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Blog: The future of social housing design and build in Scotland is all about virtual reality

Euan Revell

Euan Revell

Euan Revell, senior architectural designer at planning and design consultancy Barton Willmore in Edinburgh, says today all eyes are on digital design.

Picture the scene. You’ve just been informed that there’s a new development planned in your neighbourhood, but rather than leaf through the image of a brochure, you reach for a pair of VR goggles.  From the comfort of your armchair, you can now see the full multi-million pound housing development laid out before your eyes. Now imagine walking through it, reaching out to touch the bricks and mortar and interacting with the world around you in real time. It sounds like something from the future. But it isn’t.

This is the world of immersive virtual reality where spaces can be created using a combination of computer graphics, wireless tracking technology, headsets, HD projectors and polarised glass, all working together to create interactive and real-life experiences.

Today all eyes are on digital design, architecture and Building Information Modelling (BIM). The world of 3D virtual design and architecture is a fast-growing field and there’s some seriously forward thinking happening in these fields.

Every design will soon be made using virtual reality; enabling anyone to fully immerse themselves in a 3D (BIM) model which can be manipulated and provides an incredibly accurate sense of presence in a space that’s yet to be built. And it’s already happening here in Scotland.

As part of our national architecture team’s ambitions to lead the way in BIM, our Edinburgh team have used the modelling system for the City of Edinburgh Council’s Small Sites Affordable Housing Programme.  The redevelopment of seven sites around Edinburgh which makes up the Small Sites Affordable Housing Programme, will provide around 260 new affordable houses for 21st Century Homes, to be built by Robertson Partnership Homes.

The pressure to use BIM on our social housing project didn’t come from the contractor or the client, it was a decision made by Barton Willmore. It’s inevitable that we won’t be drawing drawings anymore, we’ll be modelling buildings. It’s more fulfilling as a designer to use modelling, after all we’re designing spaces, so it’s better to create them virtually rather than drawing them in two dimensions. Yes, BIM takes a lot of energy to produce a good set of documents, but these documents will be more coordinated and more rigorous.

What’s more, you can walk around your drawing set, which in turn produces better designs. It can quickly highlight areas that are needing a bit of design TLC. When you model in 3D you also, by necessity, think about the buildability – if it’s difficult to model, chances are it’s difficult to build so you become much more aware of the construction. This is where we can manage costs more effectively and less builds running over time.

So it’s good for the designer, but what about the public? For the Edinburgh Small Sites Programme, we were able to present our scheme in a much more dynamic way at public consultation. Traditionally, members of the public are given a set of plans to review and maybe one or two visuals to give them a flavour of what the development might look like. But when you have designs modelled in BIM – you have the opportunity to take them on a virtual tour.

As well as the Edinburgh Small Sites Programme, we also used BIM as part of Fife Council’s Affordable Housing Programme at one of the key sites and the levels of public engagement soared. Presenting our plans in this way allows us to show residents how our development looks from their bedroom window, from across the street or three blocks away. It’s much more rewarding and transparent as your design gets interrogated far more extensively.

On the occasions that we could use the 3D model to walk people around the site, the public were much more engaged, and were able to make more informed comments. They could readily see how the development would look in the local landscape. People were interested in materials, roof forms, massing of the buildings and, naturally, ‘how will my house be affected?’

We can demonstrate how shadows will fall at various times of the year, how the building will look from a neighbour’s garden and many other design considerations. It’s proven to be a vital tool for engaging with stakeholders and getting their understanding and buy in. Everyone just got it when they could see it in 3D. The queries we received were more considered and the level of engagement across the board was fantastic.

We’re already looking towards using gaming software – much like Minecraft – where we can take communities on a virtual reality tour of our designs and allow the community to manipulate these designs to incorporate their own ideas. It will not only be empowering for local communities but will allow us to continue to stake our claim in leading the way in the social housing sector.

Blog: Top tips for future-proofing your business

Marc Shenken

Marc Shenken

Succession planning was always a hot topic when markets were buoyant and businesses were optimistic. However, the recession meant many owners put this forward planning on hold, even in the construction sector, which boasts a high number of owner-managed and family businesses.

However, recent research carried out by Scott-Moncrieff found that, as the ‘new normal’ is bedding in, the topic of succession is seeing a resurgence in popularity.

The firm’s latest annual UK-wide report, ‘Strength amidst uncertainty in 2017: The SME view’, finds that almost a third (29% in the UK and 31% in Scotland) of SMEs are certain or very likely to review their succession plans over the course of this year. However, given that succession planning hasn’t been a priority of late, many may not be aware of the full range of options available.

Encouraged by the latest results, Marc Shenken, a partner at the business advisory and accountancy firm, sets out the key things construction business owners should think about when planning for the future. He emphasizes that it’s vital to think early on about what type of exit you want to achieve and, if selling your business, who you want to sell it to.

Failure to plan could not only reduce the potential value of a business, but could lead to a loss of advantageous tax reliefs and expose owners to unnecessary risks.

According to Marc, top tips to plan for the future of your business include:

Understand and verify what your business is worth

If you’re favouring a sale and exit from the business, you should gain an idea of how potential purchasers may value your business. Alternatively, if you are planning to pass the business on to the next generation, a valuation will help you determine the likely value of this gift and to plan accordingly.

Get tax advice

You could miss out on valuable tax reliefs simply by failing to plan in good time, or by making minor changes to your business. Tax planning does not always cease when you sell or hand on your business, so you may need to consider how you invest or protect any cash proceeds in a tax-efficient manner. Where possible, take advice from tax planning and wealth management specialists.

Don’t hand over any baggage

Settling any disputes with suppliers, customers, employees or HMRC is vital to ensuring your business is in the best position to be sold, gifted or wound up in a timely and efficient manner. Gaps in the management team should be addressed, and you should make sure that your accounting and tax records are in good order.

Keep your corporate structure simple

Corporate simplification planning provides vendors with the comfort that no outstanding risks or liabilities remain, and can also significantly increase the value and attractiveness of your business.

Planning for the future has, of late, been a luxury that most could ill afford. However, for those directors or owners that have come through difficult times and now resolved to stand back, get out or move aside to let the next generation take things forward, there are many options available. While there are a variety of things we might not be able to predict at the moment, planning the future of your business is one area where you can take some control.

Just a Minute with James Gibb residential factors MD Nic Mayall

Nic Mayall

Nic Mayall

The latest participant in the Just a Minute feature by our sister publication Scottish Housing News is Nic Mayall, managing director of James Gibb residential factors, which has offices in Edinburgh, Glasgow and Aberdeen and manages 24,000 properties throughout Scotland.

How did you get started in the industry?

I’ve always worked in property in some capacity. Initially I started in estate agency, diverged into letting and then spent 10 years in corporate relocation. Moving into property factoring was a bit of a shot in the dark but it’s been incredibly rewarding and I only wish I had made the move earlier.

Biggest professional achievement:

I’ve been lucky enough in my current role as Managing Director to have the opportunity to input into shaping our business and develop innovations in customer service. We’ve recently invested in a new client access portal and launched a range of customer guides, all of which have had amazing feedback.

Best advice you received:

It’s hard to say as I’ve received a lot of good advice over the years and I try to take the best bits on board! A previous boss of mine used to say, “the sun will still rise tomorrow” and that’s always a good way to contextualise things.

What is the most important part of the industry?

Customer service without a doubt. When I started in factoring, the main emphasis was on property knowledge. Whilst this is important, we are in a customer facing industry and good customer service is what makes companies stand out.

What do you like most about your job?

The continuing variation. No day is the same and it’s all about juggling balls and making sure you catch them! I’m lucky enough to work with a great team of people who are highly motivated and professional and that makes it so much easier.

And least?

E-mails. I used to receive letters from clients when I first started but nowadays, communication is almost exclusively by e-mail. E-mail is a great quick way to communicate but there can be an expectation that everything has to be responded to immediately. Sometimes it’s better to spend a little more time and compose a better, more comprehensive reply rather than fire off an immediate response.

What you would most like to change in housing?

I think there is still some room to look at adopting more generic Deeds of Conditions for properties so there is more consistency. Incorporating a provision for a sinking fund for developments is also a sensible way forward.

What future issues do you see arising in housing?

We’re at an interesting point in housing in Scotland. I think the social sector and the private sector have a lot to learn from each other and there are plenty of opportunities for partnerships going forward.

Which newsletters do you receive?

Scottish Construction Now which helps keep me up to date and the Edinburgh Chamber of Commerce newsletter.

How would you change Scottish Housing News?

I wouldn’t – I like the layout and depth of information.

Do you read a daily newspaper?

I used to read about 3 but perhaps it’s a sign of the times that I now get my news online. If I’m taking the train to work, I’ll read The Metro but I probably get most of my news from the BBC news website.

Which social media sites do you use?

As a company we’re now using social media which is a great way to communicate and get your brand known. Personally I use Facebook and Twitter a lot as well as LinkedIn for business purposes.

Hobbies and interests:

I’m a big rugby fan and still turn out for my local vets team. However, I’ve just ruptured my Achilles tendon playing 5 a -sides so I may have to take up something a little more sedentary! I’m a keen quizzer and have appeared on The Chase and The Weakest Link in the past.

Favourite holiday destination:

I’ve been fortunate to visit a lot of great places so it’s hard to pick a favourite and there’s still a lot left on the bucket list. We’ve been to Turkey a couple of times and the weather is glorious, the people friendly and the standard of hotel is exceptional.

Blog: New Innovation Factory can help industry do things better

Chris Shaw

Chris Shaw

Chris Shaw, associate development director of regeneration company Urban Splash, provides his view on Construction Scotland Innovation Centre’s newly launched Innovation Factory.

Just yesterday, I had the pleasure of addressing a huge room full of Scottish construction professionals. But this wasn’t any old room – it was Construction Scotland Innovation Centre’s new Innovation Factory, a massive workshop which from today onwards, will be home to a whole bunch of state-of-the-art construction and manufacturing equipment that anyone in the construction industry can use.

It’s unlike anything else in the UK, so as an Englishman who is passionate about innovation in construction, I’m a little bit jealous.

I’d been invited north of the border by the Construction Scotland Innovation Centre to talk at the launch of their Innovation Factory about my experiences with Urban Splash, the award winning regeneration company I work for in Manchester on developments around England.

Urban Splash was set up by two friends, architect Jonathan Falkingham MBE, and entrepreneur Tom Bloxham MBE, back in 1993. At the time they had no grand plans other than wanting to bring all the many empty buildings that were lying around in Liverpool and Manchester back into use.

What really set Urban Splash apart from other developers was that it based its investment decisions on what it thought would be future trends, rather than responding to historic ones. This was a very unusual approach in an industry which is traditionally very conservative and cautious. When we started developing in city centres, people thought nobody would want to live in Manchester or Liverpool city centre – it was seen as very radical.

But our approach was a success; Urban Splash has undertaken more than 60 regeneration projects, invested over a billion pounds in regeneration and created over 5,000 new homes, 2 million sq ft of work space, and thousands of jobs.

The £2 million Innovation Centre was launched yesterday with a major industry event

The £2 million Innovation Centre was launched yesterday with a major industry event

Being bold and innovative is where we share many similarities with the Innovation Centre team. They are passionate about getting Scottish construction businesses to look to the future and do things better. In the Innovation Factory, they have an amazing facility that’s open to anyone who wants to use it to prototype and develop new products, processes, systems and solutions. As well as all the latest equipment, they have people to show you how to use it, and collaboration and training facilities to allow organisations to share knowledge and up-skill the next generation of talent.

A particular area of focus for CSIC since it launched in 2014 has been offsite manufacturing. I believe that offsite is a game-changer when it comes to tackling the current housing shortage. Scotland alone needs to deliver 50,000 new affordable homes and an estimated 75,000 private homes over the next few years. Offsite fabrication and modularisation can really speed up housebuilding, because while the building components are being manufactured in a factory, onsite preparation can be going on at the same time. Using a controlled offsite environment can reduce the impact of adverse weather conditions on the project, reducing costs while also improving safety.

Many people think modular housing means that we’ll soon all be living in bland identikit shoeboxes. However, with manufacturers taking a 21st Century approach to mass customisation, as the car industry has, nothing could be further from the truth. This is one area we are really investing in at Urban Splash. Our “House” project aims to combine the cost benefits of modular construction with the flexibility offered by architect-designed properties. Customers have the power to design and determine the layout of their home, which is then made in a factory, and transported as a pre-assembled module to site where it is craned into position. Our maiden scheme in New Islington in Manchester is sold out, and we now also have developments at Irwell Riverside in Salford and Smith’s Dock North Shields, with plans for Scotland in the near future.

CSIC has also been supporting a consortium of Scotland’s offsite manufacturers for some time, which is making real progress in terms of allowing these businesses to collaborate and improve Scotland’s offsite proposition.

Embracing offsite is just one of the many ways CSIC can help your organisation. So if you’re in the UK and you’re involved in construction, come and see the amazing Innovation Factory. I can’t tell you how much the founders of Urban Splash wish there had been a facility like this back in the 1990s. But it’s here now – so use it!

Blog: Build to Rent could plug housing shortfall

Block one at Dandara’s Forbes Place development

Block one at Dandara’s Forbes Place development

Scotland’s housing shortfall could be plugged by Build to Rent homes but opportunities as well as threats exist for the sector, says Dr John Boyle.

Build to Rent (BTR), or institutional investment in the private rented sector (PRS), is now emerging as a major new way of providing housing across the UK.

This type of housing is common across Europe and the US where, by way of example, around 25 million people live in the BTR sector. However, to date, this sector has made little impression in the UK and Scotland.

But there are now clear signs that this is changing, with significant new BTR developments across England, most notably in London and Manchester. As things stand in Scotland, only 2% of the UK total of 84,000 units planned or completed is located here.

The attractiveness of BTR for investors is easy to see – it reduces construction risk, greatly enhances the speed of delivery, is not tied to mortgage affordability, is more efficient from a management perspective, and can improve place-making. For tenants, BTR provides quality, purpose built housing and a greater level of amenity.

To investors, the main Scottish cities are attractive in a BTR context, with higher yields, lower capital requirements and potential for market growth that outstrips many other UK cities. Demographic growth is also fuelling demand, while housing supply remains very weak.

Despite Scotland annually reaching record population levels, we are currently only building around 17,000 new houses per year, 30% down on where we were pre-recession and about half of the level that the Scottish Government targeted in its 2007 Firm Foundations policy paper.

Scotland now has its first operational BTR scheme with the 292 units at Forbes Place, just outside Aberdeen, and there are over 2,500 units now planned in Edinburgh and Glasgow. Rettie & Co have advised on the purchase of Springside in Edinburgh, where a mixed-use scheme by Moda and Apache will deliver over 500 rental units. Scotland also has a number of mid-market rent (MMR) schemes, essentially affordable BTR, including Harbour Point in Edinburgh, where 96 units generated over 3,400 applicants and so demonstrating the sheer scale of demand.

Political “noise”, especially over the prospects for Indyref2, and possible impacts on currency and taxation, has been a factor in BTR investors holding back on Scotland. This is not for reasons of political partisanship, but simply because of the investor dislike of uncertainty.

These concerns were alleviated to an extent after the UK general election, after which Indyref2 seemed a more distant prospect, but have re-emerged as various Scottish councils have signalled support for rent pressured zones (RPZs) or, in effect, rent controls, after the recent council elections. Bluntly put, investors do not like being told how to price their assets.

The Scottish Government has been trying to woo the BTR sector, with measures such as a rental income guarantee scheme (RIGS) under consideration. However, it does appear that with the prospect of rent controls and other tenancy reforms, the government is using the brake and accelerator at the same time and, in so doing, is stalling the sector. These issues are soon to be debated at two major conferences in Edinburgh – the Scottish Property Conference this Wednesday and the Build to Rent Forum on 12 October, where government, industry and academics will meet to discuss housing issues.

Government and industry need to work together to tackle Scotland’s long-standing housing problems, which is fundamentally driven by supply shortages. Lessons can be sought from Manchester, where effective political leadership has shown the way forward in establishing sectors like build to rent and boosting housing supply. Steve Sheen from Manchester City Council is set to discuss how this has been achieved at the forthcoming Scottish Property Conference. Arguably, we need some of this kind of leadership here.

  • Dr John Boyle is director of research and strategy, Rettie & Co

This article was originally published in The Scotsman

Blog: Rising costs and skills shortages expected to weaken construction industry outlook

Andrew McFarlane

Andrew McFarlane

Increased building material prices and a shortage of labourers can flatten the Scottish Government’s laudable building ambitions, says Andrew McFarlane.

As the population of the UK inexorably increases, the most frequently employed stock response in political circles is to promise to build more houses. In Scotland alone, the Holyrood government has a target of 50,000 new affordable homes.

Vast sums of money have been allocated with a view to upping the building rate and encouraging councils, housing associations and construction companies to deliver new accommodations despite a challenging economic environment.

While such ambitions are laudable, there are many factors which can throw plans off target, and it is becoming clear that considerable increases in the price of building materials are heading up the worry list.

A newspaper investigation earlier in the year disclosed that some of the essential raw materials of the construction industry in the UK have been hit by price increases of up to 35%. Hikes of this magnitude can push the most meticulous margin planning into disarray.

The costs of some construction components, including plasterboard, chipboard and loft insulation, are rising at their fastest rate for 25 years.

The Construction Trade Survey from the Construction Products Association in Q4 last year showed that overall costs increased for 88% of civil engineering contractors, while 75% of main contractors also reported a rise in raw materials costs.

The main blame for these cost rises has been laid at the door of Brexit, with the subsequent decline in the value of sterling which is producing industry-wide inflation. Increased energy prices are also hitting manufacture of items such as bricks.

Nearly a quarter of building materials supplied in the UK are imported and a modicum of good news is that, in a typically proactive response, many trade suppliers are actively seeking to source alternatives to traditional markets.

But as well as cost issues, the construction sector is beset by an ongoing skills shortage affecting key on-site trades, with main contractors reporting at the beginning of the year that shortages of carpenters and plasterers were at their highest in nine years.

The Federation of Master Builders also warned of a shortage of labourers. Nearly one in eight comes from outside the UK and there is concern that many of these employees may decide to repatriate in the event of a hard Brexit.

As well as material costs, wage inflation is playing its part in the worries affecting construction. A survey by recruiter Hays showed that average salaries in construction and property rose by 2.8%, with building services achieving 3.5%.

Nearly two-thirds of building service employers said they had raised salaries over the course of 2016 and the same proportion expect to have to offer similar rises in 2017, with 16% anticipating that these increases will be in the order of 5% or more.

It is hardly surprising that the Office for National Statistics recorded a 1.2% decrease in construction output on May this year, both month on month and three month on three month. The most notable decline was in infrastructure, which fell 4%.

The construction industry is resilient. It has to be, considering the wide variety of external factors which can buffet it unexpectedly. But despite all its efforts, a weaker outlook for the rest of 2017 seems inevitable.

  • Andrew McFarlane is a consultant in the Glasgow North office of DM Hall Chartered Surveyors and a Fellow of Royal Institution of Chartered Surveyors

Blog: How can in-town shopping centres survive and thrive?

Bon Accord graphic illustration

GVA has been involved with the planning of the Edinburgh St. James’ development and the extension to the Bon Accord Centre in Aberdeen (above)

Planning expert Chris Miller on the challenges and opportunities facing town-centre shopping centres.

Recent headlines that the equivalent of one shop per day closes on Scotland’s high streets made for grim reading, but what’s behind this and, more importantly, what can be done to arrest this decline?

For a start, look at what types of businesses have been closing. Unsurprisingly the fashion industry saw the highest number of outlets close in 2016, with banks not far behind. The common theme there is the rise of the internet – people can easily manage money from their pocket or access thousands of items of clothing from their fingertips.

E-commerce has transformed the way UK consumers shop over the last 10 years and now accounts for 14.5% of total retail sales. If growth continues at a similar rate, then online retailing could potentially reach a quarter of all retail sales by around 2025.

It’s impossible to say when this growth will hit saturation point, but it is clear that traditional high streets and shopping centres need to respond to the threat from the internet if they are to survive in the long term. A number have responded by having less of a focus on pure retailing and offering something that online services will never be able to replicate, and that’s an experience.

Developments that people can shop, eat, drink and enjoy something recreational at are becoming increasingly popular solutions to get people away from their tablets and into town and shopping centres.

Recent examples of this can be found up and down Scotland. The redevelopment of Edinburgh St. James is arguably the most high profile of these and that will feature residential units, a hotel, and a cinema amongst a whole host of other attractions.

In Glasgow, the Buchanan Quarter mixes retail with residential flats, and the recently approved St Enoch Centre reconfiguration provides for a cinema and additional food and drink outlets. A planning application to provide a boutique cinema at Princes Square is also currently pending determination. And most recently plans to transform Sauchiehall Street, which has seen a dramatic increase in empty units over the past decade, have been given the go-ahead.

GVA are currently involved in proposals that have received planning permission in principle for the redevelopment of part of the Bon Accord centre in Aberdeen. The proposals could potentially deliver substantial benefits to the city-centre by creating a melting pot of uses and a high-quality public realm. The plans should improve connectivity between the Bon Accord Centre and George Street, and become a catalyst to reinvigorate that area of the city.

Aberdeen’s Union Square is also looking to undergo an expansion to allow for an additional hotel, expanded cinema and additional food outlets.

Mixing uses like this is in line with Scottish Planning Policy and its town-centre-first approach. It stands to reason that the more people you have living, working and visiting an area, the more economically prosperous it will likely be. This has been bolstered by mechanisms such as Tax Incremental Funding (TIF). However, there are still cities in Scotland that don’t make use of such methods – could Aberdeen follow in the footsteps of Edinburgh, Glasgow and Dundee and introduce one?

Planning authorities must continue to prioritise this approach for developments which have the potential to attract significant numbers of people into town centres. There have been examples of local authorities sticking by this approach and defending the viability of city centres. For instance, Aberdeen City Council’s planning department recently recommended a major retail development at Kingswells for refusal before the application was withdrawn.

As well as online shopping, out-of-town retail parks have shouldered much of the blame for the troubles facing town centre shopping. Out-of-town sites tend to benefit from free parking, are easily accessible by car and feature modern layouts that are often more shopper-friendly than older town centre buildings.

Conversely, town centres can require considerable investment to upgrade existing spaces and improve public realms. Such sites are also often within multiple ownership, subject to heritage constraints, or are hindered by servicing and access challenges. These factors can impact on viability, overly complicate and ultimately derail development aspirations, even with the support of local planning authorities.  Such issues make the prioritisation of town-centre-first development even more important.

Whilst older buildings in town centres may make it challenging to develop planning proposals, there is no doubt that the historic and social fabric of the built environment in these areas cannot be matched by most out-of-town sites.

Chris Miller

Chris Miller

Ideally, town centre developments should offer convenient and sustainable access to surrounding high streets, commercial and residential areas and should play to the strengths of being in the middle of a busy area through the generally larger local population, proximity of daytime office workers, employees, schools, tourists and the broader variety of smaller and often independent retailers and restaurants that are not often found in out of town destinations.

Developments that create vibrant spaces in city centres and give adjacent streets a shot in the arm are key to ensuring the longevity of in-town shopping and high streets across the country.

  • Chris Miller is a planning associate with commercial property advisory GVA

Blog: Why City Deals shouldn’t overlook placemaking

Richard Jennings

Richard Jennings

The Edinburgh Region has recently signed a City Deal that has sadly missed the mark when it comes to Placemaking, writes Castle Rock Edinvar Housing Association managing director Richard Jennings.

With just one significant capital investment, targeted in Winchburgh to deliver an additional 3000 homes, there is a long way to go if we are to meet the target of 65,000 new homes in the Region. The time has surely come for us to recognise that it will take a whole market approach and require proper integration of infrastructure investment with a new debate on sharing risk between the public and private sectors.

One significant change in the house building sector over the last ten years since the financial crash in Scotland has been the rise in prominence of a smaller number of big players. With funding from new sources a small number of cash rich house builders have been smart with their investments and very focussed on risk and profit. They have been working hard to rethink their approach to sites to ensure that they get the right balance between supply and demand. Five years ago there was a focus on sites of 100-150 units and now it is in the region of 250-350. This approach has made it even more challenging for the City Region to deliver its Placemaking ambition and build momentum in terms of new public infrastructure. The current success of this strategy is reflected in land values that are limiting the opportunities for the delivery of affordable housing, whether for market sale, mid or social rent.

Whilst the house building sector, by necessity, has adapted and evolved, the delivery of affordable housing has continued to follow the same path. The number of active developing associations and local authorities has increased significantly as a factor of increased grant funding and historically low interest rates. However, due to the nature of land costs and the shape of the wider housing market, opportunities in the most pressured areas are often controlled by the house builders and there is significantly more capacity to deliver than is being realised.

The chink of light in the City Deal for the delivery of a Placemaking approach is the open door for Local Authorities to use their borrowing powers to intervene in the market. In Winchburgh this will be for the front funding of new schools and roads and in Edinburgh for the creation of a new Housing Company. There are at least a half dozen strategic sites in the City Region that should be the catalyst for the creation of new vibrant places to live that could come together if these new borrowing powers were combined with the capacity of the affordable housing sector. Collectively, the Region could shift the balance of control from house builders to Placemakers. To achieve this we will have to collectively take different risks, recognise the market value of land and take some brave political decisions, sharing control of the outcomes. The good news is that unlike many of the difficult political decisions facing Local Authorities and Central Government this presents an opportunity for genuine partnership that shares risk to deliver a shared outcome and belief in Placemaking.

If we do not adapt to the new market conditions more quickly then we risk losing out on the opportunities presented by a growing economy and low costs of borrowing. The Housbuilders have shown us how to be successful in delivering housing, we need to learn and do it even better ourselves.

  • This blog was originally produced for Inside Housing

Blog: Cracking the student accommodation construction cost conundrum

Jonathan Seddon

Jonathan Seddon

Is affordability the biggest challenge facing the purpose built student accommodation (PBSA) market at the moment? If it is, then it is also the biggest opportunity, writes Jonathan Seddon.

There are two aspects to this. Affordability of rents (from the student’s perspective) and affordability of construction costs (from the developer’s perspective).

Let’s take the students first, because they are, after all, the customers. They are the end users without whom there would be no student housing sector of the commercial real estate market.

Student life, as we all know, is marred for many by a strain on finances. First of all, there are tuition fees. Aside from Scottish students going to Scottish universities – for whom there are no tuition fees – the annual tuition fees are a significant financial burden. For foreign students, the tuition fees are higher still, and inflation doesn’t help – life as a student is meant to be the best three or four years of your life, so rises in the cost of living are a significant factor.

It stands to reason then that a rise in accommodation costs of around 8%, as is the case in some towns and cities, can quickly become a serious burden. Little wonder then that over the last year or so there have been organised protests amongst student groups, and in 2016 over 150 students at University College of London got together to refuse to pay rent until their concerns were heard at an official level. This is understandable from the students’ point of view.

There is a bigger picture, however, which is that there is a general shortage of available student accommodation, regardless of price, across the country. And let’s not forget that student accommodation can be provided by Universities and private landlords, as well as the PBSA private sector. In many ways, the private sector is doing its best to address the lack of supply, regardless of what students might think of the rents they charge and the profits they make.

Were it not for the private sector, and their constant pipeline of purpose built student accommodation, there would be an absolute student housing crisis in the UK at the moment. Let’s not forget that.

And that leads me on to the predicament faced by private sector PBSA developers and investors. They are in the game of making money. There is no denying it. But they are, nowadays, acutely tuned into their ultimate customers. They understand student needs, they carry out extensive and detailed surveys, they can tell you that students value high-speed broadband over hot water, they can tell you that quality of living is key and they understand that these PBSAs are seen by students as communities, where common areas, gyms, cinemas, and bars are just as important as the bedrooms themselves.

But these private developers and investors also understand the commercial market, and the importance of these PBSA schemes stacking up so as to be completely institutionally fundable. And this takes us on to the second affordability issue – the developer’s perspective.

In basic terms, the PBSA sector is quite well served in the £160 per week plus end of the market – the higher end of rents. There are a lot of operational developments and much more (almost twice as many) under construction. The real gap in the market, where there is huge demand and very little supply, is in the sub-£160 per week category.

Herein lies the predicament: construction costs, in the regions, for example, equate to about £55,000 per bed for a new build development, and about £45,000 per bed for a refurbishment scheme. At £55,000 per bed construction costs, the rents need to be about £160 per bed to make the scheme viable. So schemes where the rental is under £160 per week simply don’t stack up. Put even more simply – it costs broadly the same to build a PBSA where the rooms let at £200 per week as it does to build a PBSA where the rents are £140 per week. So why would the developers focus on anything other than the higher end of the market?

Students are continually looking for cheaper accommodation. As tuition fees rise and inflation rises, many simply cannot absorb the relentless rise in housing costs. Developers would dearly love to solve the problem. They know there is a gap in the market. They know the PBSA pipeline at the sub-£160 per week rental level is a trickle, and they know that if they could get into that market on a financially sustainable basis the profits that would follow could be considerable. But even at the moment the figures just don’t stack up. And what of rising construction costs as the effects of Brexit start to filter through? What of inflation? It seems that it is going to get harder, rather than easier, to make schemes aimed at the lower end of the market work.

What then are the potential solutions? ‘Modular construction’ is certainly a buzzphrase of the moment. But there is work to do there to bring the costs down to a viable level. Another option is smaller bedrooms, perhaps offset by bigger and more impressive common areas. But the room size in most PBSAs is small enough as it is.

One solution might be the collaborative working holy grail, as was Latham’s vision 20-odd years ago. The big student accommodation development players that have been successful over recent years have been those that keep to the same contractors, the same professionals and stick to a tried and tested model. Think Watkins Jones as a good example, but there are many others. If developers can avoid delays and additional costs, and keep their schemes on time and on budget, then that construction cost per bed figure can creep down. The difficulty here, however, is that such improvements are probably incremental rather than revolutionary.

This issue is not confined to the UK. It is a global problem that developers in Australia, Europe and the USA are all wrestling with. But the potential rewards for developers in the UK are far greater simply because degrees from UK Universities remain extremely prestigious and highly sought after, so students will continue to come, regardless of accommodation costs.

One potential political solution, given that students nowadays are such a significant contributing group to local economies, is positive intervention from the government. It is hard to see housing grants being introduced at a meaningful level, or tuition fees being lowered, but what about a subsidy for developers of PBSAs? A small contribution perhaps to allow schemes to be viably developed at £150 or £140 per room. Construction projects are, after all, a huge benefit to the economy with local jobs and the consequent local spend.

However, the reality at the moment is that assuming no political intervention or significant innovation in the construction sector, it seems likely that developers of PBSAs will have no choice but to focus on the higher end of the student accommodation market. That end of the market is far from saturated, and until it is most developers will presumably continue to focus on the £160 plus price bracket. But there is a big opportunity out there for developers and contractors who can work out how to develop schemes at a lower construction cost because the demand is high and is only going to grow. Watch this space.

  • Jonathan Seddon is partner and construction head at law firm Morton Fraser

Blog: Will Grenfell be a game changer for housing, bidding and contract management?

Image of the Grenfell Tower fire courtesy of Natalie Oxford via Twitter

Image of the Grenfell Tower fire courtesy of Natalie Oxford via Twitter

The social housing sector must make changes across all its platforms, says Andrew Morrison.

Most of us will remember waking up on Wednesday 14th June to the news of a major fire in progress at Grenfell Tower, North Kensington. Switching on our TV channels, we watched helplessly as firefighters worked tirelessly to try to extinguish the fire and save any lives they could in the process. As a housing and bidding professional who spent half of his childhood living in a social housing tower block, I realised immediately that this needed to be a huge wake-up call to the housing world and its suppliers.

What do I think may change in the months and years ahead for both bidding and contract management within the social housing world?

Technical Evaluation – Greater attention should be given to the technical elements at all stages e.g. in the specification of works and materials; the tender evaluation; and both the onsite supervision and post-inspections of contractor work. This will be a challenge for the many organisations who have cut back on professional technical staff.

Health & Safety – When this goes wrong, the consequences are deadly, so the priority given to this needs to be higher. Health & Safety is often evaluated at the pre-qualification stage; expect it to loom larger within the tender stage and be weighted accordingly.

Price vs Technical/Quality Evaluation – Of course clients need to get value for money with their limited resources. However, even since Grenfell, I have seen an opportunity for electric rewiring of social housing come to market with an 80% Pricing: 20% Quality/Technical Evaluation. This is unlikely to drive the attention to quality and safety that is needed.

Balance of Risk – Often clients seek to transfer most of the risk onto the contractor. However, Grenfell showed that when things go wrong, tenants go back to the ultimate property owner, in this case the council. It will be most illuminating to see where the public inquiry places the various liabilities for this disaster.

Bespoke Tender Questions – Many of the tender questions we see are generic and could apply anywhere. So, lack of time at the buyer end to create project specific tender questions can lead to suppliers replicating generic responses. Time spent at specification and bid response stages drilling into the detail will produce a much more satisfactory end result for all concerned. Of course, this takes time and resources which can be in short supply.

Resident Involvement – In some housing organisations, residents have involvement in interviewing contractors and evaluating bids. This is likely to increase as the people who have to live with the consequences of the decisions make their voices heard. This can continue with resident-led inspections of work – a feature of some of the more enlightened housing organisations.

Regulatory Oversight – The reach of the regulator has diminished in recent years. This may change in the coming years with housing organisations being asked to contribute directly towards the costs of increased regulation.

Informed and Proactive Leadership – The Lakenhal House fire in 2009 in London was an horrific harbinger of what can happen when health & safety is not prioritised in high rise dwellings. Since then, many industry experts, most notably Inside Housing, have consistently warned that fire safety in many tower blocks was inadequate and that another disaster was only a matter of time. The fact that the Met Police has announced that it is considering corporate manslaughter charges in the wake of Grenfell will likely concentrate the minds of all housing decision-makers.

In summary, Grenfell has important lessons for all those involved in social housing contracts – housing organisations and their procurement teams; council committees and housing association boards; main contractors, sub-contractors and suppliers; housing regulators and. crucially, the residents themselves need to make sure that their voices are listened to at all stages of the process.

  • Andrew Morrison MSC FCIH is managing director of Lothians-based AM Bid Services Ltd