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This week the Government confirmed HS2 will be extended into Yorkshire, the East Midlands and the North West. For cities along the route this news will be a great help in their drive to attract private sector investment. But cities in these regions which won’t directly enjoy the benefits of HS2 should not be deterred from taking steps to attract more investment themselves. While transports links are undoubtedly a big draw for investors, other factors such as reputation, relationships and pro-investment behaviour also play a key role in determining how attractive a city is to potential investors and developers.
These issues are discussed in our new report, ‘What investors want: a guide for cities’, which examines the top priorities for investors when choosing which places to invest in, and offers practical advice for cities on how to make their places as attractive as possible for investors.
The report shows that excellent transport links – both within cities, and beyond to other places – are a key priority for investors when considering the location of their next real estate or infrastructure investment. For some projects this means fast links to London, for others access to neighbouring cities are most important.
The value of connectivity is visible in the way new transport schemes trigger investor interest – and already we have seen how cities on the HS2 route are taking advantage. In Birmingham, for example, the promise of a faster connection to London has led to a large-scale city centre development. Not only are the improved connections themselves an attraction, the scheme’s announcement also raised the city’s profile for investors and encouraged them to explore the opportunities the city offers.
Leeds has also capitalised on HS2 by centering developments on the new station, which will be a key focus of investor interest in the coming years. As such, creating investment opportunities in this area was a shrewd move by local leaders. The energy with which both Leeds and Birmingham are publicising these development plans indicates they are prioritising the investments and will be quick to accommodate investor needs and easy to work with.
However, transport links are just one part of the equation for investors and developers, and our research identifies three other characteristics in cities which are equally important. Firstly, the strength of the local economy, and its potential for growth in terms of businesses and jobs. Second, a visibly pro-investment city leadership reassures investors their needs and expectations will be accommodated. Third, a city willing to intervene to get projects over the line gives investors confidence they will be supported if unforeseen circumstances hinder the success of their developments.
As such, there are plenty of other factors beyond transport links for cities to consider in stepping up efforts to attract more investment. The key message from investors is that every city across the country can take steps to make their places a more appealing prospect for investment – regardless of their relative economic strengths or connections to national infrastructure projects.
Instead of being distracted by factors outside their influence, cities with weaker economies should focus on the following steps:
1) Knowing their offer – Cities need to understand their strengths are in the eyes of investors, and focus on efforts to promote these selling points through promotional material and outreach.
2) Knowing their audience – Understanding how investors think and behave is critical – including their timescales, risk and scale appetites and return expectations
3) Networking to sell the city – Relationships are central to the investment industry, so cities should develop personal connections with investors and their advisors. Events are a good way to make new contacts, and afterwards cities can keep in touch with investors by sending up-to-date information on opportunities which suit them.
4) Being willing to step in – When the success of investments are challenged by unforeseen circumstances, or the returns on offer are insufficient to draw interest, cities may need to intervene to get a project over the line. A number of tools are available, such as providing loans, assets or providing guarantees to reduce risks.
This underlines the fact that there is much that all cities can do to step up efforts to attract investment, even if they are relatively off-track when it comes to the location of major national infrastructure project such as HS2. Taking steps to understand the priorities of investors, and to proactively respond to them, will be crucial for every city in driving growth in their local economies in the coming years.
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