The joint venture between Ikea and Skanska has plans for affordable housing, care homes and a shopping revolution in the UK
In Sweden, shoppers perusing Ikea’s flat-pack furniture in certain stores are invited into fully fitted show homes. Buyers can then enter a lottery for the high-demand BoKlok modular homes, which are built in a factory in a single day and assembled on site.
Pricing is tailored to local earnings and the lottery keeps them affordable, avoiding market-induced price hikes as the number of customers outpaces BoKlok’s output.
BoKlok, pronounced “boo clook”, means “live smart” in Swedish. The business, set up by Ikea and Swedish construction company Skanska, aims to provide homes for the average person and has built 12,000 homes in the Nordics. As the company expands, its modular show homes could soon find their way to UK retail parks.
“We need to understand how to do business in the UK in a clever way – dare to be a little bit different, but not so different that we become odd,” says Jonas Spangenberg, BoKlok’s chief executive. “It is a delicate balance, so that customers are attracted to the homes themselves and then also the process.”
Spangenberg says BoKlok will work with local Ikea stores to promote the homes, with the household brand creating trust for homebuyers.
“Being in between the furnishing company and the professional construction company makes it trustworthy, that we actually can come up with something at that lower price with the quality needed,” he says.
“Since Skanska is not today known as being a residential construction company, the connection is to Ikea. It is the [recognition of] Ikea flat-packs, and we see that as a benefit.”
But it is not just the power of Ikea’s blue and yellow branding or frugal ethos that brings benefits to BoKlok. Spangenberg says BoKlok is in talks to harness Ikea’s €9.5bn (£8.2bn) property portfolio for housebuilding. The first order of business is to secure land, and then domestic suppliers and new products, with care homes and PRS on the agenda.
Suburban appeal
After 25 years of residential development in the Nordics, BoKlok is turning to the UK, drawn by a need for affordable homes.
“The UK is a market where the demand is enormous,” says Spangenberg. “This feels quite natural for us, if you want to make that geographical expansion, to look to a country like the UK where there is a big need looking at people with an average income, not targeting a premium segment.”
The developer has a different price policy to deliver affordable homes in each new market, based on specific customer segments. In the UK, the target is “young couples and public key workers”. Spangenberg points to the pay grade of a fireman or school teacher.
“According to our calculations, they can afford to pay together approximately £1,250 per month,” he says. “It is all about developing a home offering where the cost of living will not exceed that. It is not a set price, but it is guidance for when we look for land.”
With this in mind, BoKlok has spent around 18 months behind the scenes exploring market dynamics. “What kind of customer target group should we address to really make a difference? How should the homes look, so we can actually serve customers in a good way? And where we should stop, because the UK is a big country and we are just a small organisation.”
Pockets of affordability
The first order of business is to secure land. BoKlok immediately ruled out the capital, instead seeking out affordable pockets around the South. “London is too expensive. That is why we have chosen the ‘banana’ from Bristol down to Brighton. We will never be in the big city centres.”
While BoKlok does build apartments, Spangenberg says the delivery method of dropping volumetric timber modules onto sites doesn’t work in urban centres. Instead, BoKlok focuses on the outskirts, where land is cheaper and residential development is being spurred by local authorities.
It is working with Adur & Worthing Councils to deliver 162 homes. Development will see BoKlok acquire council land, with backing from Homes England to boost the viability and help offer 30% affordable homes, which the councils will retain.
The developer is in discussions with other local authorities and private companies, as well as looking to tap out-of-town sites from its owners: “We are having dialogues with the property department of Ikea in various countries and looking into their land banks, and the same with Skanska.”
We need to understand how to do business in the UK in a clever way – dare to be a little bit different, but not so different that we become odd
Challenging perceptions
Sweden is the world leader in prefabricated timber housing. These homes make up 84% of the housing market, compared with an estimated 5% in the UK.
“We have understood that in the UK you have had some bad experiences from the early seventies, and that is still in the heads of ordinary people,” says Spangenberg of the perception of such homes. “The time is right to challenge that.”
As modern methods of construction gain ground in the UK, driven largely by private sector ambitions, local authority partnerships and often Homes England backing, that may be so. But this is not BoKlok’s first attempt to break into the UK.
In 2008, the developer had a licence agreement with a franchise run by housing association Home Group. “They tried to do one project, then came the financial crisis and they couldn’t find a way,” Spangenberg says.
The Live Smart @ Home project opposite Gateshead International Stadium folded amid delays and challenges in securing buyers, and BoKlok ditched plans for the UK – until now.
“This time, we are doing it ourselves and we have 25 years of experience in the Nordics. We think that we know what is needed to get it right.”
Mixed uses
Today, BoKlok boasts a diversified offering, and while in the UK it is focused on land acquisitions and partnerships for its affordable offering, in the future it will look to import newer products.
One example of this is its latest venture, SilviaBo. BoKlok has teamed up with the dementia care foundation established by Queen Silvia of Sweden to develop modular homes for the elderly and people with dementia.
“It is a home offering where it is easy for you to stay at home longer. It is about finding a really nice way of developing a community,” says Spangenberg. “I would see the UK as the second country we would think of bringing a concept like that to.”
In time the company will seek to create mixed-use communities through partnerships, as it broadens into private sector tie-ups. “Right now, the way we do business is in the lower-price private sales segment,” the chief executive says. “But if we can find the right kind of corporation, I can see the [private] rental way of doing business.”
Later down the line, this may be driven by more in-house efforts from Ikea and Skanska. Could shopping centres and resi be on the cards? “It could be an interesting mix actually,” says Spangenberg.
Currently, however, the focus is to understand the UK customer, tailor the product, and secure the pipeline of land to get those first modules on the ground. And the expectations are high.
“For us, this is the only thing we do. If we don’t get it right, it is a big failure for us,” says Spangenberg. “We have a positive pressure, from ourselves and our owners, Ikea and Skanska, to really, really get it right.”
SEE ALSO: Ikea’s BoKlok to bring 200 modular homes to Bristol
To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette
