Aran Percy's PRS Blog
Author: Aran Percy
Date: 18 March 2016
Tags:ConstructionConstruction and EngineeringConstruction MarketsInfrastructurePropertyProperty MarketsReal Estate
The residential sector and how it is reshaping the property industry…..
It’s certainly an exciting time to be working in the property and construction industry in the UK, particularly this week as the movers and shakers in the industry spend the week “networking” at MIPIM in Cannes. Development in the UK continues apace with commercial and logistics projects across London and retail projects in the regions on the rise. Foreign investment is being focused in key areas of the capital: the Aussies own Kings Cross, the Canadians an increasing chunk of the West End and the Asian funds own chunks of Greenwich, White City and Wandsworth amongst others. However, in the long-term, this optimism looks to be challenged as we are seeing an increasing redirection of foreign investment away from the UK and into Europe – both AXA and T H Real Estate have announced their intentions to diversify and futureproof their investment portfolio by looking abroad to key European cities. Despite the excitement in the UK’s property market, a slowdown in one particular sector is causing angst amongst those that work in it.
The high end residential market
The super prime residential market for ultra-high net worth’s has been forecast to contract slightly, but not enough to affect development pipelines. However, “uncertainty” is the prevailing theme across the industry when discussing the high end sector, particularly with spiralling construction costs being forecast on the horizon. Both British and international developers have already been in the press regarding recent reports that they are struggling to shift apartments in the high end market, stalling their proposed pipeline of projects. Quintain have now repurposed several of their high end towers into PRS. Incoming changes to stamp duty have further dampened down enthusiasm in this sector for investors. In short, the high end sector’s pipeline of projects is faltering.
The seismic shift to PRS and affordable housing
The balance is already clearly shifting from high end towards PRS and the affordable housing market. Ex-England international Rio Ferdinand is working in partnership with local authorities and the government to deliver nearly 3,000 affordable homes. Legal & General, one of the UK’s largest investment funds have decided to invest in a factory that will turn out 3,000 prefabricated homes per year. Mitcham in South West London is being used as a test case for the pop-up housing that has been so successful in Amsterdam. In short, this sector is gaining increasing momentum.
What it means for the industry professional
For so long, working on high end residential projects has been viewed as some of the most desirable work that Project, Cost and Development managers could focus on, and a high proportion of these people on both consultancy and client side have specialised in this field, often to the detriment of gaining commercial and retail development experience. Given the slowdown in the high end market, their project experience forged on high end projects is now particularly relevant to the more mundane but burgeoning PRS and affordable housing sector, and not so much the exciting bespoke commercial development and retail development sectors. Some of course will gamble on their current employers assigning them onto an ultra-prime development, but this sector will remain constricted. Others will expect their employers to push them on to commercial and retail development projects, despite pressures from clients and external funders expecting project and development teams to have the relevant experience.
The industry is seeing an increasing number of professionals exploring their options in the commercial and retail development sectors with both consultancies and developers. The trick is just knowing where to look.
It’s certainly an exciting time to be working in the property and construction industry in the UK, particularly this week as the movers and shakers in the industry spend the week “networking” at MIPIM in Cannes. Development in the UK continues apace with commercial and logistics projects across London and retail projects in the regions on the rise. Foreign investment is being focused in key areas of the capital: the Aussies own Kings Cross, the Canadians an increasing chunk of the West End and the Asian funds own chunks of Greenwich, White City and Wandsworth amongst others. However, in the long-term, this optimism looks to be challenged as we are seeing an increasing redirection of foreign investment away from the UK and into Europe – both AXA and T H Real Estate have announced their intentions to diversify and futureproof their investment portfolio by looking abroad to key European cities. Despite the excitement in the UK’s property market, a slowdown in one particular sector is causing angst amongst those that work in it.
The high end residential market
The super prime residential market for ultra-high net worth’s has been forecast to contract slightly, but not enough to affect development pipelines. However, “uncertainty” is the prevailing theme across the industry when discussing the high end sector, particularly with spiralling construction costs being forecast on the horizon. Both British and international developers have already been in the press regarding recent reports that they are struggling to shift apartments in the high end market, stalling their proposed pipeline of projects. Quintain have now repurposed several of their high end towers into PRS. Incoming changes to stamp duty have further dampened down enthusiasm in this sector for investors. In short, the high end sector’s pipeline of projects is faltering.
The seismic shift to PRS and affordable housing
The balance is already clearly shifting from high end towards PRS and the affordable housing market. Ex-England international Rio Ferdinand is working in partnership with local authorities and the government to deliver nearly 3,000 affordable homes. Legal & General, one of the UK’s largest investment funds have decided to invest in a factory that will turn out 3,000 prefabricated homes per year. Mitcham in South West London is being used as a test case for the pop-up housing that has been so successful in Amsterdam. In short, this sector is gaining increasing momentum.
What it means for the industry professional
For so long, working on high end residential projects has been viewed as some of the most desirable work that Project, Cost and Development managers could focus on, and a high proportion of these people on both consultancy and client side have specialised in this field, often to the detriment of gaining commercial and retail development experience. Given the slowdown in the high end market, their project experience forged on high end projects is now particularly relevant to the more mundane but burgeoning PRS and affordable housing sector, and not so much the exciting bespoke commercial development and retail development sectors. Some of course will gamble on their current employers assigning them onto an ultra-prime development, but this sector will remain constricted. Others will expect their employers to push them on to commercial and retail development projects, despite pressures from clients and external funders expecting project and development teams to have the relevant experience.
The industry is seeing an increasing number of professionals exploring their options in the commercial and retail development sectors with both consultancies and developers. The trick is just knowing where to look.
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