Reflections on UKREiiF 2023: The Development Conundrum

The Development Conundrum: JLL's Paul Winstanley tells BTR News what industry stakeholders and developers had to say at UKREiiF 2023, and what the sector needs to do.

Paul Winstanley at JLL discusses The Development Conundrum, reflecting on the speakers and industry professionals in attendance at this year's UKREiiF event in Leeds | BTR News
Paul Winstanley at JLL reflects on the speakers and industry professionals in attendance at this year's UKREiiF event in Leeds. Image credit: UKREiiF.

After attending this year’s UKREiiF event in Leeds, the building and property sector has much to change and answer for, according to Paul Winstanley, Head of Living Strategic Advisory at JLL. From planning to development, the process has become too complicated and costly that stakeholders are losing the motivation to develop high-quality and long-lasting homes. Developers and stakeholders alike need to start placing all the moving parts and elements that go into large-scale developments on an equal playing field. The sector right now lacks viability to develop costly assets when the profit and motivation to put expensive resources, effort and time into them is seemingly unjustifiable.

Paul reflects on the overall feeling at the UKREiiF event, the challenges, successes, and the key takeaways that the whole industry is learning from; and is yet to learn from.

By Paul Winstanley, Head of Living Strategic Advisory, JLL

It was a really uplifting experience attending this year’s UKREiiF event in Leeds; the sun shone, it was genuinely warm, and the crowds were substantial. Conversations flowed freely. The conference sessions I attended were insightful, well prepared and the contributing speakers were a high calibre.

Of course, I was most interested in all things housing, and particularly debates surrounding large-scale Living Sector investments. To their credit, I felt the stakeholder representatives for our housing development and regeneration industry displayed a broadly united front. There was a notable consensus on the national importance of delivering much needed quality housing supply (read long term core values of the sector) and a clear agreement on the difficult state of the market presently given prevailing financial headwinds (read short term economic weather forecast).

Neither of these key messages obviously were ground-breaking – it isn’t rocket science to contend that in the surrounding the areas we live in, we need more high-quality homes, schools, hospitals, community facilities, and an overall wrapper of future proofing dominated by all things ESG. We all know this is the ideal.

Yet I left concerned that the ‘missing middle line’ between the industry’s core purpose and the present economic state of the nation was largely simplified into the various key stakeholders looking to place responsibility for everything we face today at an alternative stakeholder’s door. Landowners, planners, Government, investors, and builders/contractors all had the ‘it’s all your fault’ finger pointed at them. We often talk about elephants in the room, and this particular creature was, unfortunately, very much in attendance.

But going back to my initial observation that there was more that united our industry than divides it, what struck me this week in all the sessions that I attended – as it always does whenever I listen to anyone involved in the creation of new places – is that development is hard. It is actually really hard right now – and not only is it really hard, but it is also really expensive and fraught with red tape, rules and regulations across such a wide range of elements (admittedly often for noble or societal reasons). Supplement that framework with the inevitable political ‘moving of goal posts’ over the course of time between concept and delivery of large-scale regeneration and we aren’t making it easy for ourselves.

So, my key takeaway this week was that, while we can talk about everything emotionally, philosophically, practically, socially or even – using my favourite word – holistically, at the end of the day, the key stakeholders for change need to be much more focused on the ability to balance very basic maths across the whole development continuum – and not just look from a single stakeholder’s point of view. This maths must include, critically, some level of profit for everyone involved who is providing the capital to make things happen.

To explain, if it costs £100 to build something (including all costs) and you know someone will buy it from you for up to £100 (but no more), what rational developer would choose to build it? In today’s market it feels to me that this is precisely the question perplexing many with opportunities to create the great places we so badly need.

Now, cards on the table, I’m not so sure there is a right answer to the ‘cost’ vs ‘worth’ conundrum in all cases, as social impact, environmental protection, and providing essential shelter certainly do not have a value which is purely restricted to a financial metric. Yet, being realistic, persuading any stakeholder who is a predominantly a financial investor to press the green button in this scenario of uncertain profit is distinctly unlikely.

And while we could spend hours debating the pros and cons of social versus financial return, the path of least resistance seems to me to be to look to reduce the overall costs from £100 to £80 – and not to simply fall back on trying to increase the price someone will pay to £120 to balance the books. Not easy I know – and ‘value engineering’ as a concept to reduce quality for financial return in the short term is fraught with the risk of delivering poor outcomes.

In terms of part of a potential solution, from impassioned speakers it struck me (again) just how much time, effort and money is genuinely wasted through our development process. Incessant modelling, remodelling, reacting to markets, convincing of stakeholders, adapting to changing regulations and moving legislative goalposts and a whole heap of uncertainty right across the development process drives risk and cost and reduces profit, and ultimately viability.  And it is the same even for those philanthropic stakeholders who aren’t looking to make a market level return!

We obviously need a fair and robust process to challenge development and drive outcomes which work best for society. But we also need homes, and quality homes at that. And we also need a framework which allows the development community, who are good at what they do and can deliver great outcomes, to do just that without wasting their own valuable resources – whether time or money. And, while I appreciate key stakeholders can be quite self-focused, the common ground which it seems to me there is, must be found faster, cheaper and with more certainty to improve viability and put more roofs over more heads.

If there is a will to build, and to build well for social good, there has to be a way, right?