A question of balance
Published: 04 December, 2008
In many ways the man at the helm of Land Securities, the bellwether of the property industry, is always going to be the public face of the sector, just as Sir Stuart Rose is the face of British retail. But this year Francis Salway has taken on an even more public role as president of the British Property Federation.
He is determined to form a balanced judgement on the current market, and not to be swayed by each day's economic news. "The patterns are hard to assess," he says. "Bristol attracted a million shoppers in 10 days, and that footfall is being sustained. And at Gunwharf we're seeing fewer visits but longer dwell time."
And in wider terms he is comforted by the fact that all the 2008 completions have let up well. "They were all about 90 per cent let, and that says to me that they had a natural logic about them," he says. "And it's encouraging that 2009 will only see a quarter of the completion level we saw in 2008, so we haven't created a massive oversupply. For example, at Bristol we've actually suffered fewer voids than we'd budgeted for, and the rents are higher."
In didactic mode, he reaches for the statistics. "We expect 1.9m sq ft in 2009, and maybe 3.1m sq ft in 2010 compared with 7.7m sq ft in 2008. That's a big drop. The timing of development completions has been reasonably well linked to consumer spending and demand from retailers," he asserts.
Looking further ahead he says retailer demand will be the trigger for new construction. "Occupier demand goes hand-in-hand with the availability of capital," he says. "Developers need to remember that taking a new unit is also capital intensive, so the occupational and investment markets are not necessarily out of kilter."
He points out that the investment market has not seized up totally. "Investment turnover is back to 2001 levels. I think we've been spoilt by the recent high levels of activity.' But what he does observe in the current market is a flight to quality, with the yield gap between prime and secondary property widening markedly over the past six months.
Against this market backdrop, his role at the BPF is to maintain the momentum behind some key campaigns, especially on planning and empty rates, at a time when much of the membership is preoccupied with more short term concerns.
He is particularly animated on the rates issue. "The whole principle of rating is to pay for local services," he insists. "Yet an empty building doesn't consume any services. Imposing a tax burden on an asset that's making a loss is incongruous. The whole thrust of policy up to now has been for businesses to face lower fixed costs and higher variable costs."
He says smaller investors are already suffering, and regional development agencies are forecasting that it will deter new development.
"Previously, if you were putting together a development site, it was beneficial to let parts of it short-term," he says. "Now you're more likely to demolish. That's not good for the townscape and it's not very green either: in general terms it's greener to refurbish old buildings than build new, because older buildings have less embedded energy."
Salway is heartened by the coalition that's forming to object to empty rates, including the BPF, the CBI and the BRC. "It's the most high-profile campaign the BPF has run. We'll have to wait and see if it's having an impact, but already Labour and Conservative MPs are uniting on this issue."
On planning, he says: "The big issue for BPF members is the delay inherent in the system, not that the end product is unsatisfactory."
The BPF's planning manifesto has been fed into the wider debate on government efficiency, and Salway calls for more devolution of powers. "Local authorities should be able to benefit from the rate income generated by new development," he says. "At the moment the Uniform Business Rate goes straight to central government, but revenues raised locally staying locally must be healthy. It would help deliver strong local economies, which would generate more taxes as a whole."
Above all, Salway seems remarkably calm. Navigating Land Securities through turbulent times, and fronting a major trade body with some big political campaigns to run seems to be the sort of challenge he relishes.
