Hines UK To Grow Development Arm, Eyes Manchester And Birmingham
Hines UK is on the move. After two years in which its focus was squarely on asset and investment management, the development arm of the business is now receiving attention.
Does this mean intensifying its interest in Manchester and Birmingham? And if it does, what will it build?
Bisnow spoke exclusively to Hines UK's new head of development, Robbie Pitman, to find out.
This week Hines UK announced that a new role has been created, as the Texan-owned investor continues to grow its development pipeline in the UK. With a range of commercial, student housing and logistics sites acquired in the last 12 months — including the £41M flagship retail and residential scheme above the new Bond Street Underground station — Hines is ready to roar.
Today Hines UK is managing a combined UK property portfolio worth more than £2B. The investor/developer has sites in London and key regional cities, with Birmingham’s Brindleyplace office campus at the top of the list. And according to Pitman, the regional cities could be a target for more development.
“The time had come after the last two years to bolster and add weight to the team on the development delivery side,” Pitman told Bisnow.
“I’m only in my fourth week in post, so still settling in, but at the moment the focus is on student accommodation, along with a broader remit for London offices, and some industrial, and I think we’ll carry that on, taking a broad view of the sectors. But the core will be student housing and, increasingly, industrial.”
Industrial property is already a growing focus for Hines, thanks to a partnership with Chancerygate. The most recent fruit of the joint venture was the purchase of a 3.75-acre site at the Advanced Manufacturing Hub in Birmingham. The duo plan a 93K SF, 19-unit speculative industrial and warehouse scheme with a gross development value of around £14M. It is the first scheme for the venture.
“We’re already active in the regions on student housing, in places as far apart as Lancaster and Ireland," Pitman said. "The challenge for us in Birmingham — and an increasing focus in Manchester — is providing student accommodation in a mature market. It is simply harder to find good sites, although working with our operating partner Aparto does help.”
Pitman said he expects some more site purchases before the year is out and a small but select crop of new development opportunities.
“We’ve a couple more purchases due before the end of the year, and one year in I’d like to think we will have secured three or more schemes with a development angle whether that is student housing, industrial or commercial offices,” Pitman said.
The office market is one to approach with caution, Pitman suggested. In Birmingham, the Brindleyplace investment has paid off handsomely with a first half deals rush that has dominated the Birmingham office market. WeWork are among the signings.
In Manchester, Hines and German investment company Universal-Investment acquired Royal Exchange. The 2016 deal, priced by the market at £85M, bought a 264K SF chunk of mixed-use historic floorspace which has since found its place in the fast-moving office scene.
“Commercial offices are a sector we’ve historically been more involved with as an investment. It is a market we will look at carefully, and everything depends on the duration of the investment. Investing in regional offices would be attractive to us, the difficulty is that it is also attractive to everyone else which makes getting the right opportunity a struggle,” he said.
“We’re very positive about the Birmingham and Manchester markets, and we are looking there in several different sectors.”
At least one large regional development opportunity escaped Hines. In 2013 it acquired the 178K SF Landmark site, a former cinema at the corner of Manchester's Oxford Street and St Peter’s Square. By 2017 the scheme was in the hands of Barings, who have now signed their first letting. JLL will take a 15-year lease to relocate its 170-strong Manchester team from One Piccadilly Gardens into 14K SF on the 10th floor.
Do the UK regions feel like a risky place to build for an investor used to larger, more liquid markets in the U.S. and Europe?
“We have different funds, some want larger lots, some smaller, some are focused on smaller European assets and yes than can be an issue for some global finds, but not others. We like diversity and Manchester is now establishing itself as a good market and a prime location. Definitely regions like Manchester are on our radar,” Pitman said.
Pitman spent three years in a construction and development role at Hines between 2008 and 2011, before leaving to join boutique property company Viridis Real Estate. As deputy managing director, he was responsible for overseeing the delivery of more than 1M SF of mainly commercial office space and student accommodation. He was responsible for the redevelopment of the former Guardian headquarters in Farringdon into The Ray, a 100K SF office scheme pre-let to LinkedIn as its UK base at the start of 2019.
Pitman joins an existing experienced development team at Hines, with the firm expecting to make further appointments as it looks to grow its pipeline of projects across London and key regional markets.
Hines doesn't need to invest in Manchester or Birmingham. The privately owned global real estate investment firm has approximately $121B of assets under management, and 128 developments currently underway around the world. UK regional cities are relatively small beer to this Texan giant. But as opportunities narrow, even the biggest beasts in property are seeing the value in exploring the UK regional jungle.