November 16th, 2016

The challenges facing the property industry – being heckled?

Glenbrook was recently asked to speak at the Estates Gazette Development Summit. Guy Butler speaks about the property landscape, a difference in opinion and how to find the best way forward:

 

We spoke last year when it was in Manchester and it was an upbeat affair which celebrated the market and the process.  This year it was moved to the ICC in Birmingham, and we were asked again to support the event.  Without hesitating it was something we were keen to be involved in.

 

Moving to Birmingham from Manchester was an interesting change; there was a smaller turnout and whilst fewer people had made the effort to come down from the NW, there were a lot of familiar faces and people we do business with.  Most of all the event was supported by Savills and the event gave the opportunity to have quality time with the top development team at one of the top agents.  So all worthwhile.

 

The Birmingham conference was a well organised affair, in the impressive but aging ICC.  We were on the opening panel – first on – even before the hopeful Conservative elected mayor for the West Midlands region.

 

To get the juices flowing, the assembled panel were asked to summarise what challenges face the industry.

 

We spent some time discussing this in the office beforehand, and it was going to be interesting to see what the others faced, compared to us.  The panel was diverse – L&G – the grandfather and a stalwart of the industry, and Harworth Estates – a large and successful regional player.  We overlap very little in what we do with the panel so there was a lot to learn here, as well as to give in terms of participation.

 

Legal & General (speaking from the Capital, balance sheet funding side, not the Fund side) spoke about how they are challenged finding partners and then getting progress on schemes once assembled; we had spoken together as a panel before we sat down in front of the audience, about how they are working with Scarborough on the amazing Thorpe Park in Leeds – a really good example of what can be achieved and something we admire greatly.

 

In essence L&G said that sourcing good opportunities and finding competence to be able to deliver was not a common or speedy process.  And they wanted to be able to work out how to improve this over time.

 

Harworth opened saying they would be an ideal partner – and I can see why.

 

They have stock – lots of it, competence – with an admirable track record, skills – through a large and experienced team and drive – their restructure will have recently motivated them to focus on the upside which they will all benefit from.

 

They added that funding was more of an issue for them and how important it is for local authorities to participate in funding and committing to speculative projects.  Interestingly they spoke briefly about HCA funding and saw it as not as attractive as bank funding, something that I think is worth debating more.  But we were very impressed at their breadth of regional knowledge and expressing this coherently.

 

And then it was our turn.  We were pretty clear – a lot has changed in recent years about what has caused us issues.

 

Whereas resourcing and speed of planning applications caused us angst – this has largely been resolved, in some cases by developers funding the process with planning performance agreements.  Banks are still off limits for what we do – but there is more funding than we can find schemes for, from parties like Moorfield, who we have a very good relationship with.  And contractors – well the anticipated shortages have not materialised, and whilst the strength probably now sits on the builders’ side, with them being able to pick and choose customers to an extent, there are still enough builders to go around.

 

Our problem is about sites; getting sites at a realistic price.  Armchair developers and speculators hold on to sites, hold the market up and slow down the process in the anticipation of large premiums and a share of the development profit being paid for a mediocre site.

 

We don’t want something for nothing, but there is enough risk in development without needing to give away the profit to get the foot through the door on a site.

 

So we opened our mouth in response to the question posed by the chairman, the editor of Estates Gazette, Damian Wild.

 

And after saying that we thought, in our case, the planning situation was better and our experiences were good, a very vocal front row warrior piped up in disagreement.  Much grunting caught the chairman’s attention and the session was paused.  The voice got the microphone and shared his opinion – that this was not the case.  Opinions – you will always get a lot of opinions – but why the marked disagreement the case.

 

Where we do business in Liverpool, Manchester, Salford and Birmingham, we experience helpful, clear, considered and resourced planning departments.  We know where the boundaries are.  We have open and meaningful discussions.  We share and change schemes to accommodate their wishes, and adjust our case accordingly.  We have design review sessions, like those run by Places Matter, but essentially, we have good straightforward working relationships.  We don’t get everything we want.  We don’t get our own way.  But we get a way.  This hasn’t always been the case, as during the dark years everyone left the planning departments, but now we have people who want to help and it works.  And these regions are benefitting and are being regenerated.

 

So what about the voice?  What is his beef?

 

Well we didn’t debate it for long – but long enough to guess.  Location.  I suspect the voice works mainly in the south.  In the south they have large land prices.  They have good growth.  And it is where everyone wants to develop because the prizes are great.

 

But in the North and the Midlands, the prizes aren’t so great; the viability isn’t easy to achieve.  We have to try harder, design better, be more passionate – and therefore Councils are more receptive to people who are trying.  Showing an interest in their locality is well received and you actually feel that you are “Place Making” – a term which was marginally ridiculed at the Summit for being ubiquitous.

 

When we first arrived in Liverpool many moons ago, we asked what the affordable requirement was.  “We have too much affordable”.  This is not the case down south.  Down south the balance of viability is harder to understand because the profit margins are so much greater, and with the large rates of growth, are moving so quickly – and therefore the planners have a much more difficult job in getting s106s and affordable targets right.  This perhaps leads to indecision, delay and lack of trust.  And the reason things don’t move so quickly.

 

Maybe – in the North and the Midlands, where the rate of growth and the therefore the riches to be achieved are smaller, the battle is quicker because the markets are understood and the investment is more critical.

 

Which brings us back to the voice, and our comment about planning.  In the North and the Midlands we have great experiences with our planners.  Open straightforward relationships.  Give and take.  Sharing and support.  We don’t always win but neither do we feel terribly hard done by.

 

It is clearly a different story elsewhere in the country where the gains are greater.  Maybe it is these gains that make it more complicated.  Or then maybe it is politics….?

 

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