East Midlands Property Market

Who is Building What & Where?

Matthew J WallaceRICS Governing Council | East Midlands Regional BoardPartner at EC Harris

East Midlands Property MarketAgenda

Introduction

“Who Is Building What Where?” What the Figures Say The East Midlands Property Market

What we are saying What we are hearing Future Development

RICS Financial Viability Planning

The Macro Property Market

Residential - Office National Statistics Property Industrial Retail Commercial Construction Prices

“There are three kind of lies….., Lies; Damned Lies…… and Statistics”

Benjamin Disraeli

Housing Facts | ONS

“House Values Still Dropping”

“Double-Dip Recession Can Be Seen”

National Housing Construction

“Sentiment is pretty downbeat”

“Nationally the housing market is flat”

East Midlands Housing Construction

“No sustained growth since 2008”

“Volatile but could be sample size”

Property Development

“Remained negative Since 2007”

“East Midlands again more volatile”

Industrial Development

“Negative Outlook Since 2007”

“East Midlands volatile”

Office Development

“One instance of Positivity since 2007”

“East Remained Negative”

Retail Development

“Retail been negative since 2006”

“East Mids Seen Some Improved Sentiment”

EC Harris Construction Prices

“Dropping Since 2006”

“Flattening out in last 2 years”

Construction Output and New Orders Figures - East Midlands

0

500

1,000

1,500

2,000

2,500

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Q4 Q1Q2Q3 Q4Q1(R)

Q2

2004 2005 2006 2007 2008 2009 2010 2011 2012

£ m

illio

n

Construction New Orders

Output - All New Works

Total Constr Output

Tender Prices

“Significant Movement in East Midlands in 2011”

“Correction now occurring”

BCIS TPI -National V East Midlands

190

200

210

220

230

240

250

260

TPI (

Base

198

5 =

100)

BCIS Regional TPI: EastMidlandsBCIS All-in TPI

What Our Fellow Professionals Are Saying..

“Very quiet summer, little market activity and confidence in certain sectors still low”Andrew Nichols MRICS, Gadsby Orridge, Derby

“Grade A office accommodation is in short supply. Multi-let industrial investments are in demand.

Convenience Retail from 3-6000 sq ft is still strong demand although overall vacancy rates are challenging in the retail sector”

Matthew Hannah MRICS, Innes England, Nottingham

“Leasehold industrial occupier demand has remained firm for units under 10,000 sq ft, and September has seen an increase in larger enquiries in the

East Midlands and M1 corridor. Funding still remains an issue for prospective owner occupiers”

Tim Richardson MRICS, Innes England, Derby

What Our Fellow Professionals Are Saying..“Work has now started on Kettering's 57,860 sq ft Stanier Retail Park in

Northfield Avenue, at least in terms of Phase 1 of that development, following a 24,000 sq ft pre-let to Dunelm. There is realistically no speculative

development in Kettering and hence there is talk amongst local agents of relatively short supplies of Grade A office and industrial accommodation”

Brendan Bruder BSc MRICS, Abbey Ross. Northamptonshire

“Whilst the Daventry commercial property sector is moribund, clients of ours have recently opened a double unit on High Street for their restaurant clients Buddies. Out of town development has concentrated on various planning applications, although funding restrictions confine any development commencements to significant pre-lets or pre-sales such as the phased developments at DIRFT”

Brendan Bruder BSc MRICS, Abbey Ross. Northamptonshire

“Slight improvement in sentiment but deals are taking an age to complete” Ben Coleman BSc FRICS, Ben Coleman Associates

What Our Fellow Professionals Are Saying..“Northampton is finally motoring with £10m funding agreed for the redevelopment of the rail station and new bus interchange, scheduled to commence before Christmas 2012. Northampton University have broken ground on their 485-unit student accommodation block and Northampton County Council are expected to decide their key representation in the Project Angel site in the Cultural Quarter”

Brendan Bruder BSc MRICS, Abbey Ross. Northamptonshire

“The commercial market still remains challenging”John A Smith FRICS, R Longstaff & Co. Spalding

“CSC now own both Victoria and Broadmarsh Shopping centres (Nottingham) with plans to refurbish/extend both. This will bring supply to the market in both mass market and aspirational retail sectors”

Ed Purcell MRICS, Cushman & Wakefield, Nottingham

& What We Are Hearing…

Banks are still not lending, even on pre-let

schemes

Section 106’s appear too onerous for developers to

commit to build

When’s the next CSR? Public sector is still rationalising

rather than developing

There is literally no appetite or ability to

spec build

The markets are still very nervous and sensitive to the

slightest bad newsThis hasn’t bottomed out yet… I’m still on holiday

Excuses or facts, you decide but sentiment is nervous and lack of confidence is resulting in inertia from developers, large corporates and investors | Local pockets of activity still occurring

New planning policy is not helping builders

build

We’re making our existing stock work

harder

The FutureWhere is the Current Opportunity?

• Light industrial and logistics warehousing• Residential• Health• Retail and Commercial office will remain depressed for

the foreseeable future• Professional advisors are helping clients develop tricky

sites and transact in property• You still need to access finance from somewhere• All in the preparation - Better planning around the viability

of schemes is required • The rewards are there for the ambitious, who have good

advisors and equity

RICS Guidance Note

Financial Viability in Planning

Methodology & Framework – Defines the key functions of development

Financial Viability Assessments -Good practice, what’s reasonable and objectivein the approach. No sensible Business Case = No Development

Benefits -LPA’s, Practitioners, Land Owners', Developers,Investors, Lenders…. Everyone!

Although not a panacea, This guidance may go some way in helping resolve some of the current barriers to development inertia

Biography | Matthew J Wallace BSc (Hons) MBA PGDipProjMan MRICS

Matthew is a Chartered Building Surveyor with over 15 years

experience in both public and private sector property consultancy.

Currently a Partner at EC Harris, the leading international Built

Asset Consultancy who advise and implement property solutions

for clients and the communities they operate in.

Matthew operates across the UK and has also lead and delivered

assignments across Europe and North America. With a specialism

in technical due diligence, Matt’s current caseload includes

account leadership of the BlueLight, emergency services sector.

Professionally, Matt holds several seats within the RICS including:

Governing Council | Strategy Advisory Group | East Midlands

Regional Board and is former National Chairman for RICS matrics

These roles have taken Matthew across the United Kingdom and

also to Beijing promoting the usefulness of the profession in

emerging markets. Matthew has also been influential in the writing

of the RICS’ new corporate strategy.

Matt resides in Leicestershire with his family, is a keen sportsman,

who supports Leicester City FC and Leicester Tigers RFC.

matthew.wallace@echarris.comMobile: +44(0) 7810 850 324Tel: +44(0)121 503 2739Fax: +44(0)121 503 2701

The Leading International Built Asset Consultancy