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UK Regional Development – the experts have their say

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Savills brings together experts from the property industry to discover what the new political landscape means for the regions.

The unexpected general election result was a major talking point at Property Week’s regional development round table, held just ten days after the result of the poll was revealed.

The participants met at sponsor Savills’ offices in the West End of London, but their focus was outside the capital on regional housing and commercial property markets that have finally returned to health after the economic crash.

Construction activity and investor appetite have begun to spread outward from the overheated London market, but development in many regional centres is as yet only marginally viable.

Among the topics mulled over by the 15-strong panel of developers, investors, financiers and agents were the likely future course of the Tory majority government; planning; taxation; the obstacles to housing supply; and the opportunities presented by mixed-use development.

Our panel of experts


Fiona Freeman, head of UK real estate transaction management, Barclays Real Estate
Melanie Leech, chief executive, British Property Federation
James Lidgate, head of residential, L&G Property
Alex Price, chief executive officer, Palmer Capital
Philip Barnes, group land and planning director, Barratt Developments
Kathryn Turner, senior planning and development manager, Lands Improvement Holdings
Mark Allnutt, senior director, Greystar Europe Holdings
Nick Hayes, development director, Unite Students
Martin Wood, managing director, Cathedral Group
Aisling Ramshaw, communications director, Citu
Chris Tinker, regeneration chairman, Crest Nicholson
Richard Rees, head of development services, Savills
Jonathan Steele, head of housing sector for planning, Savills
George Cardale, head of residential development sales, Savills
Susan Emmett, director of residential research, Savills

Chair: Liz Hamson, editor, Property Week

The new government

Liz Hamson, Property Week: What does the election result mean for the property industry and for development in the regions?

Melanie Leech, British Property Federation:Before the election our members were saying to us: “The one thing we don’t want is uncertainty.” Getting a decisive result was very welcome. We have had a productive relationship with the Conservative Party as part of the coalition. Having [Department for Communities and Local Government minister] Greg Clark and [housing and planning minister] Brandon Lewis -both of whom know the sector and the issues – is very welcome. Greg Clark’s support for devolution to the cities is well known. The uncertainty that we get with the result is the referendum on Europe. We have called for clarity around the timescale and the question as soon as possible.

Alex Price, Palmer Capital: What we want is stability in the UK and an economic environment that allows businesses to invest. Without that investment the UK will continue to grow through consumption and borrowing, which is probably not a sustainable basis. We would like the referendum issue to be dealt with quickly in such a way that we can put that issue to bed for now.

Philip Barnes, Barratt Developments: We have heard the government’s immediate emphasis on devolution and the “northern powerhouse”, and the northern regions are more heavily dependent on being in the EU than other parts of the country. You might see David Cameron bringing that referendum forward to get it out of the way and get on with those reforms.

James Lidgate, L&G Property: Scottish independence is clearly back on the agenda. If you look at what is happening in Europe, Scotland or Manchester the trend is for devolution of power. The real challenge for the property industry is how we embrace that and capitalise on it.

Susan Emmett, Savills: It is interesting that the Tories were the one major party that didn’t have a housebuilding target. It will be interesting to see whether they embrace a more pro-development approach now they are in power.

Jonathan Steele, Savills: The one big uncertainty in their manifesto was that they said they were going to protect the green belt. We will now look to clarify that point because previously the green belt was actively being reviewed and sustainable sites were being released which didn’t contribute to green belt objectives.

AP: If the money being spent on Help to Buy in order to stimulate demand was diverted into ‘help to supply’ it might be used to provide more resources for the planning system. However, the realpolitik is there are no votes in that. Housing will just get less affordable if we continue to accelerate demand and under-supply the market.

Capacity in the planning system

Chris Tinker, Crest Nicholson: The austerity agenda is going to be upon us and in this next round of cuts one could be the skills and capacity of local government and planning authorities. It is unclear to me where the two sides – the desire for more housing and the reality of resourcing – meet in the middle. It doesn’t feel as if the balance will be right.

PB: Prior to the election season I think we were starting to get some traction with ministers who recognised the cuts had been falling too harshly on the planning system and that it is critically important in addressing the housing crisis. We are hoping to see some radical reform on the ability to get sites through the planning system quicker.

Martin Wood, Cathedral Group: Even discharging conditions is more difficult because councils don’t have the resources. As an industry I think we are willing to pay more planning fees to get a resolution, but my experience where we have done that is we don’t necessarily get a better service.

Richard Rees, Savills: Then the whole process gets very adversarial because the applicant goes to appeal for non-determination. That slows the system down.

CT: The answer is for government to properly fund local authority planning departments. We are all big players around the table who are willing to pay for service, but if you’re a small- or medium-sized player you can’t. If the system depends upon constantly increasing payments it is incapable of performing because it is the small- and medium-sized players that have left the market. A bit like the health service the system ought to be free at the point of delivery. I think if you talk to ministers through the eyes of small- and medium-sized companies you can open their eyes to that.

Property taxation

Nick Hayes, Unite Students: The Conservatives gave away an awful lot in terms of pledges in the lead up to the election. Those pledges are not just going to be paid for by cuts and they have said they will not raise Income Tax and National Insurance so they are going to have to lean on the private sector. We will see whether the property sector is seen as some form of cash cow. Whenever taxation is brought into property it is usually not delivered in a particularly great way. CIL [Community Infrastructure Levy] is an example of that. Portsmouth is no Mayfair but the CIL rate there per square foot is equal to land values. How is that viable? The land value has been effectively halved because of the rate of taxation.

PB: One of the biggest reasons that local authority planning departments are clogged up is because of the incredible complexity and time that needs to be devoted to setting a CIL rate. To be frank the industry would rather just go back to Section 106. You would probably get more money and save thousands of man hours in the process.

ML: We have to demonstrate the connection between raising the burden of taxation on the industry and the industry not delivering as much supply into the market. Politicians have a lot in their in-trays and we are clearly not resonating as we need to resonate. It is an ongoing battle and not helped by the fact that politicians tend to turn over relatively regularly.

Tackling the housing shortage

George Cardale, Savills: Plenty of people want to buy houses. The supply of skills and materials is starting to ease and financing is reasonably straightforward. The real issue is supply. We need to be turning out twice the level we do at the moment.


Both Sheffield and Leeds City Councils have been very supportive in wanting to bring on brownfield city-centre sites. In Sheffield we took 12 weeks to get planning – Aisling Ramshaw

CT: All the tenure types that can drive additional housing – institutional build-to-rent and private and affordable housing – all rely on viable land with planning permission. The issue with capacity is that there isn’t sufficient viable permissioned land.

SE: The planning system will leave us with a shortfall of 180,000 homes over the next five years. We need local authorities to have a plan and their targets need to match local demand – 76% of local authorities outside London don’t have a post-NPPF [National Planning Policy Framework] local plan in place so they are not working to figures that are up to date and they don’t reflect housing need.

Aisling Ramshaw, Citu: Both Sheffield and Leeds City Councils have been very supportive in wanting to bring on brownfield city-centre sites. In Sheffield we took 12 weeks to get planning and in Leeds our development of 300 houses looks fairly certain to get planning next month.

RR: A lot of the regions have struggled to create high-quality developments because there has been less funding and fewer developers prepared to commit, so the political goodwill to bring brownfield schemes forward is much greater. In Manchester there are a lot of brownfield sites that didn’t get developed in the last cycle. Is funding available for those developments where it wasn’t three to five years ago?

Fiona Freeman, Barclays Real Estate: There has been a huge uptick in the number of developments funded in the regions. That has changed in the last 12 months and they have included a number of private rented sector [PRS] schemes in the city centres.

PB: We need to be careful of viewing PRS as a panacea to get the number of units being built to increase significantly. The reality is that if Manchester wants to increase housing supply it needs to take a pragmatic approach to its green belt. In Manchester the green belt is 45% bigger than the urban area. If you built 1,000 units in the green belt in Manchester each year it would take you 900 years to build on 50% of the green belt. Land supply isn’t the problem in Manchester that the planners will tell you it is.

JS: Birmingham is in the same situation – surrounded by green belt and it desperately needs to grow. We are awaiting the inspectors’ report for the Birmingham plan, which includes a review of green belt development, so that will be the first indication of where the new secretary of state is going on green belt.

Mark Allnutt, Greystar Europe Holdings: Another fundamentally undersupplied market is social housing. The UK has been relying on the private sector to deliver affordable housing through Section 106 agreements for far too long. It would be interesting to see what would happen if there was a massive programme of council house building in Britain. It is not up to private sector housebuilders or US multi family-style providers to deliver that. That is the role of the public sector.

FF: We have talked about so many different areas because there is no one panacea. It will be a combination of things. In some cases it will be PRS. Mixed-use schemes and planning will play a part. It is about adapting the tools we have to different cities and local authorities to come up with the best solution to drive housing supply forward in that area.

The private rented sector

MA: Institutional-class, professionally managed rental communities don’t exist in the UK. Politicians are starting to understand that they could be quite a good thing and the idea is starting to gain traction. PRS providers are coming out of the ground with a significant amount of rental stock, but nowhere near enough to make an impact on the undersupply of residential accommodation in the UK and nowhere near enough to deploy the amount of institutional capital that is looking for a home in residential. We own 500 PRS properties in Manchester and we could quadruple that. It is a fundamentally undersupplied market, absorption is very high, employment growth is on the up and Manchester is a cool place so people want to live there.

GC: There were about £500m of build-to-rent deals done in the private rented sector last year, but when you work out that is about 1,500 units it doesn’t seem so many. It is about 1.5% of output. It is important and gaining momentum, but is still a tiny proportion of the market.

NH: Affordable housing will be the greatest barrier to the PRS. There needs to be a use class for PRS that doesn’t require affordable housing. The issue planners will have is that if you remove affordable housing from PRS what is going to prevent developers from going in for a residential consent and then selling units individually? The answer is that it is the same as the student accommodation sector where you get planning for one building as one unit and you cannot subdivide it up and sell it off as different flats.

CT: We are doing four build-to-rent schemes at the moment with completely different planning permissions. Planning authorities all have their own brand of what affordable housing you should deliver with it, their own thoughts on the longevity of the consent, the appropriate level of density and parking. In the US some housing subsidised to the market rent as part of a PRS scheme is seen as a great advantage because you are addressing several markets at once. A lot of the people who need affordable housing in this country are key workers like teachers and nurses. For me the answer is not necessarily to get rid of affordable housing, it is having a planning system that is not a blunt instrument. In places where some forms of private housing are barely viable on the open market, the minute you put CIL on build-to-rent it will not be viable.

JL: My fear with a separate use classes is that there will be no incentive to bring forward PRS if it is not going to bring you the same value as a normal residential permission would.

Mixed-use development and place-making

LH: Is more housing now being delivered in the regions as part of mixed-use schemes?

SE: Not necessarily. We have looked into some of the statistics and actually most developments are residential only. There are fewer mixed-use schemes but they tend to be larger and higher value, located in city centres.

LH: What does really good mixed-use place-making in the regions look like?

AR: We are looking to Europe for inspiration on high-quality design and sustainability – cities like Helsinki. Our developments now use an app to connect people to energy suppliers and to the rest of the community. There is much more that can be done using technology.

MW: It is too simplistic to ask “what does good mixed-use development look like?” because every sub-sector of every city is going to be different to the next one.

PB: There is a difference between city-centre brownfield developments and new communities. If you’re in a city it doesn’t really matter what’s in the development itself because all your facilities are there. In new communities the key is scale. We have done a new urban village at Chapelford in Warrington with more than 4,000 units, so there is a Sainsbury’s, a village pub, a community centre and a pharmacy. You are not going to do it off 500 units and it would be tough off 2,000.

Kathryn Turner, Lands Improvement Holdings: If a scheme is 200 units on the edge of a town or village we focus on linkages into the existing town. It is place-making in a different
way – not providing facilities on-site but looking at how we can support them in an existing community. Where we are putting large-scale 2,000-unit schemes on the edges of towns we are aiming at creating good-quality mixed-use places. People want to live in attractive mixed-use communities, but it is a difficult thing to facilitate in the regions. It takes time, funding and effort.

CT: The only projects in Crest Nicholson’s portfolio that we have been unsuccessful at getting back into since the credit crunch have been mixed-use schemes. They require complex procurement and compulsory purchase, which local authorities have lost the skill to do, and developers have lost the guts and wherewithal to stand behind them, European Union procurement rules are a massive quagmire, and the funding isn’t there for mixed-use where commercial is the predominant use unless it is something exceptional like Bluewater. Mixed-use remains fundamentally challenged.

MW: We believe that where local authorities own some of the best sites around the country mixed-use is the only way forward. If government was to urge local authorities to look at the long-term benefits of their land supply it would help bring forward a supply of public land for mixed-use development, but they are so bothered about filling the black holes in their budgets they are trying to sell off their supply for the highest possible value today.

KT: There is a bit of a problem with planners. They are very rigid about what they want. They say you need to have a commercial element even if it is not viable and it will affect how much affordable housing they will get.

NH: We have a large unlet commercial estate because of the direction of commercial space to ground floors in areas where there isn’t footfall. Everyone knows at day one that no one is going to take the premises, but you have to stick with them for planning reasons. The bit above has to pay for what will go on the ground floor.

AP: We have just got permission to change four ground-floor units that were commercial into residential. We were only able to do that because they didn’t let for three years after the building was completed and it had gone into administration. I sense that it was only because something had gone wrong and we were coming in as a fresh set of eyes that we were able to make that change. We need to educate planners on how we create places.

RR: The thing that doesn’t work is forced delivery of a certain product that there isn’t an obvious market demand for.

MA: Schemes take a long time and you need to build in some adaptability and flexibility. Places need to develop organically. They are not designed by some fantastic developer who knows what the place is going to need in 20 years’ time.


GC: It will be interesting to see what happens with the possible extension of permitted development rights [for change of use from offices to residential]. Schemes have to be completed by 30 May 2016. Councils don’t like it because they get no affordable housing, but it is quite a popular thing for the market.

NH: At the moment, of our development pipeline £250m is regional and there is another £200m we need to place regionally. The regions remain very attractive.

MA: Employment growth and investment in infrastructure, especially transport infrastructure, look good. There is increased housing market and investor confidence in the regions. The major danger to economic growth in the regions is the failure to meet the supply demanded by household formation.

AP: Real estate is a very attractive asset class for the Asian and Middle Eastern clients we manage. They are now pushing into the UK market – not just in commercial but in residential as well. We are doing schemes for them in the big regional cities.

KT: It will be interesting to see if the acute focus on planning shifts over the next five years to creating more breadth in the housebuilding market.

JL: Infrastructure is the key. Very often successful mixed-use development is associated with delivery of infrastructure. To fund the infrastructure that makes a community a success you have to think longer term than the next political cycle.

FF: I am cautiously optimistic, which reflects the opportunities we have discussed. However, property tends to be quite slow at adapting to change and we are a cyclical industry so we really need to get things moving before we reach the next downturn in the cycle.

ML: Fundamental demand and supply imbalances mean there is a wealth of opportunity and we know there is a wealth of investment capital out there. The barriers we have discussed are all barriers to maximising the opportunities that we know are there. It is up to us to go out and seize them.

About This Forum

This event was chaired by Property Week’s editor Liz Hamson and took place on Monday 18 May at Savills’ head office, 33 Margaret Street, London W1G 0JD.
If you are interested in hosting or participating in future events, please contact Niki Kyriacou, client solutions business development manager, Property Week.
Tel: +44 (0)20 8253 8692

Author: Liz, Hamson, Property Week