Trading slump for commercial developers sees firm diversify beyond its core business

Julian Barwick (Julian anderson)

Development Securities is shifting its focus from its core business of commercial development to take on more residential projects, due to tough market conditions.

Julian Barwick, development director at Development Securities, told Building this week that the firm was now diversifying beyond its core business in order to trade through the economic slump.

The first half of this year has seen a run of depressing stories for commercial developers, with blue-chip developer Hammerson announcing it was leaving the office market. Last week Land Securities posted a 58% drop in profit, while this week British Land reported a 42% fall in profit.

Barwick said the market was “going sideways at best”.

“Trying to build a profitable pipeline exclusively around commercial development, which has historically been our stock in trade, is something we have decided not to pursue at the moment,” he said.

Read the full interview with Julian Barwick here

The shift in strategy comes after the developer’s results for the 14 months to March 2012 revealed a £10.2m pre-tax loss, turning its modest £2.6m profits for 2010/11 back to the red.

The developer, whose projects include Paddington Central in London and The Peninsula in Manchester, reported a £11.4m pre-tax loss in 2009/10.

Barwick said the firm’s success rested on the right investments, rather than year-on-year growth and said it had completed around 50 transactions in the last 14 months, compared to just five over the previous period.

“Our work at the moment… is mostly residential which is not what people would naturally associate us [with]. But it’s a strategic move to combat the market,” he said.

In its results statement this week, British Land said pre-tax profit fell 42% from £830m to £479m for the year ended 31 March 2012. But it said it had increased its development pipeline from £1.2bn to £1.4bn.