Muse chief: ‘We’re through the worst’

Matt Crompton, the northern chief of regeneration specialist Muse Developments, believes we are "through the worst" of the property slump.

"That's my gut instinct. Space is getting taken up and not a lot of new space is getting developed, which is how the property cycle works."

Crompton has good reason to feel confident having seen the business bag a string of new commissions and continue to make progress on some of its long-term projects.

But wider trends have also left him optimistic. After several years of market inertia Crompton can see demand returning to drive a revival in prime areas that he believes will gradually radiate out.

"There are fewer developers and speculative development isn't taking place at all at the moment," says Crompton. "The Manchester Office Agents' Forum says there's one to two years' supply based on average take-up rates of 750,000 sq ft a year.

One St Peter"One St Peter's Square (pictured) is the only scheme that's earmarked for starting and part of that's pre-let. Those businesses that can see beyond the recession, they'll be going in 25 years and they need space. There will also be lease events. It's a great time for them to be taking space."

Crompton adds: "Space does come back, like the Halliwells building, but in the greater scheme of things it's not big chunks. Occupiers need more efficient buildings – there's carbon reduction to think of and fuel will become more expensive, so that legislates against staying in old buildings.

"We won't bounce out [of the recession], we'll crawl out of it. But I'll be disappointed if we don't see some positive signs based on supply and demand misalignment by the end of next year.

"The market will start with some pre-lets – and we're seeing that already with KPMG at St Peter's Square because they can't find a building."

In the half year to June 30 Muse saw its operating profit increase by 25% to £1m on revenue of £19m, up from £15m. Its parent company Morgan Sindall, the FTSE 250 business that also owns fit-out specialist Overbury and social housing builder Lovell, said the division benefited from a lack of competition from other developers.

Salford Quays-based Muse has a development pipeline of around 30 projects, of which its share has a value of £1.4bn. These include joint ventures with other investors and public sector landowners, such as the £220m Talbot Gateway scheme at Blackpool, the £225m regeneration of Network Rail's Victoria station in Manchester, and the English Cities Fund scheme at Chapel Street, Salford.

"We're a long-term business that gets involved in joint ventures where our interests our aligned with the landowner," says Crompton. "We're not a housebuilder-type developer who sits on land and writes it up and down. We've got a portfolio across sectors and we're quite well spread geographically which makes us resilient."

Warrington Market Square, MuseCrompton says Muse is cash postive to the tune of £1m and the group will occasionally pump prime developments with its own money. It will also forward fund pre-let schemes and benefits from council borrowing when local authorities are involved. There's also senior debt but this is "very hard to come by," says Crompton. "Well, you can find it but it's not cheap".

With the lack of capital funding around Muse has been trying to make the most of public sector mechanisms such as the EU-backed £100m North West Urban Development Fund, the government's Regional Growth Fund (RGF) and the new enterprise zones.

"We've got the Leeds enterprise zone, a successful RGF bid at Ashton Moss and we're talking to Evergreen [the EU fund]. We're out there and active, trying to harness all three initiatives," says Crompton.

  • Muse sits within the Morgan Sindall group which describes itself as a 'construction and regeneration' business. But Crompton is pushing for Muse to become a more significant part of the business – vying for 'regeneration' to get top billing.

"The idea is to increase our market share and presence within the group," he says.

Muse, acquired by Morgan Sindall from AMEC in 2007, is heading in the right direction. It is very active, securing a stream of new projects, most recently Warrington Borough Council's £130m regeneration of Bridge Street and the £115m redevelopment of the Lloyds Banking Group site in Chester from Cheshire West and Chester Council.

The southern part of the business, headed by Nigel Franklin, picked up a £200m scheme in Basingstoke at the end of October.

Crompton says Muse is given a great deal of autonomy within the group although Morgan Sindall chief executive John Morgan sits on its board. However, "He understands regeneration," adds Crompton.

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