The Rise of the Master Developer 1

Alconbury Weald, under construction to deliver an anticipated 6,500 new homes, three primary schools, a secondary school, a district centre and three local centres, 290,000 sq m of employment space and over 600 acres of green space. Alconbury Weald is one of nine strategic projects being delivered by Master Developers Urban&Civic.

Synopsis

The past decade has seen residential Master Developers (MDs) playing an increasingly important role in the UK’s development market, helping to accelerate housing supply through the delivery of strategic housing led developments. Those acting in the role of MDs are responsible from first conception and planning, all the way through to the implementation of these major projects, either through direct development or serviced land sales.

Here we explore the MD’s business model including what is takes to service a parcel of land for disposal to housebuilders. We also provide examples of new operators in this field and discuss potential barriers to entry.

We find that there have been many factors that have contributed to a prevalence in this kind of large-scale strategic development in the past decade, not limited to:

We now have a mixture of Property Companies and Housebuilders acting as MD’s – Together with a limited number of the major quoted housebuilders that have started to gravitate back towards strategic developments as a source of long term supply for direct development; we have also seen the rise of Property Companies specialising as Master Developers, often through partnerships, with varying degrees of self-delivery and the provision of serviced parcels as wholesalers to the wider housebuilder market. Both business models complement each other and lead to better efficiencies.    

The ‘helping hand’ of government - Housing supply is high on the political agenda and has been for many years. There has been a very significant impact in the form of government loans and grants for infrastructure works, especially from Homes England. This has improved viability of large schemes and has also helped to speed up delivery.

Environmental Social Governance (ESG) matters and the commercial success of placemaking - In recent years, we have seen an ever-brighter spotlight being shone on ESG matters. Large scale strategic land often presents better opportunities to create sustainable development. There is also growing realisation and evidence that successful placemaking is not only good for communities, but can also generate better returns.  

Increasing pool of patient capital – There is a ‘structural undersupply’ in UK housing. Capital is more readily available for strategic land opportunities.

Planning system acknowledging the role of large strategic sites – Planning policy is increasingly at ease with strategic land developments. Many local authorities see the benefit of having a large site/sites to add certainty to housing land supplies.  There are also major planning reforms on the horizon which could see a switch to a zoning style system and expedited permissions.

Success of partnership models – There is a growing established track record of entities working in partnership to deliver large strategic land projects, often in JV vehicles. The overall success of these partnerships is paving the way for more to be involved.

Finally, we look at the impact that COVID-19 is having on the strategic land sector including the impact on housebuilders and liquidity. We also believe that changing buyer preferences, which are shifting away from dense urban living, present a unique opportunity for strategic land operators.

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