A clunky planning regime and low supply are the main pain points for Chinese investors to fund Scottish development opportunities, according to CITIC & GBA Asset Management chairman Grace Bian.
Bian, whose company manages more than £1bn of Chinese private and institutional capital aimed at the UK and Europe, told EG that Chinese investors had concerns after a 31 May event to present Scotland’s major opportunities (see slideshow, below).
SNP cabinet secretary Derek Mackay launched the event, co-organised by Scottish Cities Alliance, at Scottish Development International’s newly launched office at the Scottish Government’s London office at 58 Victoria Embankment, EC4.
Bian said: “I have a good impression and Scotland has good opportunities for growth but I do worry that if all our investors invest in Scotland, demand could suddenly outstrip supply.
“I think Chinese investors will care about a few things. How supportive is the local government for the project we are going to invest in? Are there any subsidies at the ground level, or any funding that is given to the project? How quick is the planning?
“Regarding return on investment, we are not looking for something in 10 years, we are looking for a quick turnaround, 24 to 36 months maximum, and no longer than five years. So the time-scale is important.
“Imagine you enter into a project which is in discussions for 12 months and 12 months in planning. You are looking at 24 months. The UK is very different to building in China; in China you can build a skyscraper in one year. In the UK it would probably take you two or three years. Nobody has time for that.”
CBRE figures show that overseas investment into Scotland increased by around 50% between 2014 and 2016.
Instability caused by political pressure for a second Scottish independence referendum and Brexit have affected investment volumes, however.
While investment volumes dipped in the months leading up to the first independence referendum in September 2014, transactions jumped in the last quarter of that year as deals that had been put on hold went through.
Nevertheless, uncertainty has been a key factor in the lower volumes seen in 2015 and 2016.
But Bian said: “To be honest, when we made a decision to invest in the UK, of course we thought the Brexit issue would be much better. For Chinese investors, prospects in the UK are always important. Unfortunately, Brexit happened, so the UK can’t be a stepping stone into Europe; there is a different strategy and we are more careful investing in the UK.
“But if the price and the deal are good, it doesn’t matter what the political issues are. Investors can still make money.”
What is the SNP doing to encourage investment in Scottish development?
Despite the Scottish government’s pro-independence stance, SNP cabinet secretary Mackay said the Scottish government knew how important it was to work with the business community.
He was keen to push the simplified planning zone concept, which he said could allow buildings that matched a certain criteria to go through in as little as three days.
By implementing competitive tax rates, especially around building transactions, and a generous business rates relief package, the government was trying to support the property industry, said Mackay.
He added: “We are investing in infrastructure – transport, digital and housing – to ensure we have the economic backbone that supports further investment. We are investing in the future, in skills, in education and supporting our business partnerships and enterprise agencies to attract further investment.
“For example, we can project the extra tax that the development will generate and we can help bring that development forward by way of public investment.”
He added: “We have implemented city deals in which the councils work with the Scottish and UK governments, putting through infrastructure investment to stimulate the private sector. Planning decisions are taken more quickly. And new innovations such as simplified planning zones can mean automatic approval for certain types of development.
“On empty land rates, Scottish relief is actually better than it is in most of the UK, and regarding speculative buildings, I think it is important to support these within Scotland, where we don’t pay business rates before occupation.”
Addressing the current climate of political uncertainty over Brexit and the prospect of a second referendum, he added: “We knew access to the single market was important. The benefits add up. So the Scottish government will put pressure on the government to get the best possible Brexit deal for the whole of the UK.
“We are trying to deliver a democratic mandate and ensure we have the economic levers to expand our economy. If that means there is some divergence from the UK, that may be necessary, but it is a well informed choice that we will put to the people that is based on sound, pragmatic economic considerations.”
Opportunities in Scotland
Delegates from some of Scotland’s largest regeneration projects pitched to investors at the event. Opportunities for investment included projects in Edinburgh, Glasgow and Dundee.
The International Business Gateway is a 37-acre strategic development adjacent to Edinburgh airport. Its plans call for 250,000 sq ft of offices, 1,410 hotel rooms and 2,350 homes, split between PRS, market sale and affordable.
Plans for phase one of the scheme, which will provide 130,000 sq ft of offices, 1,150 hotel rooms and 396 homes, have been submitted by Murray Estates, New Islington, Frogmore and Salmon Harvester.
Clyde Gateway and Highbridge Properties launched what will be one of the largest office parks in Glasgow. The Magenta development will comprise up to 1.2m sq ft of offices across 67 acres along the River Clyde. The scheme offers short-term, medium and long-term investment opportunities.
It is part of the £1.5bn Clyde Gateway regeneration, which currently includes 500,000 sq ft of completed office space and 2,000 homes. A further 2,000 homes are in planning. The total development area is 2,075 acres.
Dundee Waterfront is a £1bn, 593-acre scheme spanning the River Tay. Its centrepiece, the V&A museum, is due to open next year. Investment opportunities exist within the £500m Dundee City Council-owned Central Waterfront area, and include 2m sq ft of mixed-use development.
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