Building on firm foundations
In the 25 years since Andrew Sutherland joined the Miller property business he has witnessed the ebbs and flows that are inevitable in a cyclical sector, though he would be among the first to admit that some things never change.
Sutherland has risen through the ranks to become joint managing director of Miller Developments, the commercial property company now independent of the homes division. Over the years he’s been through the familiar battles with planning authorities, politicians and the wider process of pulling transactions together that can make progress feel painfully slow.
“Nothing happens quickly in the property world,” he says with a shake of the head. At least the sector’s relationship with the Scottish government is built on fairly firm foundations.
“We have a good relationship with the government in Scotland. We get a lot of face to face time. It’s something that doesn’t really exist anywhere else,” he says. “That’s not to say everything is positive, but they are listening to us and that’s positive.”
Sutherland will be getting a little more face time over the next year as he prepares for a 12 month stint as chairman of the Scottish Property Federation, the body that speaks for the sector and has become increasingly vocal under the devolved administration.
Speaking ahead of the SPF’s annual dinner in Edinburgh, at which his appointment will be confirmed, he reels off the issues that he expects to top his agenda. It’s the same old list of topics: business rates, land and buildings transaction tax (the old stamp duty), land availability and, of course, planning.
There is, however, one new item to add. The government’s plans for a national investment bank have sparked some interest in property circles as a potential new source of capital to help plug the gaps left by the banks and other private suppliers.
He is supportive of the proposal, describing it as a “great idea” and clearly sees some direct benefit for his members.
“It is too early for us to comment until we have some details but we are keen to work with government on this because the purpose of the SPF is to encourage investment in the Scottish property market. So, anything that can assist in that process has to be positive.
“I would like it to do something the banks are not doing. We do not come across the banks getting involved in commercial property like they did previously, unless there is a pre-let. Even then they are quite selective.”
‘We need to be a bit more measured in our approach’
He is hoping the investment bank will have the flexibility denied to the traditional banks which are now constrained by such things as the need to maintain higher capital reserves, a measure controlled by Europe and the UK regulators.
“Could it take more risk? Who knows? But it is something that we’re keen to hear about,” he says.
Although regular surveys and bulletins issued by the property agents often point to buoyant demand-led markets, he says the reality is that commercial real estate needs a lift.
“Speculative development is down and build-to-rent is tricky,” he says, explaining that government policies on removing rates relief, imposing rent caps and changes to tenancy agreements have been far from helpful.
To get an independent view on the true state of the market the SPF has commissioned the first of a series of surveys to be published by the Fraser of Allander Institute in time for its conference in March.
“We need to be a bit more measured in our approach and the study should give us something we can rely on,” he says.
Like his predecessor before last, Chris Stewart, he will warn the government against measures, including higher taxes, that will deter investment, particularly key overseas money which often means the difference between projects going ahead and remaining on the drawing board.
“Overseas investment is unemotional. There is no sentiment attached to investing in one country or another. It will simply go where it can find the best return,” he says.
There is one other key concern he would be keen to see removed: the threat of a second independence referendum.
“It is another hurdle for investors to cross,” he says. “A second independence referendum is more of a concern than Brexit. It is by far and away the biggest issue as an obstacle to investment.
“Around the UK everyone is gradually getting their heads around Brexit. We can assume something will happen and there is some sort of timetable.
“With independence there are questions over the currency, taxes and the overall impact on the economy.”
The immediate business on the agenda concerns the two forthcoming Budget statements, the first from the Chancellor on 22 November and the second from Scottish Finance Secretary Derek Mackay on 14 December.
‘Timescales become important when you are talking to potential occupiers’
Sutherland says that for his members the latter is more important as the devolved government’s powers directly affect the sector. So far, he is encouraged that Scottish ministers have listened to its concerns and made some changes to things like rates on empty buildings.
“It is testament to the government that they have been consulting with us and are starting to listen.”
He would now like some big changes in the planning system to speed up the process.
“To get detailed planning consent in Edinburgh on a big building project within one year is good going. In Birmingham we got a quarter of a million square feet of offices approved within three months. In Warrington 700,000 sq ft went through in five weeks.
“Those timescales become important when you are talking to potential occupiers.”
He blames under-resourcing and a drift of “a lot of good people” from planning authorities into the private sector which is stretching the service even further.
“The government needs to understand what is at stake here,” he says. “An application may cost a developer £300,000 to £400,000…it could be a million. It is not something anyone undertakes lightly.
“So if we are to create an environment for activity there must be a faster and more efficient way of dealing with it.
“We would like the local authorities to retain the best people. That probably means paying them more. I don’t know, but something needs to be done about it.”
Education: Stewart’s Melville College; University of Edinburgh (civil engineering)
Career highlights: Jamieson Mackay (consulting engineer); Bredero (development manager); Miller Group (now joint managing director)
Were you always set on this career path?
Well, I am the 7th generation of civil engineers in the family. That goes back a long way.
What do you do when you’re not developing buildings?
Golf. Also involved in the Edinburgh Company of Merchants. I’m a former governor at Stewart’s Melville.
If you were to invite three people to dinner, who might they be?
Sir Richard Branson, because of his vision and lack of fear
Jack Nicklaus, whose focus and tenacity impresses me
Rick Stein, because I just think he’s a great cook.