Less than eight months out from London’s next mayoral election, what do real estate leaders want to see from the winning candidate – and what does the capital and its built environment need?
That was the topic on the table at the latest EG Cities dinner, held at Searcy’s brasserie in the Barbican Centre, EC2, during the London Real Estate Forum. Guests from the public and private sectors came together to lay out what they want to see on the “to do” list of the mayor and how London can solidify its place on the world stage.
There is everything to play for in tough markets. “It’s quite difficult at the moment for lots of reasons – the cost of debt, skills and labour shortage, housing and how we need to improve on that front,” said Joseph Mazzucca, partner and head of London at Shoosmiths, EG’s partner for the event.
But there was a belief that the city and its leadership can grasp the nettle, “recover from Covid and remain a global city,” said Simon Burnett, head of London development at Deloitte Real Assets Advisory, which last year backed the launch of the London First Place Commission to map out a new future for the capital.
Flashing red
London’s housing challenges were front of mind for many of EG’s guests.
“We used to think we had a simple business,” said Harry Lewis, divisional land and development director at Berkeley Homes. “If there’s a dashboard and there are four lights on it – land, planning, build and sales – at any point in the cycle there were probably two flashing amber, one red, one green. Now, they’re all flashing red and we’ve never seen that before.”
Land is being taken by student and PRS operators, Lewis said, planning is taking forever – “we’re lucky now if we can get consent within three to four years,” – build cost inflation has been “brutal” and sales values are falling. “This is a really challenging time and it’s difficult to understand how we can find our way out of it,” he added.
Kathryn Firth, director of Arup, spoke of companies’ “responsibility towards quality” even in a difficult market for residential development. “I don’t just mean that in terms of what the materials are, but in understanding the context of a place,” she added. “There are places where we all know it makes sense to build up and intensify that way. But you can also intensify horizontally. And there’s plenty of land in some of these areas where that intensification can take place.”
The rental market too faces difficulties. Freddie Wonnacott, director of fund management at M&G, knows the risks that come from a lack of certainty, pointing to the potential damage that could be done by the introduction of rent controls, for example.
“The majority of our investors are local authority pension funds, so we’re about as risk-off an investor as you can get,” Wonnacott said. “One of the challenges from my world as a landlord is there’s a huge scope for an own goal when it comes to rent controls. While the potential future government has announced that it’s not intending to [introduce them], it may well devolve that to local mayors. You only need to look at Scotland to see the impact that has had on a lack of institutional investment.”
As in any conversation with real estate players, planning was a key point.
“On a pure planning point, we always say planning is always about three years behind the market, and in a post-Covid world where we’re talking about repositioning, the planning policy in the London Plan should be a facilitator for growth,” said Nick Brindley, partner at Gerald Eve. “I wonder if the GLA needs to set the example in relation to that.”
The challenges faced by local authorities are stark, said Gill Marshall, director at consultancy e.c.f.
“It’s getting worse – we’re watching boroughs go bankrupt,” she said. “I don’t know if there’s going to be a kind of momentum [on causalities] after Birmingham.”
Ros Morgan, chief executive of the Heart of London Business Alliance, agreed. “There’s enough capital out there to float all the boats but it’s the way that we’re presenting it,” she said of London’s ability to pitch itself internationally. “The local authorities right now can’t see the wood for the trees because of the immense pressure they are under in making cuts… [It leaves them with a challenge] of being able to find any time to focus on regeneration and development.”
At the London borough of Waltham Forest, Jonathan Martin, director of inward investment and higher education academic relationships, stressed the importance of councils remaining engaged with real estate developers.
“We’re doing a big [push] around how do we deal with de-risking the wider process on planning,” he said. “That’s centered within our development performance agreements as we badge them, and they go [far ahead of] pre-planning. So it’s a concept, then you see the site, we’ll meet, we’ll talk about it, we’ll get our deputy leader on site with you. All the way through to post-practical completion, so it gives you certainty throughout the process. It de-risks it for you.”
Pulling levers
Shoosmiths’ head of real estate investment, Nathan Rees, said real estate needs London’s leaders to take “a wider viewpoint” that breaks out of silos and gives investors and developers greater certainty over how their schemes will be received.
“You can see the sense of frustration for people trying to implement schemes and the whole idea of uncertainty of process is quite clearly at the front of people’s minds,” he said.
“This is really impeding addressing some of these things. People are saying, ‘We want housing, we want infrastructure, we want growth, we want jobs’. But if the system isn’t facilitating people bringing those forward, then they simply won’t happen.”
Tom Venner, chief development officer at Canary Wharf Group, highlighted planning, fiscal and infrastructure “levers” available to the mayor, including making the planning process in the capital work more efficiently and continuing to improve the capital’s infrastructure.
“I think that the opportunities for the mayor are to pull some of his levers more strongly and to give leadership into what a London for the future really looks like,” Venner said.
“With planning certainty, perhaps a fiscal certainty and the future of transport infrastructure, we can do an awful lot. The opportunity in London is extraordinary, and I think greater in London than anywhere else in the UK. But quite a lot of it sits on the mayor’s desk to unlock.”
Mike Hood, chief executive of LandsecU+I, added: “There is loads of opportunity, but much of it is trapped in a system where, in most cases, there isn’t a functional relationship between local leadership, regional leadership and national leadership. And because of that, there’s vast inefficiency and there’s a real opportunity for the mayor to create greater alignment there. We’ve seen when that works effectively that it can deliver significant pace and progress. But it does require brave and visionary leadership.”
And maybe even longer-term leadership, suggested Mike Whitney, head of development at Redcliff.
“Politics is very divisive when it comes to planning and the built environment, especially in London, where there are stark contrasts borough to borough,” he said. “Maybe the mayor should be in for a longer term so he can plan for something that’s not just about winning votes.”
To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews
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