Inside Knowledge: Client Briefing
Roll call: who you need to know n Tom Eshelby, residential sales director, Land Securities Established in the 1940s, Land Securities made its name in retail and office development. It has provided affordable housing as part of planning agreements for its schemes and undertook its first high-end central London residential scheme, Wellington House, in 2010. Its pipeline of residential schemes is set to grow from 98 flats this year to another 420 flats and potentially 800 more between 2013 to 2018.
n Darren O’Reilly, divisional procurement manager, Miller Homes Founded in 1935, Miller Homes is part of The Miller Group, which also has development and construction operations. It operates in Scotland, North-east, North-west, Yorkshire, East Midlands, West Midlands and the Southern regions.
n Alastair Baird, regional managing director London, Barratt Homes Parent firm Barratt Developments has three housebuilding brands. Barratt Homes covers traditional housing, apartments and regeneration, David Wilson Homes is responsible for larger family houses, and Ward Homes for Kent and the South-east. Its Wilson Bowden Developments brand undertakes commercial property development.
n Brendan Twomey, production director, Berkeley Homes (Urban Renaissance) Berkeley Group includes housebuilding brands Berkeley, St James, St George, St Edward and Berkeley First as well as commercial development subsidiary Berkeley Commercial and public sector specialist Berkeley Partnership.
n Nic Attree, head of procurement, Taylor Wimpey Taylor Wimpey works in England, Wales and Scotland and completed 9,962 homes in 201. It also builds in popular parts of Spain.
28 | 20 October 2011
Demand for homes, not flats Housing starts are still down, but some are hopeful of an upturn private housing
“My forecast for prime London is cautiously optimistic”
tom eshelby, land securities
The shock dealt to the housing market following the credit crunch still reverberates. Not only are housing starts well behind their pre-credit crunch levels – they crept up in 2010, though have stalled in 2011 – but the proportion of new homes being built outside London has fallen steeply too. All this is a by-product of lack of finance: first-time buyers struggle to get an affordable mortgage, some builders and developers cannot get the funding they need for their developments, and fears about high unemployment levels mean some consumers have held back from buying. The bursting of the housing credit bubble has changed what is being built. Developments in provincial cities are more likely to be houses rather than flats and very few high rise-blocks are
being built because banks are not keen to fund them. “People want gardens, balconies and bigger flats; they don’t want to be in rabbit hutches,” says Mark Farmer, head of private residential at consultancy EC Harris. “London is different; it is still apartmentdriven because people are buying off-plan as an investment.” Builders are also building out existing sites gradually. “They haven’t got masses of work in progress as there are cash flow risks around that,” he explains. Glenigan’s forecast for the value of starts shows strong growth until the third quarter of 2012 – albeit from a low base – and then numbers remaining static compared with the same quarter a year earlier. Mr Farmer predicts output will remain low for some time. “I do
not think anyone disputes the fact we need more houses built in the UK, but nobody will build until they can get finance to build them and people can get mortgages for them.” Others are more optimistic. Brendan Twomey, production director for Berkeley Homes’ Urban Renaissance division, agrees with Mr Farmer that there is still strong demand in London, but adds that there is also a good market for family homes in the South-east. The niche market for luxury property in central London has grown strongly since 2009. The rich buyers are unlikely to have problems financing their purchase, they see London property as a safe haven for their money and there’s a lack of supply compared with demand. Tom Eshelby, residential sales director at developer Land Securities which builds high-end residential property in central London, says: “My forecast for prime London is cautiously optimistic.” But it will be some time before the same can be said of the housing market in general.
Vetting process varies by scheme Housebuilders and developers want their contractors to prove they have a good health and safety record, a history of high-quality work, the ability to deliver the project, and financial strength. Some, such as Land Securities, do a competitive tender while others, including Berkeley and Miller Homes, draw up a list of firms they invite to tender. Miller’s vetting process includes extra considerations such as the contractor’s size, track record on Miller schemes, its proximity to site and workload with Miller. The types of contractor used vary according to the development. For example, much of Land Securities’ luxury
“We need flexibility to stop, start and re-sequence to match the market” Brendan twomey, BerkEley Homes (Urban renaissance)
residential property is within its larger mixed-use schemes so it needs big contractors capable of building the foundations and superstructure of a large project. The high-end fit out of the apartments is usually done by smaller, specialist firms.
Berkeley likes the senior management of its contractors to be involved in the detail of their firm’s work and has regular meetings with them. It wants its contractors to be able to change the pace at which they work. “We need flexibility to stop, start and re-sequence to match what the market is doing,” explains Brendan Twomey, production director for Berkeley Homes’ (Urban Renaissance). Price is also important. Mark Farmer, head of residential at consultancy EC Harris, says: “The good housebuilders realise their supply chain needs to make a profit but they need the best possible price.” www.cnplus.co.uk
Top private housing clients in 2011 to date Contracts
St Modwen Properties
Top private housing starts in 2011 to date
East Midlands East of England London North-east North-west Northern Ireland Scotland South-east South-west Wales West Midlands Yorks & Humber
Excludes individual projects of more than £100m and frameworks Source: glenigan
private housing Forecast starts on site (£m) 2500 2000 1500 1000 500 0
Q4 '11 (f)
Q2 '12 (f)
Q4 '12 (f)
Q2 '13 (f)
Excludes individual projects of more than £100m and frameworks Source: glenigan
There is much evidence of a northsouth divide in the private housing sector, with almost half of the project start activity this year to date accounted for in London, the South-east and the South-west. By contrast, the North-east and North-west together account for less than 10 per cent of the value of starts. Commentators have predicted that demand for housing will be more focused in the southern regions, due to proximity to London, as the capital appears to be weathering the recession better than other areas. Forecast starts for next year and 2013 are encouraging, considering the issues the sector has been facing: Weaker demands for house-buying, particularly from first-time buyers facing high deposit requests, and a wary mortgage market in light of the Eurozone turmoil join threats of a double-dip recession still looming. As early as Q1 next year, Glenigan forecasts the value of housing starts will hit more than £2bn, almost 50 per cent higher than the total value of starts recorded for this year’s first quarter. The predicted value of starts do not hit these heights until the same period in 2013. But private housing projects account for more than a quarter of the total value put on hold in August 2011, according to the latest Glenigan data. Private housing starts put on hold were worth £276m in that month and more than £2bn in 2011 so far. Developers still remain the biggest clients in the sector, with Berkeley’s £1.4bn of housing projects propelling it to the top of the table.
housing news in brief
Market fears hit supply
The number of homes on the market fell during September as economic fears hit consumer confidence. New instructions fell back last month as five per cent more surveyors reported supply of property falling rather than rising, according to a Royal Institution of Chartered Surveyors housing market survey.
Rented homes fund
Bouygues Development and Grainger have launched a build-to-let investment fund it hopes will deliver more than 1,000 new homes. The fund is targeted at institutional investors. Construction begins in the first quarter of next year and the first units are due to be completed by the final quarter of 2013.
Crossrail boom hopes
New developments including homes have been drawn up around the Crossrail line in London’s West End. Plans have been submitted for a 500,000 sq ft scheme around Tottenham Court Road by Derwent London and Crossrail. Plans for the other side of the station to be drawn up by Crossrail include 92 homes.
Making it right first time New housing developments involve many trades, expensive fittings and fixtures, and often non-standard finishes. This means there is lots of scope for problems to occur, particularly as one trade will more than likely damage the work of another. This is where the expertise of specialist snagging subcontractors Plastic Surgeon comes to the fore. The company carries out repairs for some of the biggest names in UK housebuilding, including Barratt Homes, Persimmon, Taylor Wimpey and Redrow, in order to avoid the delays that can be caused if baths, kitchen tops or even uPVC windows have to be re-installed due to damage. “Clients expect the highest standard of finish on their new property, so cosmetic repair and fine finishing are in-demand services for housebuilders wanting a highquality, economic alternative to ripping out and replacing expensive fittings,” explains Plastic Surgeon managing director Rob Mouser. New legislation requires new homes built must meet level six of the Code for Sustainable Homes by 2016, meaning they must be net zero carbon. The construction process is considered in these calculations, so housebuilders will be looking to vastly reduce their waste. One way to do this and also save money is through repairing rather than replacing, says Plastic Surgeon. The company also offers clients a web-based reporting system, VisibillTy, which provides a range of data information on site performance. Using the system clients can identify if one of their sites is overspending, carry out cost analysis and identify areas where they can make savings.
Produced in collaboration with Plastic Surgeon
20 October 2011 | 29
Published on Nov 8, 2011
Latest article from cosmetic repair specialist Plastic Surgeon and Construction News. Private housing demand for homes not flats.