September 2024

The fifth of our Summer Series blog posts comes from David Lynch, the Director of Development and Strategic Housing at Manchester City Council.

David boasts over 18 years of experience in the property sector, mainly in the development sector across both commercial and residential. From Development Manager at Urban Splash and Head of Regeneration and Land at PlaceFirst, David has a good seat at the table when it comes to seeing projects through to fruition.

With Manchester now being a global force of a city, David is to play an instrumental role in the changing landscape of the city over future years and helping to transform areas to create new neighbourhoods and communities for generations to thrive.

I have known David since we both worked together at Gerald Eve, and have since been good friends and cycling buddies.

So, here we go with the fifth of the series…

1. How long have you been working at Manchester City Council and in the development sector?

3 years in January I think but I’ve always worked in development, starting at Urban Splash when I was at University.

2. How has the market changed over the past 12 months for new developments reaching practical completion in the City region, and are the numbers up or down to last year?

Quality new offices reaching completion in the city centre are reaping the benefits of high demand, seen recently with new headline rents of £44 per sq ft at St Michael’s. Our work at Mayfield is well placed in the future.

Residential across the city continues at pace in terms of delivery and pipeline. Viability is being impacted by inflation and access to capital but I’m pleased to say that this year, the team (and our partners) delivered the highest number of affordable houses for a decade this year.

3. How important are regeneration schemes such as Collyhurst and Wythenshawe town centre, to Manchester?

Collyhurst is important as it’s a symbolic project, part of the wider Victoria North programme, to transform the landscape of North Manchester, providing new housing at density and the infrastructure to drive further growth.

Wythenshawe is one of our District Centre projects, making sure that our city wide growth is inclusive and that communities and citizens across the whole city feel the benefit of that growth.

Both projects aspire to break down barriers to new housing options, work and skills opportunities and drive better life outcomes.

4. What is the next big regeneration scheme planned and what will this include?

ID Manchester is about to really start being a catalyst for productivity in the regional centre, picking up on the award winning research on the Oxford Road Corridor and facilitating that industrialisation journey that has the ability to generate thousands of new jobs. On the residential front, we have just commenced public consultation for Holt Town in East Manchester, with a masterplan for 4500 new homes on the canal.

5. Manchester City Centre is performing well across most sectors. How important is it that the other Greater Manchester towns such as Wigan, Bolton, Bury and Stockport, grow and become synergistic clusters for the City centre?

We are all part of the GM ecosystem, best exemplified by the joint plan working through Places for Everyone. Fundamentally we all complement each other, what’s good for Bury is good for Manchester etc.

6. How important is it to see older living and also education services in and around the City centre, to then promote inclusive City centre living? Are existing services below standard, at the required standard or above?

With the rises in Adult Social Services costs and an ageing population, older living is increasingly important. We have a strong pipeline of adapted new developments, including Chorlton Baths, Russell Road and Jurby Avenue which are all designed to match specific needs across the city. There definitely is a gap in the market in the city centre, which are working on in the background but would very much welcome new entrants.

Our new primary school at Great Jackson Street in the city centre opened this September which is great, along with new GP surgeries this is about provision of infrastructure to enable the economic growth. We are also futureproofing our plans in Strangeways, the Village, Victoria North, Wythenshawe, Gorton and Holt Town.

7. What is the one main challenge to new development, right now in Greater Manchester?

Like all of the UK, rising construction costs and access to development capital is impacting viability.

The stats on how investable Manchester is are great but there is a real challenge when it comes to balance the needs of growth and the deliverability of things like affordable housing. We have several approaches and tools to address this including our land ownership, access to gap funding, collaboration with GMCA and central government.

 

Light stuff:

1. Where have you holidayed this year?

Back in my native North East…. castles, sandy beaches and kippers. My eldest less keen on the last bit.

2. What one thing (only) would you take with you to a desert island?

A yacht. Slightly hyperactive and definitely impatient, I can’t stand sitting on a beach and would want to escape within 2 hours.

3. Desert island discs – which one album would you take?

The National – Boxer

4. Are you a book reader, podcaster or both?

Podcasts nowadays due to childcare… football, film reviews, comedy and philosophy

5. Where is your favourite location that you have visited for holiday, and why?

Kyoto. Old meets (weird) new Japan.

 

Hopefully you enjoyed the fifth in the series of the blog series and if you want to get involved just drop us a line.

The fourth of our Summer Series blog posts comes from Mike Walker of Chancerygate.

With nearly 25 years’ experience, Chancerygate is the UK’s largest multi-unit industrial property developer and asset manager, specialising in the UK’s urban logistics and industrial warehousing sectors.

Chancerygate has more than 2.65m sq ft of industrial space under construction or ready for development across 19 sites ranging from Edinburgh to Chichester, and also manages in excess of £385m of assets across more than five million sq ft of commercial space in over 480 units. They have offices in London, Warrington, Birmingham and Bristol.

Mike joined Chancerygate in January 2015 to head up operations in the company’s Warrington office as part of the business plan to develop and invest further in the regions. Mike has over 20 years’ experience in the industrial property market both at a regional and a national level to include experience in the forward funding of developments.

Prior to joining Chancerygate, Mike held the position of senior director at CBRE heading up their North West industrial team and before that was head of the Colliers International Manchester office. At Chancerygate, Mike oversees the sourcing, appraisal and delivery of development and investment opportunities in the north of England.

I have known Mike for many years starting at CBRE when we were both ‘shed shifters’ for our respective employers. He is a well known figure in the industrial market and has a wealth of experience and knowledge.

So, here we go with the fourth of the series…

1. How long have you been working at Chancerygate and in the industrial sector?

I will clock up 10 years with Chancerygate in January 2025 – the 10 year anniversary of the NW Office!

2. How has the market changed over the past 12 months for new developments reaching practical completion, and are the numbers up or down to last year?

There still seems to good demand in the sector and evidence that rents are certainly holding up and growing in key locations. We are entering a critical period though, post summer holidays and hope to see increased take up following interest rate reductions and general growing macro – economic confidence.

3. The majority of your units are sub 10,000 sq ft. Why does this work best for you?

Our schemes tend to have units ranging from say 5,000 sq ft to 35,000 sq ft and a total floor area of c 120-150,000 sq ft. This gives us a good mix of unit sizes and tends to cater for most occupiers in the diverse SME and MLI sector. The best MLI estates offer a diverse range of unit sizes and indeed lease events, which gives investors good asset management opportunities in the future.

4. Is the MLI market still alive and kicking, and where is the occupier demand mainly coming from?

The MLI sector is still very strong. It is a massive part of the “ Industrial” sector and is sometimes overlooked in favour of the sexier big box stuff – but it is vital as it creates significant employment in our Cities and Towns and is also a vital constituent part to servicing city centre living – trendy bars and restaurants need a warehouse to supply food and ingredients, Hotels need a linen supplier, white van man needs an estate close by to pick up taps and screws etc. These are just some examples. Also, what is often ignored is the vibrancy of the manufacturing sector on MLI estates – we are currently seeing quite a lot of interest from occupiers who need to upgrade the quality of their units. Their customers are demanding it and importantly staff want to work in a better environment. Recruitment and staff retention is a key element for our occupiers.

5. Is demand currently greater from owner occupiers/investors to purchase, or from businesses looking to lease? 

There is always a lot of occupiers who want to own their own buildings, however the maths don`t really stack up currently – the cost of land and overall current build costs means that selling units to occupiers is rare. Leasing activity is strong, there is a shortage of Grade A estates, and the amount capital raised by Investors to put into the sector means that we believe yields will remain keen and probably move in, therefore we are unlikely to do many sales to occupiers.

6. What is the best performing UK region currently for new industrial development, in terms of favourable market dynamics?

Hard to nominate one particular region – we as a business focus on London and the SE for obvious reasons and the big UK regional cities. Each site we consider, we have to look closely at the local supply and demand dynamics before making a decision to invest.  This is both in the UK and now Europe. We have opened offices in Dublin and Madrid recently and hope to open in other territories soon.

7. How important now is ESG in new industrial developments and are occupiers focusing on this yet in decision making? 

ESG is a big part of what we do currently, not just a tick box exercise. We have appointed a new Head of ESG last year and have a committee that meets every quarter. Occupiers are interested I would say, but we do need to educate more so they can see the benefits of taking new units over second hand. I would say it`s not currently a key decision making driver on occupiers taking  premises yet, but it is definitely on the agenda now ! It probably wasn`t at all 5 years ago. It is key though for our investors.

8. How are you integrating ESG into new developments?

We have just achieved our first EPC A+ development following PC at our scheme in Tolworth in Surrey. All our schemes target a minimum EPC A and BREEAM Excellent. As a rule, we are always looking at how we can improve ESG by doing such things as increasing PV provision on roofs, battery storage, use of timber, do we need to provide gas?, improving airtightness of units, bird boxes etc, green roofs and green walls. I`m really looking forward to seeing the end result of the scheme`s my team is currently planning and bringing forward now.

Light stuff:

1. Where have you holidayed this year?

Done all right so far this year: Austria, Portugal, Cumbria, Menorca and Crete (later this month).

2. What one thing (only) would you take with you to a desert island?

Some kind of streaming device to let me keep up with my favourite sports – football (I would need to know how the Mighty Reds are getting on – Liverpool obviously! ), golf and cricket.

3. Desert island discs – which one album would you take?

London Calling – The Clash

4. Are you a book reader, podcaster or both?

Book at bedtime, Podcasts when driving around or on trains and planes

5. Where is your favourite location that you have visited for holiday, and why?

Our family`s beach chalet on the Cumbrian coast.  The why …..   A – it`s beautiful   B – the family connection to that part of Cumbria, my family have been there for over 240 years   C – the view constantly changes with tide and weather   D – the solitude but there is still loads to do if you want!

 

Hopefully you enjoyed the fourth in the series of the blog post and if you want to get involved just drop us a line.

Thanks to Mike for his time and his thoughts. To make contact with Mike Walker and his team at Chancerygate, his email is as follows: [email protected]

The third of our Summer Series blog posts comes from Mark Hawthorn of Landmark Investments.

Landmark is a longstanding, reputable ground rent investment company with a vast asset portfolio spanning across the country. Ambitious, clear and professional.

Mark is a natural businessman and we often contact Mark to soundboard ideas, given his wealth of knowledge, experience and extraordinary black book of contacts.

In addition to being a highly successful entrepreneur, Mark is actively involved with various charities including NSPCC and Variety, and Mark was awarded a UK Points of Light Award from the Prime Minister, Boris Johnson, for his work in encouraging companies to donate over £1,500,000 to charity in December 2020.

Mark Hawthorn funded Wildbrook in their set up and has been an ongoing mentor support since. Without this it would have never happened. Mark is also, importantly, a good friend.

So, here we go with the third of the series…

1. How long have you been working at Landmark and in the property sector?

I entered the industry as a 16 year old office junior at an estate agents back in 1997 on the princely sum of £40.00 a week. I set up Landmark in June 2000, so I’ve been in the industry 27 years and all my working life, with the group approaching its 25th anniversary. Sometimes it feels like forever, yet equally I can recall moments from 25+ years ago as if they were yesterday. I’ve still got a couple of contacts I met during estate agency all those years ago.

2. How has the market changed over the past 12 months for new investment opportunities being introduced to you, and are the numbers up or down to last year?

Our main market is the ground rent market, which has been subject to political overreach and threats of new legislation which created instability. Fortunately, common sense shone through and the legislation that was passed is mostly sensible and balanced if still far from perfect. We also have a new Government who appear to understand the complex dynamics at play in the freeholder/leaseholder world as well as the good work professional freeholders do. Just to test us further we’ve also had rising interest and gilt rates as well as complex building safety legislation.

On a more positive note, the best opportunities are always available in a down market, you just need to recognise and capitalise. We have continued to acquire and perform and we are confident that these decisions will prove to be correct in due course. We did the same during the GFC, post-Brexit vote and even during the depths of covid so have developed a playbook for volatility that only really comes with experience of such situations.

3. Can you recall your first ground rent acquisition?

I can’t remember which was first, and as I resold one in due course (around 20yrs ago) I don’t have the records. One was a £200.00 purchase from a bookkeeper who had inherited a portfolio of ground rents. We tidied them up, made a number of disposals at healthy returns and then resold them on. The other, which we still own, was initially listed on eBay – which is definitely not the right portal – so I contacted the vendor to explain the process to sell and struck a deal with him at £1,000. We have since moved on a touch, one development we acquired last year has a rebuild value of £750m and operates like its own village (ground rent is a fraction of this yet still sizeable).

4. Landmark are clearly a stand out and obvious choice as a go to ground rent investor. Is there much similar competition, apart from the institutional long income funds?

It comes in waves and cycles. When we started out we were up against other, much larger, private investors many of whom we worked with and sold to where we couldn’t afford to acquire. The institutional investors started to enter the market around 2009, pricing out and then buying out many of the private investors. We again formed relationships with the institutional investors, which exist to this day, and have transacted hundreds of millions of assets for them. This generated a healthy fee income, as well as ongoing management services, which we used to reinvest in more ground rents. The institutions are not as active as they used to be as no new financial ground rents are being created so the scale isn’t there. Again, this presents a strong buy opportunity for us. We don’t expect any new entrants of scale as there isn’t the quantum available to make it worth their while. We tend not to look at anything under £250,000 now and there is still an active market below that level for smaller private investors. To an extent we sit in a space on our own, we are able to transact on large and complex ground rents, both residential and commercial, of all shapes and sizes, whilst remaining private and flexible. We have built up valuable infrastructure and internal capabilities over the years which would be almost impossible for a new entrant to replicate, this is one of the reasons why the institutions outsource to us.

5. The sector provides long income and a diverse form of income to a portfolio for an investor. How easy is it to acquire a ground rent investment and how much legal due diligence is taken in a transaction?

Not easy, at all, if done properly. Taking the example of a 100 apartment scheme, which isn’t a big acquisition for us, you have 100 leases to review, often complex planning permissions and condition, plus insurance and service charge reviews (residential tends to have far more elements than commercial as it is 24/7 with people living in the buildings). On top of this we also undertake reviews, many of them physical, relating to the construction of buildings and fire safety risk. Post completion there is the fact that we would 100 new leaseholders, some owner occupiers others investors, many overseas, to onboard. We can often be acquiring portfolios of large numbers of buildings and properties so the complexity and requirements multiply by many magnitudes. We are presently live on an acquisition of around 6,000 apartments across around 200 individual buildings. Excluding this, our investment and management portfolio currently extends to well over 32,000 properties which we would estimate is over 50,000 leaseholders.

6. What is the one main challenge to ground rent investment right now, and how can it be overcome?

It would be incredibly helpful for leaseholders, freeholders and associated professionals to get clarity on the next steps from the Government. LAFRA was the last legislation passed by the Conservative party during wash up and was signed off around 7.30pm on the Friday. This rush job means there are a great many elements that are inactive and requires detailed and contentious secondary legislation and prescribed rates.

Light stuff:

1. Where have you holidayed this year?

I have been fortunate to enjoy a number of trips, a particularly memorable one was a large group of property and business people who went to the South of France for Tom Bloxham’s 60th celebrations. Everybody knows Tom is very social and he curated the perfect mix of business and pleasure.

2. What one thing (only) would you take with you to a desert island?

Kindle, on the basis it would provide unlimited reading.

3. Desert island discs – which one album would you take?

Definitely Maybe, by Oasis.

4. Are you a book reader, podcaster or both?

I used to say I read a lot but I’ve changed that to “I consume a lot of information and knowledge”. This came from a realisation that I read a lot of books and listen to books and podcasts. I also read lots of newsletters and digital or print magazines. On top of this I will also devour information across Twitter/X, LinkedIn and a host of others. Many years ago most knowledge did come from traditional reading whereas now it’s far more diverse.

5. Where is your favourite location that you have visited for holiday, and why?

If pushed my favourite type of holiday would be skiing – food, drink, fresh air, scenery and lots of skiing. However, if pushed on a location then it would have to be Las Vegas which I’ve visited around 12 times. There is the casino side, but I find that is a bit part as there are incredible restaurants, shopping, culture and entertainment. If you can get over the fact that it’s basically one crazy road lined by monstrous hotels (up to 7,000 rooms) it does tick a lot of boxes. For contrast I’ve also enjoyed a couple of trips to Marrakech which is a complete assault on the senses at every turn.

 

Hopefully you enjoyed the third series of the blog post and if you want to get involved just drop us a line.

Thanks to Mark for his time and his thoughts. To make contact with Mark Hawthorn and his team at Landmark, his email is as follows: [email protected]