Hugh Gibbs, co-founder of SearchLand, asks ‘What can SME developers do to stay competitive?’
Small housebuilders have been steadily losing their market share for many years now – the proportion of new build properties built by SME developers in 1988 was 40%, but by 2018 that number had dropped to just 12%.
The reasons for this are manifold: the sector has become dominated by powerful multinational construction concerns that are able to corner the market with superior resources and wider operational scope, while both a swollen and ineffective planning system and unfavourable lending terms present a major obstacle to smaller companies.
Fair, even competition between small and large housebuilders is essential for a healthy, productive property market. In this article, I’d like to explore some potential shifts and avenues that SME developers could embrace to regain the competitive edge in the struggle for parity.
The power of data
Many elements of small housebuilders pipelines have hardly changed for decades, and holding onto these old methods could hinder their growth. A sure-fire way to boost productivity and make more strategic decisions is to embrace a data-driven approach. Just as the Government has pledged £65m to digitise the planning system, SME developers need to digitise their approach to identifying viable development targets, using data-driven search criteria to unearth overlooked value in the marketplace.
Smarter searching can even help these companies bypass the planning system, which 40% of property investors view as a major obstacle. Specifically targeting sites eligible for permitted development rights conversions can help small housebuilders increase their output while minimising time wasted waiting for permission.
SearchLand’s own PDR search tool has located over 27,500 disused brownfield sites across the country that can be converted or developed with only prior approval from a Local Planning Authority. The Government’s pledge to build 160,000 new homes on such sites should be an indication that pursuing brownfield stock is the right direction for the future.
To compete, SME developers need to operate like well-oiled machines, trimming away unnecessary excess and achieving more while doing less. The key to this is a strategic, data-driven approach to operations that helps maximise the value they can generate.
Act right, think green
In everything from groceries to houses, a growing proportion of consumers are auditing the ESG (Environmental, Social, Governance) credentials of their purchases. The smaller size of SME developers doesn’t only make it easier to adopt a more strategic workflow – it makes it easier to embrace a holistic ESG overhaul.
It should be a priority for all SME developers to ensure that every stage of their construction process is compliant with the latest sustainability guidelines, while also monitoring their own actions and hiring practices to promote better governance and engaging with their local communities.
Improving their social footprint will make them more appealing to conscientious property buyers – while also creating a better working environment for their employees. Building a strong ESG platform isn’t just a performative action, but a commitment to being better run and becoming more likely to endure.
In for the long haul
I wouldn’t presume to think these steps alone would ensure the revival of the small housebuilder’s market share, but they represent a willingness to adapt and embrace new ideas.
Smarter approaches, being more thoughtful and seizing every available advantage will create stronger, more agile companies that are able to outperform their competitors – not by beating them at their own game, but by playing a different game entirely.
Small housebuilders are the backbone of this country’s property industry, and I hope that they will heed my advice and begin shifting themselves into a new gear, facing the future with a new plan for both survival and success.
Hugh Gibbs is the co-founder of SearchLand, an all-in-one property data platform. SearchLand helps developers, site sourcing teams and investors to streamline their workflow and maximise their portfolio – by making it easy to sift through vast amounts of data, users can quickly establish who owns a piece of land or property, discover the prices paid, analyse planning applications, and much more.