Real estate adviser Savills' 2010 results told a sobering tale of conditions in the planning consultancy market. While Savills' overall income was up by 21 per cent last year compared with 2009, its planning consultancy team had suffered from "challenging conditions at this stage in the cycle, with revenue down 14 per cent on the previous year", according to the report.
Roger Hepher, the firm's head of planning and regeneration, is keen to put the results in context. He says that his department saw steady annual increases in turnover right up until 2009, with 2008's results good despite that year's crash. Despite this, he admits that the last couple of years have been difficult. "In 2009 income was significantly down and in 2010 it was down again, although not quite as much," he says. "We did have to reduce the size of the team, but we managed to keep our heads above water. At peak, we had about 190 planning fee earners and that fell through natural wastage and some redundancies down to about 150."
Although Hepher says that the fees his team can charge remain reduced, he now believes it has turned a corner. "Things have levelled off this year and we're now seeing signs of business picking up, certainly in London and the South East. That mirrors all the economic statistics and graphs that you see in the financial pages. What we're finding is that the volume of work is picking up, but fee rates are still quite depressed," he says.
"There was a period a couple of years ago when there was significant fee undercutting and they dropped to quite a low level. It's going to be quite difficult to get them to recover to a sensible economic level," Hepher says. "We haven't gone in for the sort of suicidal fee cutting that some firms did, but, inevitably, if you perceive that market rates are declining then you have to follow suit, otherwise you lose out on work."
Perhaps the strongest indication that Savills is feeling more bullish came at the end of August, when the firm announced its acquisition of planning consultancy the London Planning Practice (LPP). Founded by Nick de Lotbiniere and Jon Dingle in 2003, the practice specialised in the prime central London property market, with clients such as department store Harrods and developers Minerva and Northacre. The acquisition saw LPP's 17 planning fee-earners move across to join Savills' 60-strong London team, bringing total numbers of fee-earners back up to about 170.
According to Hepher, the move was informed by a strategy that has remained consistent ever since Savills elected in the mid-1990s to become a major player in the planning consultancy market. "The company decided it wanted to become strong in planning because it saw planning as getting increasingly complex and central to all property transactions and valuations," he says. "It also saw that planning consultants often get involved in projects from the outset, so if planning consultancy divisions can get involved very early on, potentially other services can be offered to clients and the firm can get greater involvement in those projects as they unfold."
The major development in the growth of Savills' planning division came at the beginning of 2007, when the company acquired Hepher's own practice, Hepher Dixon. At that point, says Hepher, Savills had around 70 planning fee-earners. The acquisition increased its ranks to 145. "It more than doubled capability overnight," he says. "More particularly, we transformed the planning capability of Savills' London office. Previously, it had only eight or nine planning fee-earners, but we brought around 35, so all of a sudden Savills became big in planning in London."
Despite this influx of staff, Hepher says, Savills realised that its planning division was not regarded as a major player in the central London property market. This perception, he insists, was not matched by the company's actual track record. Nevertheless, Hepher felt that the simplest way to improve matters would be to acquire a firm whose central London credentials were known to all in the sector, such as DP9, Gerald Eve or LPP. In the end, the acquisition of LPP took around two-and-a-half years, mostly, according to Hepher, because nobody was in much of a rush to get it done.
He won't say how much LPP's acquisition cost. "I'm happy to say that it was subsidised by the wider company, which is a reflection of the fact that planning is taken very seriously by Savills," he says. "It's centre stage, it's mainstream business. In some firms, planning is regarded as a sort of oddball service and is kept in the wings. That's absolutely not the case at Savills."
Hepher says that Savills' investment in the growth of its planning division demonstrates the company's confidence that levels of business will grow in the short to medium term. This optimistic view, he says, isn't shared by all Savills' competitors. "The market does seem to be polarising at the moment, with some firms seemingly having lost interest in planning consultancy," he says, reeling off a list of several large firms that he believes have to all intents and purposes closed down their planning divisions. Such moves are not, he believes, symptomatic of the economic situation. Rather, they are the result of a misreading of the political runes.
"I think some firms based their decisions on a view they probably came to about 12 months ago when there was a lot of gloom about planning. There was a lot of concern that localism was going to stifle development and cause business to dry up even more than it had already," says Hepher. In fact, as the ongoing row over the draft National Planning Policy Framework and its inclusion of a presumption in favour of sustainable development amply demonstrates, the government is proving itself to be rather pro-development after all, he believes.
"Now with the NPPF, I think that we face a period of quite significant development activity," he says. "A lot of developers and landowners are seeing that the government really is serious about encouraging development to happen, about encouraging planning decision-makers to be positive about development proposals."
Ending on a further optimistic note, Hepher says: "I see an upturn in activity. We have a complex system that is only going to get more complex, whatever the government says." And complexity, of course, is manna from heaven for consultants.
1979: Gains a masters in town planning from the University of Manchester
1979: Joins Greater Manchester Council as a planner, later becoming a senior planner
1988: Becomes a partner at Grimley JR Eve in London
1995: Co-founds Hepher Dixon, becoming director
2007: Sells Hepher Dixon to Savills, which he joins as head of planning and regeneration