Sun, sea and service stations

Now could be the right time for the UK construction industry to book itself a place in the Spanish sun. The hotel and resort sectors are booming, inward investment is pouring into retail, leisure and industrial projects, and the economic outlook is sunny for the next few years. And, as the euro starts to pull Europe closer together, it is a fair bet that if British firms don’t bag those sunbeds fast, the French or Germans certainly will.

Spain’s economy is enjoying strong growth after the slump that followed Seville’s Expo ‘92 and the Barcelona Olympics. Incoming investors are taking advantage of the country’s growing consumer demand and low overheads, and low interest rates have given local developers the confidence to invest. “Over the past 18 months, there has been a resurgence in Spain. If there is another recession, Spain might ride it far better than any of the other European countries,” says Charles Langdon, director of architect BDP’s associate practice Arquitectura Langdon in Madrid.

One added attraction for the UK is that British or part-British clients account for a high proportion of the cash pouring into Spanish construction sites. Leisure developers such as THI, Heron International, Chelverton and Lend Lease are among the overseas arrivals that have realised that Spain’s population of 39.8 million is undersupplied with shopping and recreation facilities.

But before UK managers start pencilling in their six-month secondment in the sun, they should note that Spain is not the kind of traditional overseas market a company can export its UK staff and experience to. It is part of Europe, and as sophisticated in construction and business terms as France or Denmark.

“The UK approach only works to a degree – you have to adapt to the Spanish way,” confirms Davis Langdon & Everest partner John Blasby, responsible for the 35-strong Spanish office.

So, for most UK firms, operating in Spain will mean employing 80% local staff and ensuring that the British minority is bilingual. “You have to sit well with the local culture, and speaking Spanish is part of that,” says Tudor Salusbury, director of Ove Arup & Partners España. Currie & Brown director Kevin Ellis, speaking in his Barcelona office, makes the point that in tomorrow’s integrated Europe, working in Spain will not be seen as working overseas but simply as opening a branch office in a different part of Europe.

The UK firms that have established themselves in Spain tend to do so by forming a joint venture or association with a local firm; the British side contributes clients and leads from the UK and the Spanish company provides local projects, staff and expertise.

As a result, UK consultants in Spain tend to side-step competitive fee tendering. “Work tends to come from existing clients – you don't hear about a lot of jobs until they happen,” confirms Currie & Brown's Ellis. However, he anticipates that this could soon change, given the number of UK name-plates arriving in Spain. And in the project management field, it is not just UK competition – there are US, French and German firms as well.

Typically, the long-established firms survived a lean period in 1994-6. “Things were pretty grim when we arrived in 1994,” recalls Ove Arup's Salusbury. “It was right in the middle of Spain’s over-spending hangover.” Inflation went unchecked and interest rates soared to 15%. But a new government is credited with pursuing the tight monetary policy that created the conditions that are now attracting foreign investment. “Three years ago, no one thought we’d be in the first wave of monetary union,” says Federico Quintero, director-general of Bovis in Spain. “Unemployment is still high [at 15%], but it’s decreasing fast.” Both Spanish and overseas investment is chiefly drawn to the leisure, retail and tourism sectors. Many Spanish cities are now ringed by out-of-town entertainment destinations anchored by multiplexes and factory-outlet shopping villages. “Investors like Spain,” says Langdon. “The returns are almost as good as elsewhere, but the construction costs might be only 70%. The figures stack up.” Other market sectors, such as private residential and offices, are also buoyant, but clients here are less likely to turn to the services of non-Spanish consultants.

Developers taking part in the leisure boom include Heron International, which announced an expansion of its Spanish development programme last month, adding a 30 000 m² entertainment centre south of Madrid to ongoing developments in the west of the city and in Barcelona. Rival developer THI has a 22 000 m² scheme on site in Madrid and another going on site at Vittoria at the end of this year, and it is searching for further sites.

A new generation of hotels and holiday villages aimed at more affluent tourists is also taking shape. Mace is project-managing the early stages of two themed holiday villages worth £100m in Catalonia, while QS WT Partnership is working for the Marriott chain and Virgin on two “exclusive” developments. Upmarket villas for overseas clients is a market enjoyed by DL&E.

Here you can start the project on a handshake. In the UK, you’d be fired

Fernando Conde Möller, director of Ferran, with Ferran architect Jordi Pujol i Riembau, commenting on Spain’s relaxed approach to doing business.

As well as staying in swish hotels and villas, next year's holidaymakers will be able to visit a new generation of theme parks. Bovis has started construction of Terra Mitica, a £200m Mediterranean-themed park near Benidorm, which is backed by a consortium of local investors. At least one other theme park is under construction on the south coast, project-managed by Gardiner & Theobald's associate practice Ferran.

Leisure and retail may be the main markets for UK consultants, but most have taken care to ensure a foothold among light industrial and high-tech clients. There are forecasts that these firms will form the next wave of inward investors, as Spain starts to benefit from the Mediterranean effect: if economic risks are equal under the euro, the argument goes, why not base your manufacturing plant where overheads are lower, the quality of life higher and the weather warmer? Schemes such as Hewlett-Packard's printer plant near Barcelona, project-managed by Davis Langdon Edetco, DL&E’s Spanish arm, are expected to multiply.

Several UK consultants are also working for telecommunications clients that are taking advantage of Spain’s recently deregulated market. Gleeds has been appointed by BTT – the Spanish arm of BT – on 50 new exchanges. Telecoms company Esprit introduced Mace to the Spanish market last year, and Gleeds and Aukett + Imagina – a joint-venture architectural practice in Madrid – are working on the fit-out of an office and call centre for BT. Bovis’ global alliance with US telecoms giant Lucent has resulted in an office fit-out and a possible £20m production facility.

Mace’s Mike Davies, director for international operations, reports that the company is carrying out several feasibility studies for industrial projects in southern Spain. He also adds healthcare to the list of potential growth sectors. “In the past few years, the Spanish have spent a lot updating roads and rail infrastructure.

I think hospitals are next on the agenda,” he says. Davis Langdon Edetco is already in the market with a commission for the headquarters of Sanitas, Spain’s BUPA.

The inward investment arriving in Spain provides the perfect opportunity for British construction firms to travel on their clients’ coat-tails. Once there, they should be able to enjoy two or three years of steady work as Spain builds the leisure, shopping and manufacturing facilities that are the norm in the rest of Europe.

And after that? Well, Spain is likely to be just another part of Euroland, with a mature and competitive construction market. But it will still be a hot, sunny and very pleasant part, so why not take advantage of the Mediterranean effect?

The Spanish way of working

In general, Britons who relocate to Spain will find themselves in an industry that produces similar results to those in the UK, but uses quite different methods. Spain’s legal structure that lays heavy responsibility on the design architect; the existence of the aparejador – a site architect who is also part QS; and a reliance on traditional contracting, all create an alternative construction climate.

Many who work in Spain point out that the process is less contractual and less structured than in the UK, with more scope for intuition. “Here, you can start a project on a handshake. In the UK, you’d be fired,” says Fernando Conde Möller, director of Gardiner & Theobald associate Ferran. And, although the working day may be as long as it is in the UK, there is a slightly more relaxed approach to business.

If we designed the lovely glass buildings Aukett does so well in the UK, people would boil

Lola Ripollés, of Aukett + Imagina, talks about the necessity of air-conditioning in Spain.

Under Spanish contract law, it is the individual architect, rather than the practices they work for, who takes on design liability. As a result, any architect signing off drawings must carry hefty liability insurance. For instance, even with no claims against him, Ferran architect Jordi Pujol i Riembau carries personal insurance for £400 000, in addition to a further £400 000 held by his firm.

Single-point responsibility

Although the design architect is the one named in the contract, at some stage he or she is likely to hand over to an aparejador, or site architect. This hybrid QS-architect takes charge of cost planning and project management, as well as design development. They may be employed by the original practice, or by a project management company, but not usually by the contractor – design and build is almost unheard of in Spain.

Contractors also believe in single-point responsibility, and, on site, the contract manager is king. “He will do the buying, cost-control, programming – he’s pulled in too many directions,” says David Johnson of Gleeds in Madrid. “It’s possibly a failing in the process.” And if problems arise, lawyers are unlikely to be called in. “There’s much more sitting around and talking, with table-banging and emotion,” adds Currie & Brown’s Ellis.

However, there is another reason contractors are unlikely to need lawyers to settle disputes and claims. It is established practice for all public and some private tenders to be advertised at a maximum price. When contractors respond, they submit bids 20-30% lower than the advertised level, and in time-honoured fashion, the lowest price will win.

Once the project is under way, however, the contractor will “discover” new complications, and costs will inexorably rise to the advertised level. “The philosophy of contractors is that you are entitled to ask for extensions. Contractors are just as financially minded as elsewhere – they just express it differently,” says Bovis’ Quintero. According to Ellis, “a lot of pre-negotiation talks try to prevent this problem. But contractors tend to say to us: ‘If we put that in, we won’t get the job’.”

The traditional framework also means that fee-based contracting, with its overlapping packages and timescales, has been slow to take root in Spain. To date, firms such as Bovis that offer a construction management service have largely been working with non-Spanish investors. Bovis, Heery and Mace are all hoping that Spanish clients are becoming sufficiently experienced to appreciate the greater flexibility – and risk – of the construction management route.

A view often expressed by British consultants is that their Spanish counterparts do not share their rigorous pre-project planning or mid-project management procedures, but still achieve good results on the type of intuition and improvisation that has possibly been squeezed out of the British approach. “That’s why the combination of the British and Spanish systems is so good,” says Bovis’ Quintero.

Keeping the numbers down

Spain has no large architectural practices with national coverage. According to Aukett + Imagina, more than 12 staff is a rarity.

There’s much more sitting around and talking, with table-banging and emotions

Currie & Brown director Kevin Ellis on what the Spanish use instead of lawyers

The legal position has been one disincentive to the formation of larger practices. After all, there is little point in growing a company or partnership if personal liability still keeps you awake at night.

Another reason for the small size of practices is the high cost of employment. Redundancy packages in particular can be prohibitive. Freelance architects, quantity surveyors and project managers often enter long-term relationships with firms without being employed by them. Ove Arup Partnership has a core staff of 15 but can call on another seven or eight regulars when workloads peak. The same system applies to contractors, which have small direct workforces and rely on labour-only subcontractors.

Decisions on design and materials inevitably reflect the nature and climate of Spain. Marble is far cheaper, and often used where carpet or tiles would be laid in the UK. Natural ventilation is a foreign concept, and air-conditioning a necessity.

“If we designed the lovely glass buildings Aukett does so well in the UK, people would boil,” says Lola Ripollés of Aukett + Imagina. In densely packed, vertical cities, offices and residential buildings are usually designed with lifts and basement car parks.

Construction costs are noticeably lower than in the UK. According to Gleeds, the Spanish twin of a British building would cost 80-90% of its sibling, because of lower materials, preliminary and on-site costs. A typically-specified Spanish school or supermarket would cost only 70-75% of its UK equivalent. Heery attributes part of the discrepancy to lower expectations for out-of-sight areas.

For consultants, lower construction costs have the effect of levelling the higher percentage fees achievable in Spain to take-home margins roughly the same as in the UK.