How Can SME Developers Gain a Competitive Edge in the Market?
SME developers are not on top today. 40 years ago, 2 out of every 5 new builds in the UK were carried out by small housebuilders; the latest figures show that ratio as just shy of 1 out of 7. The increasing dominance of large-scale construction companies added to the challenging economic conditions has seen smaller players steadily lose their market share and ability to compete. Greater competition and diversity within the construction market is not only important for the benefit of the economy, it could also prove vital in addressing this country’s urgent housing shortage.
Further, the endless limitations of today’s outdated planning system have fuelled the divide within the sector, with the inefficiencies proving a severe threat to the budgets and resources of smaller players. While the Chancellor’s recent funding pledge to help digitalise the planning system is a welcome initiative, it is only a small step towards improving developers’ ability to contribute to housebuilding and as things stand, it will not reverse SME’s declining position within the market.
In today’s market, SME developers may not have the odds in their favour but placing digital priorities at the heart of their strategy could be crucial in ensuring their survival amidst the increasing threats they face in the sector.
Shifting the odds
While larger developers have greater scope to withstand the limitations of the slow-moving planning system, given the strength of their budgets and development pipelines, SME’s must not underestimate the flexibility and agility that can be derived from their smaller scale- they must be pro-active in finding ways to harness this flexibility and greater ability to react to the market. Operating at a higher, broader level can make larger companies blind to certain opportunities and what they have gained in terms of size, could easily be lost in terms of agility.
If SME developers try to beat larger housebuilders at their own game, they will always be at a disadvantage. There is untapped value hidden throughout cities and rural areas around the country and implementing the right tools to harness these opportunities could be key in resetting the balance of power within the industry. Identifying these opportunities is a question of adopting new operational processes and making the most of the technology at their disposal.
The age of data
Much has been written about the transformative power of big data and its role in revolutionising a wide array of sectors– the most prevalent narrative is that having access to all the available information and the skill to analyse it can reveal ‘diamonds in the rough’ that all others have missed. This is the mentality that smaller developers would be wise to adopt if they mean to win back their market share.
For example, when it comes to site sourcing, which is a critical element of the development process,
the traditional methods of identifying and selecting development sites, involving manually inspecting selected search areas and trying to find viable plots of land can be a huge drain of resources for smaller businesses, as opposed to larger operators who have the manpower and budgets in place to search over larger areas and withstand potential planning hurdles along the way.
If instead, smaller developers implement a more data-driven strategy to site sourcing, they will be able to increase their efficiency and harness the agility that their relative size grants them, which could be key in differentiating themselves in the market.
The power of data extends beyond just sourcing sites – putting data at the heart of their operations can reduce costs and increase productivity, turning smaller companies into well-oiled machines that can make the most of every opportunity and are better insulated against unexpected shocks and downturns in the market.
Know your rights
To stay in the game, smaller developers need to make the most of every tool in their arsenal. One important (and often overlooked) avenue for developers is to utilise permitted development rights (PDRs), which were introduced by the government as a temporary workaround to overlong planning application requests.
PDRs allow developers to purchase certain sites and carry out conversions or extensions on them without needing to go through the formal planning system to get permission – all they need is prior approval from the Local Planning Authority, which takes considerably less time, and they are good to go.
The Government says that in the five years to March 2020, change-of-use PDRs created 72,687 new homes, which means not only can SME developers benefit from their use, but they can also have an impact on the housing crisis. Making the most of opportunities like these can make all the difference, and SME developers can’t afford to keep overlooking them.
It isn’t only for their own sake that we need small housebuilders to survive and succeed – it is for the benefit of society as a whole. We aren’t reaching our Government’s target for new homes built every year, so something needs to change, and losing our local developers will leave us even further from that goal.
As in the tale of David and Goliath, in this underdog story a resolve to thrive and go toe-to-toe with their giant counterparts – rather than accept the status quo of their market dominance – can go a long way towards turning the tables in favour of SMEs. But forget the rock and sling – an openness to re-assess the strategies, operational processes and the arsenal of tools in place will be key for smaller players to find value within their organisation, utilise it to their advantage and stand out in today’s unforgiving market.
Hugh Gibbs is the co-founder of SearchLand, the 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, much more. Before founding SearchLand in 2020, Hugh has worked in both private and public sector planning roles alongside running his own land finding business.
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