn to score below 1, which is when it becomes an unarguable waste of time.

All is not well

HS2 was meant to solve problems, and without it those problems remain. There are genuine worries about rail capacity and a lot more worries about how reliably Whitehall screws up decision-making on Northern infrastructure. If cancelling HS2 meant £35bn available to complete high-speed Northern Powerhouse Rail there’d be a lot of cheers (spoiler: it won’t). The real worry is that a cocky “we’ll be okay” attitude to HS2’s non-arrival in Manchester feeds into an already potentially complacent approach to the city’s economic strength. The Resolution Foundation has drawn attention to this in a recent report, and it is worth a few minutes of your time.

Fingers out

“‘Job done’ complacency on Greater Manchester’s economic revival is badly misplaced,” the Resolution Foundation says. “Greater Manchester is still at the foothills of its economic revival, and progress needs turbo-charging because on current trends it will take almost a century to reduce its productivity gap with London to a reasonable point.”

Something ambitious is clearly needed, a view echoed by CBRE’s Ogden. “HS2’s arrival at Manchester Piccadilly and just as importantly Manchester Airport – the North’s gateway to the world – remains integral to boosting regional economic growth and productivity,” he says. “In short, we want and deserve HS2 and a bigger city centre, better local connectivity, improvements in education provision, and more homes. Why should Greater Manchester and the North settle for anything less?”

Harsh but fair?

The property industry – developers, big international money, institutions, local investors – aren’t happy. Nobody is. But they aren’t finger-bitingly worried by HS2 collapsing. When HS2 was announced in 2010, senior figures with skin in the game were unbowled over. “Only a Londoner could think that what Manchester’s economy needs is a faster link to London,” one said. In public, the position was ‘if you offer us cake, we’ll have cake’. In private, nobody in property would have put HS2 at the top of their (long) infrastructure wish list. Plus, remember those Oakervee cost-benefit ratios. In other words, Rishi Sunak has a point.


Going up, or going down? This week’s movers

Mixed fortunes in the world of beds-to-rent. Co-living accidentally hits the down button in Salford, while student housing rockets to the penthouse in Leeds. Doors closing!

Student flats

Are investors returning to purpose-built student accommodation (PBSA)? Maybe so, if a deal involving Israeli insurance group Menora Mivtachin Group is a guide. The firm signed a £500m funding deal with Cain International. The deal unlocks another 2,400 beds, mostly in the North.

With Olympian Homes, Cain will deliver the 45-storey Cirrus Point in Leeds to provide 660 beds across 255,000 sq ft, making it the tallest PBSA building in the world and the tallest building in the city. It is due for completion in 2026.

In York, in time for the 2025-2026 academic year, Rialto House will provide 275 beds with a 10-minute walk from the city centre and a seven-minute bus ride from the University of York. With Fusion Group, Cain will be delivering further projects in Liverpool and Manchester.

Investors see a market getting tighter – and they love Leeds. Just 50 new developments will be completed in the UK in 2023-2024, less than half the level seen in 2016-2017, according to Knight Frank’s latest bulletin. Leeds saw the largest number of new deliveries at 2,328 beds. Knight Frank says someone has to get moving because student numbers will rise by 16% (263,000 students) by 2030.


We can now add Salford City Council to the list of planning authorities (hiya Liverpool!) who take a more than a usually dim view of co-living, the flat-share hybrid born out of student housing and the build-to-rent boom. Beech Holdings applied for permission to convert a long-empty office block, and a neighbouring office block which is already residential, into 238 co-living units. Unlike many applicants, Beech could point to existing co-living space it operates at Westpoint, in nearby Trafford borough. This ought to have been an advantage, but wasn’t. Likewise, planners ought to have liked Beech’s decision to create more than just a cluster of souped-up student rooms: each of the 322 sq ft one-bed and 215 sq ft studios would be a dinky little flatlet.

Salford planners didn’t reject co-living out of hand (“in certain parts of the city”) but there was hesitation that it would create a samey kind of demographic, they were worried by double beds (meaning double occupancy, so less space per person), and by the neighbourhood having relatively little in the way of facilities. They didn’t understand why one block provided so few desk spaces, and both so few media spaces (“it is questioned whether this is sufficient if people want to view different TV programmes and/or films”), and thought it would be even worse at peak times.

Officers said “the size of the individual units and the size and types of available shared spaces available for residents to use are insufficient to provide future occupants with an acceptable level of amenity. This in turn will not provide for a decent home or healthy living environment.”

Co-living has had a tricky time from the start: see Subplot July 2022 for a summary of the patchy progress in convincing people it’s not over-crowded and unwholesome. But the Salford conclusion may change things. Salford’s decision report described the refusal as an “in principle” objection, which – given that Beech had gone down the mini-flat route, itself a concession to planners – sounds like it closes the lid to most co-living. Maybe mass co-living is doomed, maybe not, but it begins to look like only firm central government guidance could overcome this kind of objection. Who is betting any government, either blue or red, will do that?

Get in touch with David Thame: [email protected]

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