A new Welsh Development Agency-type body tasked with curating key sites for development and de-risking them to entice private investment should be considered, Richard Rees, the UK managing director of property advisory firm Savills, believes.
Welshman Mr Rees, who has 8,000 staff under him across 136 offices in the UK, believes it is also time that more staff working in the public sector are encouraged – while hybrid working is here to stay and was already taking root prior to the pandemic – to spend more time in offices.
The then-Labour administration under the First Minister, the late Rhodri Morgan, took the decision to abolish the WDA back in 2004, which saw staff absorbed into the civil service of the Welsh Government.
While the Welsh Government is active in helping to facilitate commercial development – while also bringing major brownfield sites to market like the 100 acres at Brocastle in Bridgend – Cardiff-born Mr Rees believes a standalone statutory body would bring a more dynamic focus in seeking positive outcomes from public- and private-sector interactions.
Mr Rees, who began his career in Cardiff as a graduate surveyor with Savills in 1989, said: “Although I have a slightly wider role now as UK managing director, my career and trade over 30 years has been in development surveying, and the public sector working collaboratively and co-operatively with the private sector is fundamental.”
However, he said while the private sector is good at delivering buildings to “create a place”, he said it is often the case that without public-sector involvement projects fall down.
He recalled the involvement of the WDA in helping to kick-start development at the SA1 waterfront scheme in Swansea as a perfect example of how the public sector can enable private- sector investment.
He said: “It was 100 acres across a massive dock with a semi-institutionalised ABP selling it to the WDA, who then facilitated it by creating the infrastructure and having the vision to put in some technium buildings, to create innovation, alongside some residential. And we built the only grade A office building in Swansea at the time. I was part of the advisory group when the WDA started building that speculatively with development company Terrace Hill.
“The WDA put a wrapper (lease) around it and leased it to Admiral. So, we made money on an office in Swansea, which at the time was a pretty unusual thing. So I think the public sector needs to fill in the gaps where the private sector is not working and to facilitate development by putting in high-quality public realm, infrastructure and place making... as that generates money back with rates, employment and the investment that comes with those schemes.”
Asked whether the time was now right for a WDA-type organisation to be recreated in Wales, at arm’s length from the Welsh Government, he said: “The answer is yes of course. I thought the WDA was a very effective organisation that made development happen in places where it might otherwise wouldn’t have.
“It would need (new body) to have proper governance and I think if you had an organisation that was focused entirely on development, growth and bringing inward investment in, it would be really powerful.”
Mr Rees said post-Covid more people working in the private sector were returning to the office in a boost to the centres of cities and towns.
On occupancy trends, he said: “Everybody thought [during Covid]that we can work from home and that the new paradigm was all fine.
“However, then most people became bored working at home. I think a lot of the service sector industries and the financial institutions, and that would be some of the bigger occupiers in Cardiff, are now seeing staff in pretty regularly at around three days a week or on some sort of rotation.
“I think all of our occupier clients realise that working at home full-time doesn’t allow for any glue between people... with less transfer of information, the building of relationships and facilitating effective learning.
“We had some stats from our research team at a recent board meeting and outside of London the average occupancy (new letting deals) is only seeing 8% less space than pre-Covid. It hasn’t been as dramatic as many people and commentators thought (during Covid) and is reflective of the need to have people working together.
“As an organisation, Savills takes on a lot of graduates and apprentices. And those people find it very hard to learn fully remotely... they also don’t have the fun and enjoyment which you get from collaborating together.”
He said that the public sector, which in cities like Cardiff, Swansea and Newport, is a major occupier of office space, needed to increase office-based working levels.
Mr Rees said: “People like being in cities and going to restaurants, bars or offices where there are other people.
“If you go on your own it doesn’t feel like you get the same buzz and that sense of excitement and energy you get from being around people.
“I hope that the public sector will get to the point where it’s seen as being a positive thing to be in the office. If you go around Whitehall at the moment departments are pretty empty and sparsely occupied, whereas most of the private sector are not. It is the same in Wales.”
The Welsh Government aims in the current Senedd term to have 30% of the Welsh workforce working from home or close to home in co-working hubs.
The Cardiff administration also has a policy of seeking to boost town and city centres, which many commentators believe would be further boosted by bringing more employment to the high street – underpinned by investment in integrated public transport to reduce the carbon emissions of commuting to work by car.
Mr Rees agreed that there appears to be a contradiction between the two strands of Welsh Government policy.
Despite an adoption of hybrid working and a trend in converting secondary office space, and in some cases retail too, into residential, he believes the look and feel of city and town centres will not change significantly.
Asked what cities will look like in a decade, he said: “I think if you look at some of the most successful places, so whether that is London, Birmingham, Manchester, Cardiff, Bristol or wherever, people tend to visit when there is interesting public realm and where it feels like a nice place to go for a walk etc.
“The smart local authorities also know what is needed from a community perspective, particularly from education and health.
“And I find it quite interesting to think about some of the pop-up healthcare opportunities or university faculties that want a place to attract people in.”
He said there remains growth in the industrial sector, which has been boosted partly by the growing distribution space needs of online retailers.
Mr Rees said: “The latest figures for our research team show that across the country only 3% vacancies (industrial space). So, unless there are significant changes in those occupiers I think it is pretty solid, but they (investors) probably won’t get the same rental growth that they’ve had.
“But I think there will still be pretty strong demand from many investors because if you look at the longer term we are going to need some big sheds for the foreseeable future.”
Mr Rees doesn’t foresee the UK Government seeking to lower environmental standards on new buildings to support growth.
The Westminster government is looking to establish regulation light new enterprise zones in England. It said it would look to establish zones in Wales too, although the Welsh Government, like on free ports, wouldn’t countenance any downgrading on environmental standards or employment rights.
Mr Rees said: “Most rational human beings want to protect the environment and feel nervous about climate change at scale. I think all of us pre-Ukraine were on an environmental journey to get to net zero.
“New buildings will be environmentally sustainable, both commercial and residential, and it would be pretty catastrophic to start constructing new buildings that didn’t meet environmental legislation.
“The way I think they might go is that we could see a pushing out on the timescales for existing buildings to get to those standards. For housing associations most of their stock will not meet EPC (energy performance certificate) standards. And if they only get to 20% of their existing stock by 2026, do you make a housing association go bust?”
Housing market
On the residential market he said that for too long supply has failed to meet demand.
He said: “The market is definitely going to soften because as interest rates go up people cannot keep paying more. It is quite an issue and a structural one for society.”
However, Mr Rees said one of the biggest impacts on the lack of supply of new homes is planning.
He added: “I think politics is also an issue as there aren’t many votes in building new houses next to the people who you think want to vote for you. That is also a real issue. So you have to take this at a county/country level and say ‘we need to deliver more housing in this area and it needs to be several thousand to meet demand’... these homes have to go somewhere.”
He said investment in integrated public transport networks, like the South Wales Metro project electrifying the core Valley Lines into Cardiff, could also help people look further afield to where housing stock is available.
Mr Rees added: “It is also about infrastructure. If you have a London Underground-type turn-up-and-go network (promised by the Metro), then it is no distance from Cardiff to the Valleys. You also have to improve what the high street looks like and facilities, as just making a train line to Merthyr quicker doesn’t necessarily mean you are going to live there.”
Savills in Wales
Savills has just celebrated 15 years in Cardiff, where from its offices at the 2 Kingsway building overlooking Cardiff Castle it has around 100 staff.
Mr Rees said: “We are 8,000 people in the UK and 133 offices. We have got a really nice business. When I started in 1989 there were 400 people and now there are 40,000 worldwide.
“It has been a great journey and we have tried to stick to the knitting by providing great property services and we have not geared the business so there has never been any real debt.
“We just employ really good people and give them as much freedom as we can to provide great services and as a result we have got longevity with many good-quality people.
“We also have a very good graduate programme. We had more than 2,000 applications this year and we had 370 graduates in our system, which is the highest we ever had.
“We are also now at 227 apprentices, when five years ago we had just four. It is part of our investment in diversity and inclusion to get the widest possible range of people, which has helped us grow the bandwidth of ideas, which is so exciting.”
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