Policies, polaroids and profit

PMQs  It has been a long time coming, but today the Brexit process restarted in earnest with Boris Johnson taking the position of UK Prime Minister. Whilst now in the driving seat, there is considerable work for Johnson (who was elected to his post by 0.1% of the UK population) to do between now and the extended Article 50 deadline of 31 October to convince his peers and the electorate of his policies. Much publicised is Boris’s ‘do or die’ position on Brexit (although despite the rhetoric, he favours a renegotiated deal to a no-deal). This will be put to the test in the coming days as several senior Tories are expected to walk. However, assuming that Boris does not ‘die’ in the process of delivering Brexit, what kind of a Prime Minister would he make on other issues? Boris’s voting record and public statements create a relatively clear picture of his policy positions. He is a low-tax, low-spend politician who pledges to raise the income tax threshold and to cut business rates and corporation tax. He favours reducing central Government support for both welfare and for Local Government. He is pro-health (remember the slogan on the bus?) and would look to increase tax on alcohol and unhealthy foods. His voting record speaks to a firm foreign policy position and a willingness to use military interventions. On the home front, he adopts a laissez faire approach to education and is pro-academies. And on property issues, he would propose to reverse stamp duty changes, is pro-green, wants to achieve net zero carbon emissions asap, says that he is committed to the delivery of affordable housing and wants to save the high street and give small businesses in particular support to do so. To read a primer on these issues prepared by my colleague Daria Kulikova, take a look here.


Rebuilding society  Perhaps the biggest development risk relates to demand not turning up at the point of completion, or at least not at the right price. This can be avoided when the builders of the scheme are those that will eventually occupy it, as was the case with the original building societies. These first took root in Birmingham towards the end of the 18th century to support a generation of workers who had moved into the rapidly industrialising region, but who individually had few resources. The societies were owned by the members and had the sole aim of building a home for each of them. These were hence: (a) ‘terminating’, meaning that they were wound up when this single objective was complete, and (b) ‘mutual’, and so any residual profits were distributed between them. A wave of demutualisations, mergers and acquisitions by the banks starting in the 1980s has significantly thinned out a once-prolific model. There is one large building society left (Nationwide) and a handful of mid-tier players, but they are no longer terminating and hence nowadays more closely resemble banks, moving them away from their historic purpose. Nevertheless, last week Nationwide obtained approval for a scheme of 239 new homes in Swindon. The scheme will be not-for-profit, with the intention of creating a multigenerational community and is designed to set a ‘blueprint’ for other building societies to follow. In a world where crowd funding takes a new meaning, could a modern breed of technologically-enabled mutual societies be part of the solution to the housing crisis?


CEO survey  Last week PwC published the real estate trends section of its annual CEO survey. The identified trends speak to themes that have been explored in the past year in this blog. I’ll pick out the three that I think are most important, each of which is linked. Firstly, technology is casting a beam of light into one of the most impenetrable types of asset. Data availability and benchmarking has created greater transparency, both in investment decisions and in building performance. This in turn creates a clearer focus on assets which are performing poorly across a range of measures. Secondly, the way in which many investors are achieving innovation is to give more emphasis to differentiation through customer centricity. This can also lead to untapped revenue streams but, as PwC’s survey finds, requires a level of trust in relatively anonymous investment businesses; a quality which 60% of real estate CEOs were concerned was lacking. Thirdly, quickly rising up the agenda of real estate businesses is the subject of sustainability. Positive actions in this area can both ameliorate the increased scrutiny around building performance, and also be a source of differentiation and alignment with one’s tenant brand and values.


Work Café  What form of business these days doesn’t involve some sort of café? What started as a kettle and a jar of Nescafé in a cupboard has over 20 years risen to comprise a significant chunk of office floorspace and a key feature of many shops. Why? Because both businesses and retailers recognise that these are places to do work and create sales rather than just to get a drink (72% of employees perceived that to be the case in a study by Staples). The latest application of the café in business comes from Santander, which has recently opened a UK branch of its ‘Work Café’ concept in Park Row, Leeds. Trialled in Chile, this is an ‘innovative space for clients and non-customers, which brings a bank, co-working area and coffee house together in a single place’. Three meeting rooms, seating up to 8 people are bookable by anyone, for free, for up to 2 hours, complete with free Wi-Fi, ClickShare and a chalkboard. This is part of a bigger trend towards corporate occupiers, rather than property investors, offering free office space where there is thought to be a brand or customer acquisition benefit to doing so. At Work Café you do still have to pay for the coffee, but if you’d prefer a free cuppa why not pop down the road to our Leeds office on Park Square?


Rewind  For those watching the moon landing 50 years ago, there must have been a sense that we were about to herald in a glorious new age of interstellar travel and the colonisation of planets beyond our own. Somewhat disappointingly this has not been the case. In fact, the citizens of 1969 might be a bit miffed to know that progress would be so lacking by 2019 that their 7-year old music format, the tape cassette, would actually be making a comeback. Sales of tape cassettes have doubled over the past year amidst a surge of support from celebrities and hipsters. Those who grew up with these will recall that they have lower fidelity, were easily breakable and needed to be rewound to find the start of a track. However, tapes are not the only tech that digital Luddites are promoting in a bid to rewind the digital age. Polaroid cameras (1963), fax machines (1924), and not-very-smart cell phones (1973) are all beneficiaries of this retro resurgence. With the inescapable, and at times tedious, industry focus on PropTech, is there the danger of a real estate retroaction? I stand ready to launch a start-up promoting the original version of Prodev (1984), slide rules (1620) and of course paper copies of Parry’s Tables (1913).