A client's view: Great Portland Estates

James Pellatt, head of projects, Great Portland Estates

What’s your pipeline looking like?

It’s very robust. In our near term pipeline we have over 800,000ft² of commercial office space to deliver, all of which will start in the next 12-18 months. Then, following on from that, we’ve got 15 projects with 1.1 million ft² which takes us through to 2022. This is all development which we have sufficient funds in-house to deliver and we are looking at the various planning, right to light and other consents to take them forward.

How do you procure construction work?

A variety of methods; whichever is most appropriate. At the moment we are mostly going through two stage tendering but we are negotiating certain packages within those contracts as well.

What are your priorities when selecting contractors?

We like to work with people we have worked with before. Rather than just one project we can build on our experience with each other. But as we enter a more robust phase [of market growth] we are looking for some new suppliers as well. It’s striking a balance between established relationships and the availability within the marketplace of key individuals.

The other thing that we look at very carefully is contracted payment terms. We want our main contractors to pay our subcontractors on a back-to-back basis

The other thing that we look at very carefully is contracted payment terms. We want our main contractors to pay our subcontractors on a back-to-back basis and that may not be quite possible, but we will definitely exclude contractors that have extended payment terms - I don’t want to name names but they know who they are. It’s very detrimental to the industry. Increasing payment times increases costs for me because ultimately the trade contractor is going to factor that into their tender, or it’s going to further reduce their margins. Either way it’s a very cynical ploy and it’s been on the increase over the last year.

We find a lot of people still want to work with us. A lot of competing developments are by new developers in the market who don’t have a track record of paying people promptly. If you are asking a lot from your supply chain you need to be able to pay them quickly and we respect that.

Do you see market conditions improving further over the next year, and if so, are you worried about cost implications?

I see market conditions improving in the next year. The fundamentals within our market are constrained supply and increasing demand. Market conditions are positive and we believe will remain supportive of development over the next couple of years. In terms of cost increases, we are concerned but it is not neccessarily a bad thing because we are coming up from a very low base. Ultimately we need the trade contractors to be around for the long term and start to invest. Concerned yes but not worried. Materials is less of an issue than labour, which is the greatest risk for costs: management is very fleet of foot these days and there’s a lot more movement of staff.

Does the strengthening market mean you alter the way you work with your supply chain, and if so how?

Not really - we have always spent a lot of time talking to them and understanding their issues and we will continue to do that. We will continue to look for innovation where we find it and to make sure that our tender information is well co-ordinated when we issue it so that our sites are well organised. If they are, everybody has a chance of making a profit and we get the buildings on time and to the quality that we need.