After last month’s shock Brexit vote, how will the development market be affected? Now more than ever, firms will need to be proactive
The EU referendum result on 24 June came as a surprise to more than a few - the UK voted out and the markets across Europe held their breath. Parts of the markets still are. However, there’s little doubt that this scenario is a political crisis with some emerging economic ramifications - it’s not a financial nor debt driven crisis.
Commentators seem to agree that the Brexit result creates a landscape of uncertainty in the planning sphere, though banks and alternative lenders have both the cash and the will to invest in opportunities that are coming out of this uncertain landscape. There’s an element of policy behind the next steps for the sector and the decisions taken by government post-Brexit will have a knock on effect on the sector. Even so, the UK is still an attractive market and there’s appetite for the right assets.
So let’s consider this UK planning sphere that we are operating in. After a short period (the Friday following the EU referendum to the following Monday) when the government seemed not to want to make any announcements, the secretary of state for transport was very clear in setting out, at a conference in London, that the government’s position on infrastructure was clear - now, more than ever, the UK had to be open for business and ready to attract investment in infrastructure and development from around the world. Using the expression in the secretary of state’s speech - “investment in the long term infrastructure we need has become more important, not less”.
Let’s put to one side, for the moment at least, the airport expansion debate about Gatwick vs Heathrow and this government deciding to leave that decision for the new prime minister. While that may not make perfect planning sense, it certainly makes political and policy sense. It gives the new prime minister a policy announcement to create waves with and a sense of momentum, determination and grit.
I think the same should be said for investment in economic, environmental and social infrastructure - schools, housing, energy, road, rail and ports. The self-inflicted political crisis does not and cannot mean that the planning world comes to a stop, that energy is not demanded, that the need to travel is cancelled, and the wish to buy or rent is given up on.
In the wider market, what do we see?
In relation to alternative lenders into the planning and real estate development market, a recent De Montfort University report laid out useful information. This insight mirrors our experience and thinking on the lending market in the UK - alternative lenders such as pension funds have warmed very quickly to the notion of the UK private rented sector (PRS) and are keen to put money into that portion of the housing market.
The overarching strategic policy levers are in place from London’s new mayor for the delivery of PRS. On publicly owned land, the GLA is applying an additional lever to require joint venture partners to develop approximately a third of residential units as PRS units on site when GLA land is being provided.
Purpose-built student accommodation has become even more interesting; there is a soft suggestion of a shift towards accommodation which can be of a PRS type, and open to both students and non-students. This addresses the suggestion that student accommodation /ghettoisation is a problem, and certainly it encourages balance and mixed communities. PRS is pure residential use, so use of PRS for both student
and market rent (subject to price) gives access to both student and wider residential markets without a change of use.
In relation to sheds and logistics, with the huge and ongoing move to online shopping and e-retailing, there is a still a dearth of good shed sites and opportunities for sheds, particularly with rail links. There is a focus on some ports along the south and east coast, and in the North-east, where expansion plans need to be aligned with warehouse and distribution works.
That is on the private sector side; what about the parliamentary and public side? To a relative fanfare, government announced in the Queen’s Speech the Neighbourhood Planning & Infrastructure Bill - to bring about more neighbourhood planning and more infrastructure. We expect the emphasis of that bill to shift more towards the delivery of development and infrastructure and less on the softer side of neighbourhood planning.
Proactive determined development with momentum will attract the overseas investment that we want and faced with political uncertainty, it feels like the development sector is going to have to step to the fore and show government how to get on with things.
Al Watson is head of planning and environment at Taylor Wessing