HS2’s Venner: ‘We’ve proven with Euston that the government can do business’

Controversy has swirled around the HS2 high-speed rail project over the past 12 months, but commercial development director Tom Venner insists he has a “match-fit team” in place. “We’ve proven with Euston that the government can do business and it can create an investable proposition that the private sector wants to invest in.  Now we’ve got to do it again and again to lever private sector investment into the regions as much as London,” he says. [caption id="attachment_927375" align="alignright" width="200"] Tom Venner[/caption] His assertion comes just weeks after the resignation of HS2’s chairman Sir Terry Morgan. At the same time, he also resigned from his role as chairman of Crossrail, a position he had held for 10 years, following confirmation that London’s new railway line was indefinitely delayed and its budget had ballooned. Allan Cook, the former chair of engineering firm WS Atkins, has replaced Morgan as chairman of HS2. Last summer HS2, which is designed to run from London to Leeds via Birmingham and Manchester, was also investigated by the National Audit Office over allegations around land purchasing costs and concerns it could overshoot its £56bn budget. “My landed property colleagues have gone through a huge amount of prodding and poking by the NAO and they’ve come out with a clean bill of health,” Venner says. Venner, who joined Landsec in January 2017, leads the team responsible for delivering more than 16m sq ft of commercial development opportunities around HS2’s planned stations. He sums up his team’s role as being to remove as much of the railway risk from the commercial development opportunities as possible to make them attractive to developers. Private investment and delivery However, could the drama that surrounded the £56bn scheme in 2018 still give potential investors in the circa £12bn (GDV) of commercial development opportunities pause for thought? “I hope not. Evidence so far has suggested not,” Venner says. Some of that evidence Venner alludes to includes a 25-year development agreement with Lendlease for the circa £5.8bn mixed-use regeneration project around Euston station. The deal, signed in March, came after HS2 secured Royal Assent for the first phase of the line between London and Birmingham in February 2017. Lendlease beat off competition from Argent Related and Canary Wharf Group to land the master development partner role. It has been a long time in the making. British Land was originally chosen as the development partner for the estate in 2007, but plans were shelved in 2012 following the financial crisis and a period of indecision over whether HS2 would be given the green light. But despite this, and high-profile opposition from the likes of London mayor Sadiq Khan, work at Euston is in progress. Currently, the buildings to the west of Euston station are being demolished to make way for the new train platforms. Meanwhile, there is also archaeological work being carried out to remove more than 45,000 skeletons from the burial ground in St James’s Gardens. With work on Euston finally underway, Venner and his team are now evaluating “the appropriate time” to go to the market with the other commercial opportunities. However, with the commercial development sites on phase 1 not available until 2026 when the London to Birmingham part of the railway line is slated to complete, Venner concedes that they can’t expect developers “to invest in planning for eight to 10 years before seeing any return. We’ve got to be realistic”. This is why the commercial opportunities at Old Oak Common, where HS2 will intersect with Crossrail, and around the Curzon Street station in Birmingham, will not be taken to the market for at least another year. Click here for larger version of map The second part of the route between Birmingham and Leeds will not be brought forward until after Royal Assent is granted for it, an application for which is not going to be submitted before 2020. But in the meantime Venner and his team will continue to mull over their options as to how to facilitate the commercial development around the stations. This includes discussions with the Old Oak and Park Royal Development Corporation, which is charged with regenerating the West London area, about the possibility of packaging sites up. “Euston is by far the most complicated and exposes our development partner to the greatest risk and so that form of transaction works for it,” he explains. “At Old Oak it’s probably a simpler conditional land sale transaction and maybe even the same at Curzon Street. But we have not ruled out any delivery mechanisms because there’s so many moving parts. I’m open to ideas.” He adds that aim is to maximise the value of the sites as well as generate returns for the taxpayer. “Where we have spent a lot of money buying land we should make the most of it and that’s what every taxpayer would expect.” Retail’s best bet Retail on the UK’s high streets may be in a downward spiral, with around 18.2m sq ft becoming vacant in 2018 alone, but retail across the country’s transport hubs is faring better. This has caused several retailers, such as WHSmith, to focus on developing their transport hub offerings. In its most recent full year results WHSmith reported a 7% increase in its trading profit to £103m from its travel business, which includes outlets at train stations and airports, while its high street trading profit was down 3% to £60m. Its travel business at the time of the results accounted for 63% of the group’s profit from its trading operations. “Station retail has been pretty resilient,” Venner says. “There will always be a convenience edge to retail in stations, but the question is can we do more than that? In order to do so, the stations have to become destinations in their own right. “So we’re very focused on how we create a place that’s got the ‘wow’ factor. We need to think about creating new experiences and being flexible so we can respond to the changing retail market.” He adds: “We don’t have to make those calls for a few years yet and we’ll certainly make them as late as we possibly can.” For now, Venner is taking each step as it comes. With the interview drawing to a close, he is on to his next meeting with Lendlease at Euston, where, in spite of the lurid headlines, the first HS2 train may depart from in 2026… To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette