Property & Construction Annual Review
Peter Hardy, Managing Director of psd’s Property & Construction Sector, reviews the 2016 recruitment market and considers the progress that the industry will experience during 2017.
The “Brexit Effect”
During 2015, the investment market was already shrinking, resulting in little appetite for investment in commercial property at the beginning of 2016. However, in the first half of the year, the residential development market pushed on as only it can do, sending prices sky-high in London but also creating a ripple effect around the UK. The EU Referendum result stopped the price surge and the whole market in its tracks. The Plc Housebuilders were particularly thrown and virtually stopped all recruitment overnight, but everyone soon realised that the EU Referendum result did not mean Armageddon and whilst the London market appeared over-supplied, demand continued to be strong outside the capital.
As we moved into October 2016, of the 13,700 houses and apartments on sale in Greater London for £1m or over – only 37 sold. There will be limited residential development now in London for a few years and prices will almost certainly come down to a more realistic level.
Surprisingly by the fourth quarter of 2016, the investment market for commercial property was starting to push on again. Private equity investors were starting to see new opportunities, take risks, and make things happen. It is always impressive to watch how successful individuals at the cutting edge of the property industry are able to read the market so effectively. This improved sentiment helped propel a surge of recruitment activity in the various markets and psd was particularly active in the added value areas of fund raising, equity investment and real estate debt in the final quarter, making a number of Director and Managing Director level placements. This trend seems set to continue for at least the first quarter of 2017.
PRS Development Challenges in 2017
Many continued to talk about PRS during 2016, however this market did not see enough development to further convince industry professionals. Until this market develops into a well-established sector, speculation will continue. Investors have money to invest, but the size and scale of the product is just not currently there. Many people are put off by the high cost of maintaining and operating PRS apartment blocks. We ran a number of opportunistic assignments in 2016, but momentum in the desire to recruit established experts from the USA, or from the tiny pool of experts in the UK, fizzled out by the end of the year. Until we see genuine commitment to this sector from all types of participants then recruitment will be sporadic.
Changing consumer habits affected the retail space
Logistics saw a great deal of growth in the second half of 2016 as sheds continued to spring up all over the UK motorway network. A range of new investment vehicles was created to take advantage of what investors might see as a sensible, defensive investment. The Retail sector was surprisingly confident about its prospects for 2016 – however, changing consumer habits have affected the market. Shopping centres are evolving into spaces of leisure where the retail market is fast becoming much more than a place to make purchases, with an emphasis on the retail “experience” taking hold. Technology and clever marketing have helped developers and investors keep pace with the change in consumer habits.
psd was kept busy recruiting development experts, and their analysts, asset managers and transaction specialists in the investment arena. Demand has continued into the first few months of 2017.
Apart from a few major projects completing in 2017, new offices are not being built in Central London. Land Securities and British Land want to let their buildings before starting any more development. However improving office space in all other major UK cities continues. Recruitment for developers very much focuses on technology, leasing and marketing, meaning that the traditional surveyor can be up against candidates from a range of other specialist backgrounds. We should remain busy through 2017 as there is a shortage of really good marketers, leasing specialists and technologists who can genuinely come up with something new.
Industrial sector success
Industrial remains a very solid and sound, income producing investment. Low maintenance and refurbishment needs means that shrewd investors can make a good return on this sector. However it will be interesting for professionals within the Property & Construction sector to see if investment, institutional or private, restarts with any degree of conviction in 2017. If it does then the markets will stabilise in all areas producing low returns, with the exception of London Residential which is overpriced and over supplied. As ever for those with good access to funding and strong off-market contacts there will be opportunity. Our capability to build good relationships with really influential investment specialists in London, Mainland Europe, the USA and the Far East will always mean that our services are in demand.
As 2017 cranks into gear, we expect to be able to go to candidates in all sub-sectors and offer good opportunities – there are more than enough interesting options for high calibre individuals to enjoy. The simple fact is that the Property & Construction sector always generates opportunities at all stages of the cycle, and psd‘s job is to support clients in the right way to ensure that they recruit the best people at the right time.
Peter leads psd‘s work in the Property & Construction sector. He recruits senior and board level positions in development, construction, fund management, private equity, property services, PRS and affordable housing.