Copyright: David Lawson – GRID Magazine 2003
For God’s sake, this is Land Securities. They just don’t do that sort of thing. Solid, sedate, dignified – the thesaurus bulges with routinely applied to the UK’s biggest property company for half a century. Think again, because they do now. If this was a political party it would be New LandSec. New approach to development. New ways of working. New ideas for leasing. New architecture. About the only old bit left is a position at the peak of the property sector. Rivals come and rivals go. Canary Wharf enjoyed a brief supremacy in market value: MEPC and Greycoat took the high ground for design. But where are they now?
This makes the transformation all the more baffling. Why change a winning formula? The firm wrote the definitive guide to late 20th century property. Build good, if dull, offices for blue chip covenants and squirrel them away in an ever-expanding investment portfolio. And don’t shout about it. There was time, not that long ago, when a trembling journalist might be summoned once or twice a year to be handed the essential financial figures and allowed a few brief queries.
Then came the revolution. New managers swarmed in, more than ready to talk shop over a swift sandwich. New directors shed the pinstripe image, pictured beaming happily and shirtsleeved in the annual report. The buildings were just as surprising. The light-dappled office complex on London’s south bank. Another like an upturned glass ship near Victoria Station. A boring Sixties conversion in boring Earls Court transformed by a new skin and topped by a revolving bar. And an open invitation for some of the brightest young European designers to join the party
. Meanwhile, this epitome of institutional-standard development has thrown away the rulebook on leases with a system called Landflex that basically tells potential tenants they can have pretty much whatever they want.
Outsiders squabble over reasons for the changes. Many point to Trillium, bought last year and now merged into the parent. ‘Manish [Chande] came in and gave them a good kicking,’ says one developer, referring to the outsourcing group’s founder who was briefly shortlisted as the next LandSec chief executive. Others nod at Peter Walicknowski, another supposedly groomed for the top after being brought in from Lend Lease. ‘His fingerprints are all over the place,’ says the developer
LandSec is happy to give credit where due, despite the fact that both left unexpectedly when the vibes proved wrong. Trillium brought a closer appreciation of what tenants require - and the tools to deliver it with techniques like life-cycle costing, says Ian Ellis, who moved up to take Chande’s place. ‘Peter gave us the wow factor’, adds Salway. ‘Trillium enabled us to implement it.’
Pause again for a reality check. The wow factor? Isn’t that a word used in endless TV shows about how to sell a boring semi, or adverts for little cars that really look like every other little car? There is a distant connection. Developers are like house sellers and car producers, competing for customers in a ferociously competitive market. They need an edge.
‘Buildings have to be an uplifting experience, particularly where they need to raise a whole neighbourhood,’ says development director Mike Hussey. And he should know, after doing that job in a previous role enticing firms out to Canary Wharf.
The influx of new people and ideas has certainly transformed LandSec from a dowdy old lady into an in-your-face ladette but that still leaves the mystery about why it all happened. Once again, why change a winning formula? The answer lies in one short sentence by chairman Peter Birch in the current annual report: ‘More than three years ago we recognized that asset accumulation alone would no longer deliver sufficient shareholder returns in a period of low inflation.’
A 24-word epitaph for 20th century property development. In other words even the most successful developer in UK history could not continue to just play it safe, producing a building a year and accumulating a portfolio while rents kept rising.
So the ideas were already there. Trillium and a raft of new executives were brought in to implement them rather than vice versa. The real source of change was the quiet, unassuming chief executive Ian Henderson. When he was thrust into the driving seat by the unexpected death of Sir ???????? in ???, no-one expected such excitement. He had, after all been imbued with the LandSec ethos since joining in 1971.
Ironically, the City applauded when Walicknowski and Chande joined, gasped when they left and groaned when Henderson postponed retirement for two years. Analysts still fret about who will be handed the crown when he finally leaves next year. That seems to miss the crucial point that it does not matter who takes over. The train has left the station and no-one will stop it now.
Land Securities has always produced high-quality buildings. It would be perverse not to when creating a long-term investment portfolio where nasty holes can appear in the accounts when things start to fall apart. The trouble is, they could be dull, drawing ill-informed comparison to the speculative rubbish thrown up by opportunistic rivals over the last 50 years.
Not any more. Cardinal Place, a swooping glazed arc in Victoria gave a hint of change when plans were revealed before the Millennium. Empress State, a Sixties conversion just unveiled in Earls Court has strengthened the message that ‘the wow factor’ is here to stay.
A clutch of new schemes are set to make what development director Mike Hussey sees as vital to attract tenants in future. ‘We aim to use the brightest designers in Europe,’ says Hussey, listing potential collaborators such as Jean Nouvelle, Hertzog de Meuron and Raphael Monea. ‘Where these can’t handle it alone, we look at linking them up with a UK firm to implement the project.’
UK superstar Lord Rodgers has already been brought on board to sketch plans for a possible residential scheme – another first for LandSec – behind the Tate Modern. This is next to the site of St Christopher House, where a computer designed façade will send colours rippling across the planned replacement buildings. Architect Wilkinson Eyre seems likely to look for similar possibilities on the huge Sainsbury site at nearby Blackfriars, while US firm ICPF is coming up with plans for Bressemer Place in Victoria.
As a development giant, LandSec works with dozens of construction partners. Salway wants to change that, honing down to a few regulars - perhaps as few as half a dozen. He stresses that this is not a closed list. ‘But we want to get used to working with partners so each knows what the other wants. There may also be pricing benefits through regular work.’
Shorter leases
Chief executive Ian Henderson spent his year as president of the British Property Federation pleading with the industry to preclude potential new laws by offering smaller tenants more flexible leases. So it should come as no surprise that he is among the first to put his shareholders’ money where his mouth is.
LandSec has introduced its own version, Landflex, which offers a cocktail of floorspace and services, mixed in whatever proportions tenants choose. These are still early days, with the scheme still restricted to Empress State, a spectacular conversion in Earls Court, and a 45,000 sq ft building in Soho Square.. But Salway is confident enough to aim for conversion to short leases on as much as 20% of the portfolio over the medium term – up to as much as 1.5m sq ft.
While the designs that LandSec produces over the next few years may be startling, the biggest changes will be invisible. The merger with Trillium has fundamentally changed the way the company develops buildings, according to Ian Ellis, chief executive of the Land Securities Trillium business unit.
For instance, engineers and maintenance staff no longer wait patiently for the architects to wax all creative and leave. They now chip in with contributions such as cleaning costs. ‘Life-cycle costing will be a critical factor,’ he says.
So that means less marble and more plastic? ‘No. It means marble only where the customer wants it – after being told the ongoing costs,’ says Ellis.
This prioritisation of customer needs flows naturally from outsourcing partnerships. It has already fed back into policy. Green issues, for instance, are central to the management of the Department of Work and Pensions estate, and the skills acquired have helped implement LandSec’s own environmental programme.
Life-cycle costing and intimate knowledge of maintenance also fed into developments such as Empress State. There are no polystyrene ceilings to cause a mess when Landflex tenants move, and the stairs are floored in vinyl rather than carpet to reduce costs, which are part of the wrap-up fees.
This move to customer focus could spawn a whole range of new services. Landflex caters for the smaller end of the market and Trillium for the very top. Salway is reluctant to speculate but Ellis’s eye gleam at the prospect of some meeting in the middle where bigger tenants on longer leases could be offered a more complete property package.
The Trillium factor goes beyond customer focus. The fact that half the 500,000 sq ft BBC development at White City is on target and half is ahead of schedule will be a strong selling point as the company seeks to break other boundaries.
‘It shows we are efficient and can deliver,’ says Salway. This will be vital in plans to reach out to big occupiers fretting over their future space needs. ‘We are not going to market ourselves as a cost-management service,’ he says. ‘But we will point out that providing 200,000 sq ft in central London is a fiendishly complex business and we are in a position to do it.’
LandSec has never really exploited its sheer size in the way market leaders do in other sectors. With 8m sq ft in central London, it has something like 5% of the market. That suggests the potential power of a business park, where tenants can be shifted from building to building to meet their changing needs.
Salway is well aware that tenants are lost because they grow – or shrink – to a level where buildings are no longer suitable. So why not move them around the portfolio? He immediately sees the problems. Canary Wharf used to ensure it always had a tower under construction to provide space for potential movers. LandSec’s strength lies in low void levels and aversion to speculative development. .
But the way lease terms are loosening, property packages becoming more extensive and development more efficient, it’s not beyond the bounds of possibility that one day Even Newer Land Securities could become a similar brand, promoting central London almost like an office park.