50% of us live in a city

With the excitement of the budget 2015 out of the way attention turns back to business as usual. I was privileged to attend a breakfast event this week discussing Yorkshire prospects for property and the key take away I had was the need to do things differently, whether marketing collectively as a region, targeting specific sectors to create “hubs” or simply being more forward in how the area promotes itself. It has worked with wooing Google but surely we can bring in much much more.

If you dig below the surface though, this need to do things different is driven by underlying megatrends – the global evolutionary forces that are creating long-term shifts in demographics, cities, economics and politics. But what does this mean to property, well simply its drives a differing pattern of occupational demand, creates new sources of capital and asset classes and ultimately new avenues to profitable growth. These megatrends can be cut in many ways but the one which stands out to me is “Rapid Urbanisation”.

“Half of the world lives in cities” is frankly starting, though I do wonder how you define a city. I class myself as living in Penistone (not a city) but Penistone is arguably part of Sheffield (a city) – therefore do I live in a city? The brain starts to hurt at this point.

 

On a global scale this means there is more demand for retail and office within the largest cities. A sheer drive to provide services and employment to accommodate these individuals, with most occurring in emerging markets, provides opportunities for those willing to enter and make the investment. For smaller districts it creates challenges particularly as cities grow and infrastructure and essentials fail to keep up. Living in a country going through austerity adds more burden as the private sector need to invest into public projects otherwise it raises longer term doubts over the ability to fund them from the public purse.

 

So what are the opportunities and changes we’ll see?

• All age groups are drawn to cities from students studying, workers wanting the balance of work and play or even the elderly generation means there will be requirements for all types of housing in cities;
• People are rising in wealth; it’s not everyone but certainly is occurring and this changes peoples behaviours – buying the luxury brands, meat from a butcher etc. This creates opportunities for retail units attracting higher calibre tenants than before;
• Climate change and sustainability seems to have hit the industry hard and most conversations now include elements of it. Demonstrating a sustainable development adds a premium price to it;
• As the densities of mega cities become greater, development that embraces “liveability” – offering access to green space, good public realm and built with high standards of sustainability - will create long-term value. City dwellers will pay premiums for high-quality living and work space; and
• Sheds, warehouses and distribution centres (like I-port in Doncaster) located near big cities to feed the growing e-commerce market. Delivery within 24 hours means there needs to be a larger spread of units offering a full range of products.

 

Megatrends are certainly an interesting way to think about the future. The world is ever changing and with that there is a need to keep pace. Setting up a twitter account or implementing gardens within buildings all show that we are moving forward but you need to keep up. The great urbanisation requires private and public sector investment to be successful and over the next few years this will make or break the cities of tomorrow.

 

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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The budget that added a little hope to the housing sector

It was 12:30pm and a fairly standard Wednesday and we were all sitting huddled around our televisions, laptops, smart phones or simply listening via the old fashioned wireless waiting for the final budget of the current Chancellor. Now I’m not one to comment on politics and who will or won’t be in power come the summer but there was one or two things that made my ears prick up.

So the budget 2015 sought to tackle the housing shortage, not just in the capital but wider into the regions, via a number of initiatives:

1. Help to Buy ISAs for first-time buyers at first was a little strange to me until you hear a little more the detail. You put a little money away and the government gives you an extra 25%. Compare that to your current savings accounts or even ISA and it makes you cry with joy over such a lucrative rate and sadness that your other savings are withering away! It will help those struggling to find the new higher deposits required but a big hope of mine is that house prices don’t rise on the knowledge that people will have more savings. This helps tackle raising the money but not really the shortage of properties.
    
2. Housing Investment with the creation of 20 new housing zones and investment to tackle the housing shortage in the capital (maybe he missed the housing shortage in the regions?). This will contribute to the housing shortage in a roundabout way. So 20 areas across the country have been selected as the first Housing Zones, Chancellor George Osborne announced in the Budget, with the government planning to work with a further eight councils to deliver up to 45,000 new homes on brownfield land. But what does “housing zone” mean? Well the site will benefit from a share of up to £200 million recoverable investment from government, cheaper borrowing from the Public Works Loan Board, and priority access to expert planning and technical support from the ATLAS service run by the Homes and Communities Agency. Sounds good doesn’t it. But let’s not forget this country needs more than 45,000 houses to address the shortage!
    
3. Business rate changes will see some councils keep up to 100% of the revenue from business rates. This brings a bit more power back locally and certainly helps the “Northern Powerhouse” case. This retention will allow economic development, if used correctly, and allow local people to spend local taxes ultimately empowering the regions. The review paper shows that the Government is now talking about property “usage” rather than “occupation”. The rate reliefs introduced can be used creatively, assisting business start-ups and promoting economic growth.

Overall the budget delivered a little to help the house-building across the United Kingdom. The detail is still required to really appreciate the changes but let’s hope the new found changes don’t have an adverse impact on housing prices. The big question I still have is how the significant housing shortage is addressed. The plans in place aid the industry but don’t go far enough

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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Do people really understand BIM?

“But what on earth is it?” and “How can you use 5D cost modelling?”– I keep hearing this in relation to BIM to the point where I thought I would set out some points, particularly given in May-11 the UK Government called for BIM adoption on UK government construction projects > £5m and requiring collaborative 3D BIM (with all project and asset information, documentation and data being electronic) on its projects by 2016.

Building information modeling (BIM) is the generation and management of digital representations of physical and functional characteristics of places. Basically they are files used to support decision-making. The use of BIM is applied across the building life cycle and can support cost management, project management and even facility operation.

Now having seen this in action I guess I take away one point – it needs a strong project manager or a “BIM Manager”. BIM covers the inception through to occupation and therefore needs focus.

But why did BIM come about. Well I can’t pretend to know the precise reason but logically thinking the industry has been under pressure for a number of years to deliver exceptional projects under tight budgets and skills shortage – the industry needed to address this and through BIM virtual construction before physical can reduce uncertainty, highlight problems to be addressed and improve safety on the construction phase. BIM works to bring together all parties including sub contractors to input and ultimately will provide opportunities to pre-fabricate.

As I speak today you could slowly pass your days oblivious to BIM, particularly if you focus on private sector or smaller projects but change is coming. It was good to hear Wates Group progress towards BIM and also the iteration that BIM is essential to meeting the government’s cost saving targets. It does highlight a need for everyone to look to BIM – there is no point the architect using BIM but not the contractor.
To me it is the collaborative approach BIM provides. I often am amazed at how close-knit the construction community is and BIM simple promotes this further. It’s all very much technologic advances but there are clear benefits for all parties:

• By using BIM it will provide a longer term view of the project, which will lead to clearer benefits or consequences of design decisions;
• The availability of clearer information at the start up will reduce costs;
• Widely believed that BIM reduced construction defects and therefore reduced costs;
• BIM provides a single source of data vastly improving life cycle management of an asset;

The key things to think about right now are developing policies that address BIM, a framework will aid the future introduction. BIM is important and this should be communicated without your organisation and developed into staff training. Take the time to invest in systems and processes in advance of implementation

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or
anything relevant to property and construction.

Enjoy the weekend

Lee

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How has the skills shortage impacted the industry

This week has been quite fulfilling. I always like completing a project as it is when you really appreciate all the hard work that has gone into something. I’ve worked with Harworth Estates for a number of years and to see it being brought back to the listed market just shows the strength of the business. Whether talking with the guys at Harworth or a few others this week one thing that is noted is the skills shortage.

Each year a survey is performed on the industry and the 2014 survey by Hays highlights a few topical areas

·         Salary growth (up 5.25%)

 I come on to the skills shortage later so it is no surprise that salary growth is occuring. If anything 5.25% feels low. Looking at the key areas of growth it is structual engineers which lead the way – this is not necessarily a niche area. In reality I don’t think there necessarily has been any significant pay increases but what you are seeing is businesses hiring and to recruit the best you have to pay more than you would ordinarily. Employees are wise to this in making career decisions and employers are also wise in investing to either keep staff or paying more to bring them in.

 

·         Skills (84% of employers think they will have a shortage)

 

The industry is moving in the right direction but with this brings challenges, can you recruit fast enough to feed the demand. Nothing worse than taking on work and then not delivering due to insufficient staffing. From talking to a business last week they had suffered 20% pay increases to assemble a team on a project – certainly doesn’t help the bottom line but how can you plan better. The industry should look to graduate programmes and bring people in earlier on, treat them well and develop them through the firm. This is a longer term fix but is more cost effective. In the shorter and medium term look at your growth and the sectors you operate in. What is it telling you? If growth looks likely or big projects are potentially there then look to recruit or to meet short term deman bring in temporary/interim staff.

 

·         Benefits all around

It was interesting to read that only 36% of employees asked for a payrise yet 84% are considering moving. Is it not logical to seek a payrise (where you feel there is a valid reason). A lot of businesses are looking at alternative ways to reward employees from share options through to better training. Remember it is not always about the money but the career. Do they see a future in the firm? Are you nurturing them or running them into the ground?

I think above all there is a general consensus that employees are key in the construction sector and one project can employee a number of different skills. By working with your employees to understand their needs can reap benefits and help the bottom line. Consider holding focus groups, anonymous surveys or one to one discussions to really get to the bottom of the issue and this should reduce the need for throwing too much money at the situation.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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