Full speed ahead
Infrastructure is one of the traditional routes out of a recession for the property and constuction sectors. But with an ongoing recession and the costs of a new low carbon agenda, is transport still leading the way? Alexandra Pratt reports
According to the RICS UK Construction Market Survey Q4 2009, workloads continued to fall through to the end of the year, with public works and public housing doing best.
Yet it’s not all doom and gloom, as infrastructure made a significant improvement, at 31% above the activity levels of a year previously (RICS Chart Book April 2010) and if aviation is included, 2009 saw the highest capital investment in transport for 40 years (S Rawlinson & S Waltho, Down the Line, Davis Langdon, 2010).
So, with a range of high profile projects, from airport runways to new rail lines on the horizon, UK transport investment looks set to benefit from the demands of regulatory changes, capacity demands and the replacement of old assets. But is that the full story?
“Infrastructure is absolutely the way to generate economic activity,” says Mark Prior, partner and head of transportation at the built asset consultancy EC Harris. “But how much of what has been announced is real and will hit the industry straightaway, remains to be seen… High Speed Two (HS2) will probably be 10 years.”
With the UK General Election just gone and the consequent uncertainty over possible cuts, in addition to potential regulatory changes such as the break-up of airport ownership, the future looks very uncertain.
Two of the largest planned projects are the proposed HS2 links to the Midlands and the North, which remains the subject of disagreement between the main political parties, as well as the third runway planned for Heathrow (now cancelled).
“Politics, rather than finance is the key factor in big projects,” says Andrew Stephenson, partner and head of infrastructure and transportation at Davis Langdon. “Business knows the General Election is likely to affect the way in which future investments are made.”
In the short- to medium-term, some committed funding is regarded as ‘safe’, such as the planned £28.5bn investment by Network Rail through to 2014, which includes £10bn on a 22% rise in capacity (Rawlinson & Waltho), but for many others which may be PPP or PFI funded, they are vulnerable to both cuts in public spending and the lack of private finance.
“PPP/PFI funding is not as readily available as it was… infrastructure investment funds are sitting on cash, but can’t leverage it,” explains Prior. “It’s down to liquidity.” For Stephenson, there is also the issue of risk.
“Projects are often overshadowed by accounts of overrun and budget challenges and this translates to ‘high risk’. Greater assurance of project success is required to make this an attractive asset class for private investors to compliment the public sector funding commitment.”
While this has meant that some projects, such as the Glasgow Air Rail link, have been cut or scaled back, the impact on the surveying profession hasn’t been all about job losses.
Stephenson believes RICS members have a role in providing the assurances required by private investment, as well as achieving “more from less” in projects, especially via an understanding of global procurement.
Savings often do arise on the supply side in a competitive market, and for those working in transport, the focus at the moment is all about efficiency and deriving value, by “sweating the assets we have and getting those to over-perform” according to Prior.
Aviation is the transport mode currently hit the hardest by spiralling costs of oil, security and environmental regulations (as well as recent turmoil caused by volcanic ash clouds), all of which translates into uncertain demand.
The response to this has been to derive income from other sources. Manchester Airport, where traffic fell by over 11% last year, highlights the need for new facilities including parking and commercial areas in its current masterplan, as well as a need for greater efficiency in the use of land, placing the focus squarely on those working in facilities management.
Perhaps unsurprisingly, despite the downturn, skills are an issue.
“There’s an increasing trend for major transport companies to in-source technical capability in the UK,” says Prior, while in the British Airports Authority (BAA) there has been a significant move to promote ‘upskilling’ within programme management across the supply chain:
“Professional project managers are integral to the successful delivery of BAA’s ambitious capital investment,” says Stephen Livingstone, BAA programme control director.
“We are committed to developing our own staff with an emphasis on programme management. However, it is also important that our supply chain has in place the right calibre of staff with a transferable skill set. Going forward, we will require a professional qualification – or equivalent demonstration of competence – in project management as part of our supplier selection process.”
Longer-term however, the prospects for transport seem brighter. Regional airports in the UK are still planning for growth of 50%, and even though the third runway at Heathrow has been ruled out, BAA plans to go ahead with its £800m redevelopment of Terminal 2.
Integral to the future of short-haul flights and now linked directly to runway three is HS2, which goes to consultation in the autumn. But, like all major infrastructure projects this has already run up against potential planning problems.
The Infrastructure Planning Commission (IPC), established by Labour to reduce the time taken to achieve planning permission, was initially supported by the Conservative party – albeit in an elected form.
Although its impact would be longer-term, it has been welcomed by those in the industry, as “the consolidation of infrastructure planning within fewer bodies would be a logical way forward,” says Stephenson.
The potentially good news is that the Conservative party’s position is to now abolish the IPC and replace it with a system that provides a fast-track process for major infrastructure projects.
Transport is all about economic development one way or another, and recently on big projects, much investment has been put into the regenerative transformation of the often depressed areas nearby.
One of the main goals of the HS1 Eurostar into London’s King’s Cross St. Pancras was regeneration, and with the £5.8bn rail project now complete, London Continental Railways (LCR) is now leveraging £10bn in regeneration funding in partnership with local and central government and other developers, which, it is hoped, will produce 17,000 homes and 94,000 new jobs.
The key areas to benefit will be 500,000 sq m of former quarries around Ebbsfleet in Kent, where 25,000 new jobs are predicted over the next 20 years, and Stratford City where the joint developments are creating the largest mixed used urban regeneration project in Europe, including 7,000 new homes through the London 2012 Olympic legacy.
At the main inner London site at King’s Cross, work continues on 780,000 sq m mixed use development around the station, including 40% public spaces, the new University of Arts, and 50 new buildings, including 2,000 new homes.
LCR’s main partner in this privately funded development is Argent, who have recently announced a further £50m for the project.
“We have made tremendous progress in delivering both a new home for St. Martin’s [College of Art & Design] and essential site-wide infrastructure,” says Sir David Clementi, chair of King’s Cross Central, “including key components of our low-carbon district energy system. Housing… and offices are now also coming forward and the Partnership has committed itself to re-investing the proceeds in yet further delivery.”
High-speed rail (HSR) is also being used in other parts of the world, particularly developing nations, to push forward wider economic development. China plans to have 28,000km of HSR by 2014, twice the length of all other global networks combined, at a cost of £326bn.
In India, the recently published ‘Vision 2020’ for the railway network revealed plans for four new HSR ‘bullet’ trains, running up to 250km/h in special ‘corridors’, plus a further eight in the future. The costs are expected to be met through PPP, carbon credits revenue and growth in rail revenue, as the Rail Minister, Mamata Banerjee, hopes for growth of 10% annually for the next ten years in a “Big Leap Forward”.
The wider plans for the Indian rail network focus on what Banerjee calls “geographically and socially balanced growth” that will include at least 10,000km of “socially desirable lines” that will go some way to reducing city migration and take employment and access to markets into poorer areas.
Issues such as electrification, gauge conversion and energy efficiency will be addressed and a new Metro Development Authority will be established.
As India is urbanising so rapidly, urban transport is becoming critical, and the response has been a number of metro projects across many major cities, including in Bangalore, Mumbai, Hyderbad and a line between Delhi and Kolkata, to which a further 125km will be added this year.
Metro is also a significant new mode of transport in Europe and North Africa, with the French company RATP creating new metro and light rail lines in Algiers, Rome and São Paolo in Brazil.
In France, seven new lines of silent, pollution-free metro or light rail have been created in recent years and there is an ongoing modernisation programme to the Paris metro, including flow management and control systems as part of a move to driverless, automatic systems.
Perhaps the biggest issue in transport development and investment in the 21st-Century is carbon emissions.
“Railways can be India’s principle and foremost response to the challenge of climate change,” says Banerjee, who plans to include at least 10% renewable energy through the use of solar and biomass energy in railway properties, and build new infrastructure using anti-erosion measures.
“Broad investment in rail is going to be a major step in that [low carbon] direction,” says Stephenson, and this is true not just in the UK, but also in the developing world, where the focus is now being placed on the low carbon infrastructure, as 80% of the 57% rise in global transport CO2 related emissions 2005-30 will come from developing nations, such as Indian and China, according to Asia Development Bank research.
Almost all of this growth is from vehicle emissions, and air pollution costs 1% GDP in many Asian cities, making efficient, well-planned low carbon transport essential to both the environment and economic development.
It certainly seems the developing world is leading the way in sustainable transport. This year’s Sustainable Transport Award was given to Ahmedabad’s Janmarg Rapid Bus Transit system in India, which is used daily by 18,000 people.
Janmarg uses innovative median stations and passive solar design for cooling and the city as a whole plans to be a leader in sustainable transport. For the first time all the nominees for the award, given in Washington DC in January, were developing nations, many of whom were using bus rapid transit systems linking deprived areas with economically active ones.
In the UK, CO2 from transport is responsible for 21% of total carbon emissions, but the current goal of government is to reduce that by 80% by 2050.
“Rail is a beacon for all modes of transport,” says Stephenson “with half the emissions produced by cars, the current investment across the rail network is aimed at increasing capacity, and reducing CO2 through electrification and the use of sustainable biofuels.”
The Government’s White Paper on CO2, published last year, does include rail electrification and sustainable bio fuels, as well as new technology for fuel efficiency in aviation and shipping (a major, but often overlooked polluter).
It also includes HS2, and operational efficiencies that chime with the business case in calling for ‘transformative improvement in efficiency’.
“I want Britain to be at the forefront of ultra-low carbon technology, blazing a trail for environmentally sustainable transportation,” Lord Adonis, the Minister for Transport under Labour recently said, and the UK Government has already begun a programme of funding, through £30m for low carbon vehicle transport projects in addition to the funding committed to rail.
But is such an expensive ‘revolution’ in transport affordable? While in Asia the incorporation of low carbon measures in new infrastructure is equally good for the economy and the environment, in the UK and other developed countries, re-focusing existing infrastructure toward to low carbon agenda certainly will not be cost-free.
“Initiatives to reduce carbon are important, but the current economic climate may not be the right time to do it,” says Prior. “Personally, I think it may stay on the page for the foreseeable future.”
There’s no doubt that opportunities for surveyors are available, but they may require a willingness to travel.
“The Middle East is still buoyant; there’s still a huge amount of investment going on,” says Prior. In the UK, despite political and economic problems, transport is still clinging onto its traditional role as generator of activity, and there is real support for ongoing investment in the sector.
The British Chambers of Commerce has highlighted 12 projects that it believes should be prioritised, including the beleaguered Crossrail, and it calculates the wider benefits from the £30bn investment in those projects will be £86bn.
Therefore, it seems that amidst the gloom of a barely post-recessional UK, as Stephenson says, transport looks set to remain “the biggest show in town.”
Namma Metro, Bangalore
Once the Garden City of India, the IT boom, population growth and reliance on road transport in Bengaluru (formerly Bangalore) has made the city one of the most congested and polluted in the world.
City planners believe traffic decongestion to be the key to alleviate the strain on the city and the stress on its 6.2m population. Development of Namma Metro, a major new metro system has now begun.
The project is designed to encourage commuters to leave their vehicles in their garages and use public transport – with an aim to carry up to 161,000 passengers per day by 2021. The plan is just one of several schemes in the city, which have been designed to work in tandem with each other.
“The metro is being positioned as a complementary, rather than competitive mode of transport,” said BL Yashavanth Chavan Dy, chief engineer and chief PR officer for Namma Metro.
For example, new city bus corridors will not run parallel to Bangalore Metro corridors, instead buses will act as feeders. The metro itself will be quick, safe and economical, and its energy requirement per passenger km only one-fifth of that of road-based systems.
The good news for pollution-choked commuters is that there will be no air pollution as the system runs on electricity.
Wuhan–Guangzhou, China
The picture above shows two of China’s latest high-speed trains on the platform at the Wuhan Railway Station, part of the newly-built 1,068km Wuhan-Guangzhou high-speed railway. Operated by China Railway High-speed (CRH), and connecting Wuhan and Guangzhou, it is the world’s fastest conventional train service, averaging speeds of 313km/h in non-stop service.
The line is part of the planned 2,100km Beijing-Guangzhou High-Speed Railway, which is expected to open in 2012.
China already has the world’s longest high-speed rail network, with around 6,500km of routes in service. And with recent funding from the Chinese government’s economic stimulus programme, 17,000 km of high-speed lines are now under construction, with plans for a total network of 50,000km by 2020.
China’s high-speed trains use a wide range of domestic and imported technologies from Germany, Canada, France, Japan and Sweden, which includes the technology behind the Shanghai Maglev (magnetic levitation) train, connecting the city with Shanghai Pudong International Airport at record- breaking speeds of up to 500km/h.
Manchester Airport, UK
Manchester’s airport is the fourth largest in the UK, and the busiest outside of the London region. Owned by Manchester Airports Group (MAG) – a holding company owned by the ten metropolitan borough councils of Greater Manchester – it’s also is the largest British-owned airport group.
Although 18.7m passengers checked in last year, up from 16m in 1997, this is a fall in numbers from an average of 22m per year between 2004-2008. The airport’s long range plan, published in July 2006, forecasted that passenger numbers would increase to 38m anually by 2015, with further growth to around 50m by 2030.
However, what could not be foresaw in 2006 was the sharp decrease in passenger numbers, which can be blamed predominantly on the global recession, the collapse of XL Airways and rising fuel and service costs.
Over the past decade, Manchester airport has been dogged by controversy over building on greenbelt land surrounding the site, particularly over its second runway, which was built in 2001 on 400,000 sq m of greenbelt land, at a cost of £172m.
To do this, four Grade II listed buildings were taken down and re-constructed nearby, and over £20m was spent on environmental restoration and protection. Nonetheless, there was criticism that natural habitats were destroyed. Manchester is currently the only UK airport, other than Heathrow, to have two commercial runways in operation.
California High-Speed Rail
Approved by Californian voters in November 2008, the California High-Speed Rail project is a high-speed rail system currently under development by the California High-Speed Rail Authority (CHSRA).
Anticipation for the scheme is high. When built, high-speed trains capable of an astonishing 350km/h will link San Francisco to Los Angeles in as little as two and a half hours – a journey that can take over eight hours by car.
The planned system would also serve other major cities in California, such as Sacramento, San Jose, Fresno, Bakersfield, Anaheim and San Diego, at a later stage.
The CHSRA projects that construction of the network will create around 150,000 construction jobs and 450,000 permanent jobs from the ‘new commuters’ that will use the network, while the Los Angeles-San Francisco route is also projected to create a profit of £650m annually that will initially be fed back into the high-speed rail system for maintenance and further extensions.
Within station sites, major developments are already taking place to accommodate the network, including the Transbay Terminal development in San Francisco (see Developments).
Construction is expected to begin by 2012, with a total cost estimated around £30bn. However, critics have suggested costs could go over £50bn, and attaining the proposed speeds would be difficult between stops.
Further information
www.rics.org/transport
www.rics.org/economics
www.magworld.co.uk
www.davislangdon.com
www.cahighspeedrail.ca.gov
