Catherine Henry on why unprecedented investment, north-shoring, and a hunt for talent are making Yorkshire and the North East more popular than ever
It is clear to see the property market in Yorkshire and the North East has improved dramatically over the last two years. We have seen an influx of new and exciting businesses moving into the region as well as existing companies looking to either add to their existing portfolio or restructure in preparation for a future sale.
On the commercial side, further expansion work has recently started on the Teesside Advanced Manufacturing Park in Middlesbrough. The site houses 70,000 square metres of office, workshop, and laboratory space, hybrid and light industrial units, and other larger custom-designed buildings, while property consultancy Sanderson Weatherall has reinforced its commitment to the Tees Valley by moving to a new office in Stockton's Bowesfield Park. The firm said it was attracted to the development by the number of established professional practices already located at Bowesfield Park, including Archers Law, Handelsbanken, and Santander.
Significant residential developments planned across the North include Surgos's £1.8m construction of affordable homes in Northumberland. Also exciting is the acquisition of Flaxby Golf Course in north Yorkshire, which will transform the course into a £200m town. Subject to planning, construction of 1,000 homes, a school, shops, and community facilities will begin at the end of next year.
As a result of these kinds of developments, law firms across the region have noticed an increase in office to residential conversions. For example, the iconic Metrovik House in Newcastle city centre will be transformed into multi-million-pound student accommodation ahead of the 2016 academic year. Barbara Painter, Newcastle real estate partner and development specialist at international firm Bond Dickinson, said: 'There is a continued strong demand from student developers, although this is having
a knock-on effect on what were the traditional student letting areas of the city.'
In Sheffield, work has recently begun on the £65m property development at New Era Square. This is a 20-storey mixed leisure, commercial, and residential development in the heart of the city, which was entirely backed and funded by overseas investors. There are more exciting times ahead for developments in the Sheffield city region, with demolition due to start in the next few months in preparation for the construction of the new £480m retail, commercial, residential, and leisure scheme known as the 'Sheffield Retail Quarter'.
As Tanya Holt, real estate partner at Nabarro, commented: 'This will trigger wider investment into the region and further developments, such as the redevelopment of the former NUM building in the centre of Sheffield, on which we are currently acting for the Barnsley-based developer, Quest Property. While the view is that the market is likely to slow down in the coming months, impacted of course by the uncertainty around Brexit, the regions currently continue to offer an attractive investment prospect, aided by the focus around the government's Northern Powerhouse Initiative. This is something which we are seeing from our regional and national clients. As a result, we are continuing to invest in
our people and are always on the look out to recruit new talent.'
The Brexit conundrum
The looming referendum is perhaps one of the most significant decisions affecting Britain's economy that we will face this decade. Opinions on the EU referendum are very much divided. Advocates of Brexit claim that leaving will put Britain in a strong position for negotiating beneficial trade deals, but this argument rests upon whether we are seen as a desirable trading partner. Others predict that to leave will risk our economic stability and subsequently cause a loss of jobs in certain areas. Perhaps the greatest uncertainty associated with leaving the EU is that no country has ever done it before, so no one can really predict the exact result.
The effect of Brexit on the law is uncertain. The changes in legislation could either remove areas of work or create work for lawyers in advising commercial clients of the changes. A complete exit from the EU would leave Britain in control of all its legislation and would see us having to establish >> >> separate trade arrangements with the EU.
On this, Painter remarked that Brexit uncertainty was putting a brake on occupier activity, which the firm expected to continue into the second quarter of the year.
'This is coupled with relatively few new quality office developments coming on stream and limited grade A supply, meaning that there is reduced choice at the moment,' she continued. 'While perhaps not reflective of the market generally,
Bond Dickinson's North East real estate sector team continues to be very busy across the whole of the sector, with particular activity around residential and commercial investment, housing delivery,
and strategic land.'
Undoubtedly, the increase in transactional work
in the North has had a positive impact on the recruitment of real estate lawyers across the region. High-street firms through to regional and national practices are expanding their real estate teams.
As things stand at the moment, the picture is fairly positive. However, the impact of the recession is
still being felt, and there are challenges for firms, including a distinct lack of real estate lawyers with between three and five years' post-qualification experience (PQE).
As Rozie Hunter, my colleague and managing associate at BCL Legal, explains: 'Candidates from smaller practices who may not have had the opportunity to work for recognised regional or national firms are now being offered interviews. More consideration is being given to character as well as pedigree, giving lawyers from smaller firms the opportunity to compete with their top-tier counterparts and, in some cases, beating them
to the best jobs.'
In terms of the legal market, the North is fast becoming a popular location to settle. Yorkshire and the North East are home to recognised international firms, leading regional practices, and long-established high-street firms. This is being compounded by 'north-shoring'. This concept isn't new to other professional services but is now becoming common practice for law firms. While London will remain a key centre for City firms, it is significant that the regions are being seen as a viable option for future business practice. There is a growing trend for national law firms to north-shore their legal services to the regions, which is increasing the opportunity for lawyers to deal
with commercial work, particularly in real estate.
There are many reasons why firms are making the decision to move north. For example, firms can employ lawyers without the City price tag and operate with lower running costs. There is also a high number of law graduates in major cities, so firms can capitalise on those seeking paralegal work. In addition, switched-on firms are recognising that there is a strong talent pool of lawyers in the regions who will benefit from the work.
Retention rate hike
Immediately after the recession hit Britain in
2008, retention rates for newly qualified solicitors reached an all-time low. Fast forward eight years and there is an upturn in the economy, and a renewed optimism means retention rates are the highest they have been. Most regional firms are retaining over 80 per cent of their trainees and some even 100 per cent. In addition, real estate continues to be the most in-demand area of
law. As well as general real estate, we are noticing an increase in niche spin-off areas such as construction and property litigation. As
mentioned earlier, ambitious, enthusiastic, and driven junior lawyers are now able to take a
'step up' from smaller practices into national
and international firms.
In the regions, 2015 finally saw newly qualified salaries at the top-tier firms reach £40,000 - the first increase since 2008. In addition, mid-tier firms have taken this into consideration and have increased remuneration packages in order to remain competitive and attract external talent.
The uncertainty surrounding Brexit has not impacted the buoyancy of the legal landscape - yet. Britain currently attracts the highest level of commercial property investment in Europe and a significant proportion of that comes from overseas investors. Yorkshire's regional heavyweights, the Big Six, continue to flourish in a highly competitive marketplace. Financial recovery is on the horizon and commercial property work has experienced a healthy increase due to, in part, private investment. All of this is good news for trainee solicitors across the region: external opportunities for mid-level lawyers are plentiful and promotion opportunities are in healthy supply.