City urged to cash in on regeneration boom

City investors have been urged to consider investing in the buoyant regeneration sector.

The call from fund manager Morley and regeneration agency English Partnerships (EP) comes as the pair publish research by property data company IPD. This shows that regeneration investments have outperformed the rest of the property industry over the past five years.

The figures, published today, show that returns from 581 regeneration projects across England valued at £7.5bn have averaged 16.7% a year since 2001. This compares with 15.1% average for UK property investments as a whole.

Although regeneration has been slightly eclipsed in the past three years because of a strong performance by London offices, the figures will be welcomed by prime minister Gordon Brown in his drive to encourage investment for the extra 70,000 homes each year that his recent green paper promised (27 July, page 20).

Neil Gardiner, a fund manager at Morley Fund Management, said: “I think the City will look more at regeneration as returns from commercial investments slow. Regeneration now has the track record and institutional investors can’t ignore it.”

Regeneration has the track record and investors cannot ignore it

Neil Gardiner, Morley

Morley manages the £130m investment vehicle Igloo, which is behind waterside projects in Leeds and Leicester. It has £2.5bn of developments in the pipeline.

Gardiner said he hoped to raise a minimum of £370m to invest in Igloo over the next few years as a result of significant interest in the City.

Steve Carr, head of policy and economics at EP, said much thought was being given to attracting more investors and fund managers.

He said: “The debate is still going on about whether or not we could set up regeneration as an asset class and whether this would encourage investors.”

He added that a “fund of funds” might be established that would cover the whole of England and invest in large developments.