Pension funds can help spark recovery in sector

Matt Crompton, joint managing director of Muse Developments, said speculative building would return but institutions could lead the way, rather than the banks.

“It’s starting with pre-lets like KPMG and as confidence continues, access to funding will improve,” he said.

He added: “Institutions will come back faster than the banks to offer finance. Pension funds could come back into the market as lending rates are higher and will stay relatively high and they will be willing to take on a degree of risk.

“The market dynamics have to be right and market demand has to be demonstrably higher than supply, but when that happens, you can then create a business case for speculative building.”

Muse has stepped up its development activity in recent months. It started building KPMG’s new Leeds headquarters – a new 60,000 sq ft office development following a landmark funding arrangement with British Steel Pension Fund.

“It reflects the modest increase in confidence that we are seeing across the country,” said Mr Crompton. “People like KPMG are, to all intents and purposes, recession-proof so for them there has never really been a better time to build new offices.”

Last month, the Aire Valley Leeds Enterprise Zone took an important step forward when Muse began infrastructure work on the Logic Leeds site after receiving Government funding.

The first phase, due to be completed in August, involves the construction of 200 metres of highway to link the site with the A63 East Leeds Link Road.

Mr Crompton said: “We have got a steady level of interest from occupiers but it would be more helpful if the Government started giving more tax breaks to companies.”

Meanwhile, work has started on the first phase of housing at Doncaster’s £300m Civic and Cultural Quarter regeneration project in Doncaster, which will build 54 new homes to be known as The Gables.

The project has already seen the completion of Doncaster Council’s new civic offices and the refurbishment of the Civic Quarter multi-storey car park and Sir Nigel Gresley Square.

Mr Crompton said: “The Government is trying to kick start the economy through residential development. Its initiatives have helped us to start on new residential projects from Plymouth to Glasgow.”

While London has led the property recovery, Mr Crompton said Yorkshire was holding its own against the North West in terms of development activity,

Muse, which employs 55 staff across four offices in Manchester, London, Glasgow and Plymouth, was acquired by listed construction group Morgan Sindall in 2008. It has weathered the recession better than some of its competitors due to the number of sectors in which it works. Turnover in 2012 was £62.3m, up from £56.6m the previous year. Pre-tax profit was £1.8m, down from £3.4m.

“We have got good sector resilience as well as geographical resilience to cope with the ups and downs,” said Mr Crompton. “When a lot of other players are out of the market there’s less competition and that also helps.”

However, Mr Crompton said the future pipeline for the company was uncertain. “Land values are too low for owners to put on the market and there is also concern about there being less competition among developers. But we are always on the look-out for opportunities, even though there are fewer out there.”

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