£10.6bn of investment in city offers recovery hope

INVESTMENT in city development hit £10.6 billion last year – the highest level since the start of the recession – raising hopes that Edinburgh is thawing out from the economic frost.

A report outlining the market value of developments in 2011, either completed, ongoing or in the pipeline, showed it had risen by £600 million on the previous year, though it was still £300m shy of figures posted before the slump.

Despite soaring numbers of planning applications, however, experts have described the true scale of the upturn as “pretty 
minimal”.

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They point to the two-thirds of would-be developments that failed to progress beyond the planning stage in 2011 and suggested that “chickens are being counted before they are hatched”.

The study, to go before councillors next Thursday, examined the vibrancy of the city property sectors – housing, offices, industry, retail, hotels, culture and leisure, and student accommodation – noting that house building had been the year’s strongest performer, accounting for 72 per cent of all “active” 
construction.

While offices made up more than £2.5bn of the city’s total potential development value, only six per cent of applications had ever got off the ground.

Properties in the cultural and leisure sector, such as the revamped National Museum of Scotland and National Portrait Gallery, that traditionally perform poorly in the development stakes contributed ten per cent of delivered 
construction.

There was “virtually no industrial development on any significant scale in 2011”, the report added.

Reacting to the research, Councillor Ian Perry, who heads the planning committee, said: “There’s lots of figures in there which suggest that although Edinburgh is feeling the effect of the downturn, the economy is holding up better than almost anywhere else outside of London.

“What we’ve done in Craigmillar, for instance, is knock things down and start again. There are three sites going in Craigmillar now, whereas in 2009 and 2010 that stopped.”

Cllr Perry suggested that a three-year high in planning applications was one of the signals for growth and said the council would support 20,000 new jobs in the next five years as part of a new strategy being launched in September.

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John Bury, head of planning, said despite being in a double-dip recession the city was “getting closer” to where it was in 2008 and seeing a “steady recovery”.

However, John Boyle, head of research at Rettie and Co, said the six per cent rise in developments’ market value since 2010 was too insignificant to be an indicator of recovery.

“You have to look at the percentage change and really it’s pretty minimal,” he said. “The market has been bouncing along the bottom since 2008.

“You would need to see a considerably higher rise of about ten or 15 per cent before you can say there’s green shoots of recovery.

“The property market tends to lag. Until the economy comes out of this I don’t think the property market will be coming back anytime soon.”