BUILD Q4 issue

30 Build Q4 2018 he UK housebuilding industry continually fails to keep up with demand and in 2017, despite a 21% increase in building, only two-thirds of the government target of 300,000 homes were delivered. Of that figure, only 19% was afforda- ble housing. These statistics highlight the dire state of the UK housing market and how it is now reaching a tipping point. The reasons are many fold, and respective views and positioning are well documented. Causes for the fall in supply has been everything from: builders having vested interest in keeping demand greater than supply; overly complex planning rules; growing populations; councils’ inertia; residents’ conservatism; lack of skilled workforce and now Brexit. However, when supply fails to keep pace with demand, innovation and competition have an uncanny knack of arriving to correct the imbalance. The most visible examples of these forces have been seen in ser- vice-based industries such as taxis, hotels and electricity where entirely new business models have given rise to massive shifts in value from traditional players to new entrants. But could this happen in the UK housing market? The US has seen the success of challenger construction company, Katerra, valued at $3bn, which has a simple mantra of ‘breaking new ground’ through investing in innovative technology to really optimize every aspect of building design, materials supply, and construction. The construction industry as a whole has failed to invest in new technologies and is doing business in the same way that it did a hundred years ago, according to Katerra. There is huge scope for new materials, techniques and processes that must be brought to market. We believe that research and investment in innovation not only needs to, but will happen here in the UK, sooner rather than later. Technology should be used to overcome issues, such as skills shortages, whilst in the process, delivering and building houses. Recent investments in the manufactured housing sector by established players such as Laing O-Rourke, Ilke Homes and Berkley demonstrates the willingness of some firms to consider new ways of delivering housing. We expect that Disruptive models set to break new ground in UK housing market ReardonSmith Architects Ltd is an award-winning global leader in hotel and resort design. In July, they were named among the winners of BUILD’s 2018 Architecture Awards with the title of ‘Best Global Hotel & Design Firm” in the United Kingdom. On the back of this well-deserved achievement, we spoke with James Twomey, Director of ReardonSmith, to find out how they have forged their global reputation in this notoriously competitive arena. T this will accelerate as these firms and new entrants look at ever more innovative ways to radically disrupt this most traditional of industries. We believe that houses of the future will be manufactured in a factory and not built on site. The manufacturing process is not particularly com- plex. At scale, modular housing should yield major improvements in both quality and speed for the production of houses, manufactured with very low if any defects in days rather than months. Similarly, the customer service advantages along with cost efficiencies should be compelling for buyers. This approach results in a faster process, with higher quality housing stock. As a result, these houses will be more energy efficient, which will in turn reduce the ongoing cost of ownership by occupants. The cost of manufacturing at scale will become lower than traditional building, and the groundworks needed for these lighter constructions are substantially less, which will also reduce costs. So faster, cheaper and better quality and the weather outside does not slow the factory down. However, disruption is not without its challenges. Where the industry will really need to work, is to change perceptions. Modular housing should be recognized for the precision and expertise in its engineering, rather than cheap prefab buildings. There is currently a misconception that modular houses are shipping container homes or portacabins, which fails to do justice to the technical knowledge, materials and technology that the houses are created from. Will we see a shift in housing development? Many new players are increasing rates of construction to accommodate the current lack of housing capacity and to cater for the growing build-to- rent sector. Over recent months we have seen a significant shift in atti- tudes as firms recognize the yet untapped potential in modular housing. A combination of an ageing workforce amongst existing traditional builders, exacerbated by Brexit as overseas workers go home, combined By Steven Taylor, Head of Valuations, Eight Advisory UK