The next cohort of young developers is facing a tough market with SME developers dropping from contributing 40% of housing share 30 years ago to just 10% currently. Andrew Argent, business development manager at Close Brothers, explains how Tomorrow’s Developer network is hoping to help more next-gen developers spread their wings.
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How did Tomorrow’s Developers come about?
The housebuilding sector has been quite siloed in its approach to recruitment and talent historically, and there are several barriers to entry for aspiring developers, which has led to a skill shortage in the sector and rising costs of labour as a result. We’ve done a fair bit of research internally, and the Home Builders Federation has suggested that almost one-third of the workforce will be retiring over the coming years, which poses a risk to interrupt and disrupt housing supply. Tomorrow’s Developer is focused on breaking down the barriers of entry into property development.
How did you decide what areas to look at?
We did a review of our loan book internally and recognise that the average age of our client was 52 and we really need to be doing more as a business to help, support and encourage the next generation of property developers into the industry.
Barriers are high in property development, but we wanted to understand what these barriers were. We surveyed the next generation of housebuilders, which to us is those aged 25 to 35 years old. We learnt that 84% believed funding was the largest barrier to entry. Second was sourcing sites 53% and third was navigating the planning process at 47%. Off the back of that we created Tomorrow’s Developer, which essentially is a network, with events, that has been created by Close Brothers utilising our experience not only internally but that of our wider network and professional team to really help break down those barriers that have been identified through the survey.
What do the events include?
Each event has guest speakers, and they are all tailored to a topic. It’s an educational piece and we want to try and pass on as much information to the next gen and aspiring house builders as possible. We have tailored our event to what those barriers are.
Savills have talked about sourcing sites and making yourself more visible in terms of the bidding process when perhaps you don’t have the level of experience of some other developers in the local area. Also navigating the planning process. Travis Perkins has talking about supply chain issues, cost of materials and objections in that regard and modern methods of construction. We’ve also had some of our clients talk about their experiences, which has probably been the most beneficial for the attendees. For example, we had Andy Hill, who is the CEO of Hill housing group, the third-largest privately owned housebuilder in the country, who has built his business over several years. It’s a very sizeable business. He’s been through numerous different downturns and has grown his business from scratch. Conversely, we had Alex MacDonald, managing director of Macar Developments, and he’s very much next gen. He was an estate agent in 2017 and was able to share his top 10 tips and things he wish he had known when he started out.
It’s a difficult industry to operate in. And these are real, valuable bits of information that these attendees and the network can take away with them in terms of sculpting their business going forwards.
Who can attend your events?
The value of the network itself is based on the people that attend. First and foremost, they must be next gen so between the ages of 25 and 35 and they have to have at least two years of property industry experience. They can come from anywhere in the sense that it could be an agent, land buyer, contractor, planning consultant etc and most importantly, they must have the desire to get into property development.
We’re very passionate about helping the next gen into development. The next gen are very much the creators, the innovators and it’s important that we support them, so we’ve got a thriving housing industry going forward.
Why is it so important to help this group?
We want to help the next gen in terms of boosting housing supply. The SME developers market has been decimated over a number of years now. Unfortunately, it currently only contribute 10% of the housing supply, whereas 30 years ago it was 40%. They really were the bedrock of housing supply and more needs to be done.
We recognise that the quality and the experience of some of the developers may not fit our profile in terms of a branded property finance specialist. And we’re not going to change our underwriting principles because we’ve got obviously got our shareholders to look after and our reputation. However, the whole point of this network is that we try and unlock opportunities for them. We recognise that they may go and use other lenders and use us as a sounding board in terms of advice, and it’s up to us to nurture those relationships early on. But ultimately, now if we can lend a bit of money off the back of this to some developers that are moving forwards, then that’s a great takeaway for us as well.
Will future events be outside London?
We’ve done three events in London, the South East. We’re learning each time we do an event, which is great because it must keep evolving to remain effective. But we did our first event up in Manchester in March and that went down extremely well. We are looking for some partners to take it more regionally as well because we want to try and spread this net as far as we can. Birmingham, Leeds and Bristol are on the radar.