London Development Barometer


Summary of results: London Development Barometer Autumn 2019

05 December 2019

Summary

M3 Consulting’s bi-annual London Development Barometer (LDB) was launched in Autumn 2017 to compile a snapshot of market sentiment from property specialists and decision makers involved in London development activities. Since the last survey in April 2019 following the article 50 extension, Brexit has taken a number of detours: Theresa May resigned, Brexiteer Boris Johnson took over, Parliament passed a bill to illegalise no deal, and Europe agreed to a new deal that crossed May’s old red lines. As the 31 October deadline came and went, and the UK has landed back at yet another extension.


Other than Brexit, the domestic agenda has largely taken a back seat. The Conservative Party continues to promote home ownership, while the Queen’s speech had alluded to intentions to legislate environmental targets, infrastructure improvements and building safety. These are however effectively on hold as the country prepares for the second general election in three years.

The Autumn 2019 LDB aims to uncover whether and how these and other prevailing factors have influenced the industry’s views and outlook.


Results overview and key messaging

2019 M3 Consulting Infographic V10 crop web

Overall, the industry’s concerns around Brexit have come to the fore in the last six months. Almost 6 in 10 are of the opinion that London’s development activity would be best served by staying within the EU. Almost a quarter just want some clarity, irrespective of the final outcome. Brexit itself has surfaced as the industry’s biggest concern during this period.

Meanwhile, the industry’s confidence around foreign inward investment and development finance have weakened considerably, mirroring the sentiment regarding the predicted impact of the global economy and the global political environment.

Closer to home, however, reservations with the government are still evident despite subsiding slightly, with 8 in 10 still of the opinion that the government is not doing enough to enable development activity. Accordingly, improvements to the town planning process is again the industry’s top priority for government, above mitigating the Brexit transition in second, and funding for local authorities, infrastructure, transport and housing delivery.


Summary of the respondents

    • 150 responses, with a 100% completion rate
    • 58% of the respondents were senior figures at their organisations
    • Representation came from organisations involved in a range of sectors
    • SMEs (up to 250 staff) account for 62% of the respondents, with 38% from large companies (251+ staff)
    • Average of 17 years’ industry experience


Key findings

1. Almost two thirds (59%) of the industry believe staying in the EU is the most advantageous outcome for London development activity. 23% believe any outcome of either staying in the EU, leaving with a deal and leaving without a deal, is most advantageous, as long as there is clarity.

    • Only 5% believe a no deal Brexit will be advantageous to London development

2. Brexit itself is the industry’s biggest concern, with 76% believing it will have a negative or significant negative impact on development activity. 

    • This figure is similar to that of the Autumn 2018 survey (77%). Of this, the proportion of respondents who believe Brexit will have a significant negative impact has grown from 20% in Autumn 2018, to 32%.
    • Only 13% believe Brexit will have a positive impact, but reflects a slight increase over 10% who believe the same this time last year.

3. The industry’s outlook for London development activity has barely moved in the last six months.

    • 43% believe there will be less development over the next five years, the same as six months ago.
    • 29% believe there will be more development over the next five years, down marginally from 32% six months ago.
    •  These figures were at 46% and 29% one year ago respectively. 

4. The industry’s view of government remains overwhelmingly dim, with 80% believing they are not doing enough to enable development in the capital. While improving on past figures, this continues the two-year disapproval rating of 80% or more.

5. The industry’s outlook on foreign investment has significantly weakened over the last six months, with only 42% believing inward investment levels will either increase or stay the same, compared to 64% six months ago.

    • 47% believe there will be less, compared to 30% six months ago.
    • 29% believe Brexit will lead to more investment, compared to 32% six months ago.
    • Nearly three quarters (73%) believe Asia will be the largest investor, with the Middle East again in second place at 15% and The Americas in third with 7%.

6. Brexit has overtaken construction skills and capacity as the industry’s biggest concern, with 76% believing it will have a negative impact on development activity. However, this reflects a downward trend from 80% who believed the same two years ago.

    • 75% of the respondents believe construction skills and capacity will have a negative impact on development activity over the next five years. This has also fallen over the last year, with 75% dropping from 79% six months ago and 85% a year ago.
    • Concerns around the global economy have risen from 42% one year ago, to 52% six months ago and 63% in the Autumn. Meanwhile, 57% believe global politics will have a negative impact, compared to 48% six months ago and 50% a year ago.

7. Confidence in the positive impact of Crossrail 2 has been declining over the last year. 68% believe it will have a positive impact on development activity, down 77% one year ago.

    • This is followed by government investment, with 65% believing it will have a positive impact, up from 55% six months ago. 49% believe town planning policies will have a positive impact, placing it third.
    • Confidence in mayoral policies have slightly improved. 47% now believe the mayor’s policies will have a positive impact on London development activity, increasing from 35% six months ago and 45% one year ago.

8. Improving the town planning process continues to be the industry’s top priority, with 49% ranking it in their top two and 33% ranking it as the top priority.

    • This is well ahead of the 34% have ranked mitigating the Brexit transition in their top two, and 17% ranking it as their top priority.
    • 29% have ranked funding for local authorities, infrastructure, transport and housing delivery in their top two. However, only 9% ranked it in their lowest two priorities, compared to 15% for improving town planning processes and 16% for mitigating Brexit.
    • Only 1% had promoting Build to Rent policies as a top priority, while retaining policies that support home ownership was at 3%, again making them the industry’s lowest priorities.

9. Almost half of the industry (47%) believe sustainability and climate change will have a positive impact on development activity, but only 16% placed it in their top 2 priorities for the government.

10. The industry is more concerned on the development finance front, with 71% predicting finance will become more expensive, compared to 65% six months ago. Only 27% believe there will be an increase in the availability of finance, compared to 37% six months ago.

    • Over half of the industry (54%) believes the cost increases will have a negative impact on development activity, rising from 51% six months ago.
    • The availability of finance is also a growing concern, with 42% of respondents believing the changes will have a negative impact, rising from 35% six months ago.

11. 89% predict an increase in market demand for senior living over the next five years, the highest it has been, increasing by 5% from six months ago. 85% predict an increase in demand for affordable/council housing, up from 74% six months ago.

    • Confidence in the demand for Build to Rent increases slightly from 75% to 78%, yet that was at 84% a year ago.
    • Confidence in the demand for retail continues to plummet, with 86% predicting a decrease, the highest it’s been since the survey began and with an increase of 6% from six months ago. In correlation, multiple respondents have cited repurposing of retail units as a trend on the rise.

12. The industry believes the direction of residential sales has become clearer, with 46% predicting an increase in demand and 28% predicting a decrease. Six months ago, it split opinion, with 41% predicting an increase and 37% predicting a decrease.