PUBLIC-PRIVATE PARTNERSHIPS Unlocking regional growth: The importance of public–private partnerships when viability is tight

Alex McKinlay

Alex is the head of the public sector land team at Savills and provides development strategies and disposal advice to clients across the UK. With over 20 years’ experience in the public sector development market, Alex joined Savills in 2016 to operate across the UK business, working with London and regional teams to deliver procurement, agency and consultancy services to a wide range of public sector bodies. Alex is an expert in The Official Journal of the European Union (OJEU) procurement and sales, having led teams on many high profile projects, including the Olympic Park, and Chelsea Barracks. Other specialisms include developing workable overage clauses and the Charities Act.

Alex describes the challenging property development markets. “In such a market, you don’t fix viability by hoping for a price surge; you fix it by de‑risking and structuring delivery so that long‑term capital can move at scale.” He suggests how public-private partnerships in housing-led schemes might be the answer. But Alex exercises caution: “Be honest about the cycle: we’re on a gentle slope, not a trampoline.” 

Current development challenges 

When costs, risk and regulation conspire to stall development, the most credible route to large‑scale, high‑quality delivery is a new breed of public–private partnership that fuses public land and plan‑led certainty with long‑term institutional capital. 

Across UK real estate in 2026, the occupational story is robust, but development viability is challenging - especially beyond the very best locations. Sustained rental growth reflects undersupply, yet higher debt costs, stricter risk pricing and muted capital value recovery continue to restrain new starts. Even as base rates edge lower, cheaper development finance has been slow to arrive. In this cycle, income—not capital growth—is doing the heavy lifting, tilting the market away from speculative building towards stabilised, de‑risked assets. If regions are to deliver the places their economies need, the delivery model must change rather than waiting for a cheaper‑money rebound. 

The pipeline makes this plain. In 2025, development and refurbishment starts in central London offices were broadly average; in key regional city markets they were “almost none”, as detailed in Savills’ UK Cross Sector Research Report published in January 2026. Scarcity props up rents, but leaves businesses and communities short of modern space. This is the classic viability trap: demand exists, yet the blend of land costs, planning risk, borrowing and exit pricing still doesn’t stack up for private developers without support. The outcome is a two‑track market - selective lettings in a handful of prime buildings, and inertia elsewhere - hardly a recipe for balanced regional growth. 

Housing faces the same bind. England is off‑track on the 1.5 million homes target, with planning delays, cost inflation and labour shortages all cited as obstacles. While the planning environment has become more permissive in many respects, and mandatory targets are back, developers have struggled to capitalise amid weaker sales demand and expensive debt, pushing delivery timelines out to the late 2020s. In the meantime, the need for homes across tenures, and for mixed‑use neighbourhoods that support them, continues to outstrip what the market can viably supply. 

Capital market dynamics reinforce why the old playbook won’t fix this alone. Investment turnover is forecast to reach around £55bn in 2026; prime yields may harden by 25–50 basis points, but not enough to trigger a V‑shaped recovery. There is limited distress to recycle, and the spread between yields and all‑in debt remains thin. Returns over the next five years are expected to sit in the 8-10% p.a. range - solid, but decisively income‑led. In such a market, you don’t fix viability by hoping for a price surge; you fix it by de‑risking and structuring delivery so that long‑term capital can move at scale. 

Where public-private partnerships (PPP) step in  

The components already exist. Public sector land can be brought forward on fair, transparent terms that reduce developers’ upfront cash exposure and sensitivity to short‑term pricing. A cleaner policy cadence - one fiscal event per year - and a plan‑led system including Planning and Infrastructure reforms and the return of housing targets create clearer ground rules. Aligning these with programmatic procurement can turn bespoke risk into repeatable delivery, lowering risk premia and making borderline schemes viable. 

Crucially, there is capital ready to partner if the product is right. Living sectors account for roughly a quarter of total investment, with over £32bn earmarked over the next three years and the UK a priority. Single‑Family Housing (SFH) has powered Build‑to‑Rent since 2023, matching fast‑growing rental demand from young families and avoiding building safety gateway delays that have slowed multifamily. Many housebuilders are now targeting c10% of completions for institutional investors. In a PPP, this creates a flywheel: public land provides scale and certainty; institutions forward‑fund delivery; stabilised income recycles capital into future phases. 

Grant and tenure alignment can accelerate this model. From mid‑2026, new Social and Affordable Homes Programme funding will be allocated, with a hard completion focus by April 2029. Packaging public land, grant‑supported affordable homes and institutionally funded SFH or multifamily into phased programmes balances cashflows, widens the buyer base and restarts delivery where sales‑led approaches have stalled. 

Energy and infrastructure are decisive. The UK has shifted grid connection from ‘first come, first served’ to ‘first ready, first connected’, prioritising viable projects. Ofgem’s reforms encourage demand and generation to locate where capacity exists. Together with the Clean Power 2030 Action Plan and movement toward strategic spatial energy planning, this allows site selection to align with real‑world power availability. A PPP that assembles land, with substation capacity and a connection timetable baked in, removes one of the biggest post‑consent risks - vital where data centres, logistics and housing compete for power‑enabled plots. 

What success looks like 

1. Employment‑led mixed‑use nodes: where public partners assemble land and set infrastructure and design parameters, while institutions and developers secure pre‑lets and living tenures consistent with an income‑led thesis 

2. Large‑scale living portfolios with SFH at their core: delivered in phases across public land, forward‑funded by institutions and built by housebuilders with clear throughput and cost visibility 

3. New communities integrating transport, green infrastructure and energy from day one: leveraging the government’s intent to create seven new towns and the broader push for plan‑led growth. 

Across all three, the shift is from one‑off schemes to rolling programmes that compound learning and scale. 

Guardrails 

• Micro‑market intelligence over macro averages: city‑level vacancy and supply can hide scarcity in the locations, and products occupiers actually want 

• Land value capture that funds infrastructure and affordable homes without stalling sites: use transparent, flexible agreements that adjust to financing conditions and prioritise delivery over brochure‑friendly asks 

• Be honest about the cycle: we’re on a gentle slope, not a trampoline. Programmes - not one‑offs - create the consistency that lenders, investors and contractors need to price keenly and commit long‑term. 

The prize - and the risk 

Get this right and, by 2027, we should see a larger, better‑balanced pipeline in regional cities starved of starts; healthier recycling of capital as first‑generation living assets trade and fund new phases; and more infrastructure‑ready sites reaching occupation faster because grid alignment was designed in, not hoped for. That’s how today’s robust but selective occupational story becomes tomorrow’s delivered growth - in jobs, homes and tax receipts that don’t just accrue to a few postcodes. 

The alternative is to wait for a market‑only revival that this cycle is unlikely to deliver. With prime rental growth supported by scarcity, returns anchored in income and borrowing costs still too sticky for a speculative surge, regions cannot be passengers. 

Entering 2026 with realistic optimism, the UK’s major regional cities are on the cusp of recovery - but sentiment and fundamentals won’t bridge the supply gap on their own. Public–private partnerships - combining local authority land, mayoral backing and institutional capital - are the most credible mechanism to unlock the large‑scale, high‑quality development regional growth demands. 

The tools are in front of us. It’s time to use them.