What are the big themes in the world of SME development currently? I found out when I attended the Developers Boardroom Dinner IV last month, where we discussed the perception and reality of the industry that I’m part of. With a ‘2020 Vision Panel’ hosted by Susan Freeman of Mischcon De Reya, and a presentation by eccentric branding expert Steve Edge that brought the room to its feet, this was an evening that did not disappoint.
The theme was our industry’s reputation, and why public trust in property developers is at an all-time low. Earlier this year, the British Property Federation and Grosvenor reported that only 2% of the public trust property developers to behave honestly. This was followed in September by negative publicity surrounding Permitted Development conversions, leading The Times to publish headlines such as ‘Landlords make millions from flats the size of a parking space’.
It’s worth noting the context here. In 2008, 69% of the 200,000 homes built were by small (29%) and medium (40%) sized builders. By 2017, just 40% of the 195,000 homes built were by small (10%) and medium (30%) builders. With both figures still woefully short of the 300,000 annual target, and larger sites by definition being built out by large housebuilders, the last few years have seen a new breed of SME developer emerge with niche strategies and a commitment to bringing back the trust factor.
One of the panellists Mike Bristow, CEO of CrowdProperty, has gathered data from hundreds of SME developers. The biggest challenge, he says, is funding. “46% of earlier stage SMEs quote finance as the major constraint,” he says. “Alternative lenders are critical to unlocking SME developers’ potential, and this sector is slowly gaining traction. Another obstacle is getting asking prices to stack; joint ventures with asset owners is one way to unlock this – however traditional lenders are still wary. On top of all this we are at ‘peak uncertainty’ with the economy, and plans for improved planning and tax regimes are arguably optimistic.”
According to another panellist Nick Cuff, land director at Pocket Living, another problem for SME developers is, “finding the right sites capable of being developed. Post credit crunch we’ve seen a regulatory reaction from government around land use, but there’s also a crisis in how to use existing space, with issues around quality of delivery with many PD conversions. We need new ways of maximising space, with co-living being a prime example.”
