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Smart City Building with Huawei / Promoting Green and Efficient Energy / Capital Allowances: One Year On
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BIM Managers: Breaking Ground
Also in this month’s issue... Top 10 Location Considerations When Developing Sites The True Legacy of Building Stadiums for the FIFA World Cup Walkable Urban Places are the Future of Real Estate Development Build Magazine Issue Two: June 2015
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Contents 4. News
Reading List 10. BIM Managers: Breaking Ground
Construction 16. Top 10 Location Considerations When Developing Sites 18. Slight Rebound in Construction Output Growth in May, Helped by Post-Election Bounce in New Orders
Inside the Industry 22. The True Legacy of Building Stadiums for the FIFA World Cup
Eco Building 26. BCC Research Anticipates by 2019 the U.S. Market for Green Building Materials will Expand to $69 Billion 28. Promoting Green and Efficient Energy for Europe’s Regions
Products & Innovation 32. Smart City Building with Huawei
Real Estate 38. Walkable Urban Places are the Future of Real Estate Development
Comments 42. What Does the Tory Victory Mean For Property Investment Options?
Regulation 46. Will heat regulations leave landlords hot under the collar? 48. Capital Allowances: One Year On Build Magazine
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News American Capital Invests $51 Million in Compusearch Software Systems American Capital, Ltd HAS announced that it acted as sole lender and second lien agent on a $51 million second lien financing to support the acquisition of Compusearch Software Systems, Inc. (“Compusearch”) by ABRY Partners. Compusearch is the leading provider of acquisition and program management software to federal agencies, Department of Defense program offices and government contractors. “American Capital has partnered with ABRY on previous investments and we are delighted they turned to us to work together on this attractive investment in a leading federal government software provider,” said Ryan Brauns, American Capital Managing Director and Head of Sponsor Finance. “Having invested in Compusearch under previous ownership, this is an excellent opportunity for us to leverage our deep understanding of the company, its business, clients and industry and support its continued growth plans under ABRY.” Headquartered in Dulles, VA, Compusearch provides software and services that advance commerce and collaboration among government agencies and contractors. Compusearch’s PRISM™ software is fully compliant with Federal Acquisition Regulations and is the contract writing system for defense, intelligence and civilian agencies. PRISM™ automates requisition and solicitation generation, competitive bid evaluation, award generation, contract management, management reporting, and contract closeout and archiving, and also significantly speeds up compliance with the complex bidding rules for federal contracts. Compusearch’s software solutions also include TopVue™ for program execution and deliverable support and SpectrumCLM™ for Government Contractor’s Contract Lifecycle Management (CLM) processes.
“Compusearch has generated consistent, long-term growth under the leadership of a strong management team whose members have significant industry experience,” said Adam Schatzow, American Capital Principal, Sponsor Finance. “The company’s core product, called PRISM™, is regarded as the ‘best-in-class’ offering in the federal procurement software market. Easy to use, easily integrated with other systems, adaptable to different users and compliant with federal regulations, PRISM™ enables effective and efficient operation among agencies.” “Compusearch marks the third investment from American Capital in an ABRY portfolio company in the last 12 months,” said Brian St. Jean, Partner, ABRY Partners. “American Capital provided a second lien financing that was flexible and seamlessly sat behind a bank executed first lien facility.” The American Capital Sponsor Finance Group works in partnership with private equity sponsors to provide financing solutions, including unitranche, second lien, subordinated debt and minority equity investments, to support buyouts, recapitalizations, add-on acquisitions and growth initiatives. The Sponsor Finance Group will underwrite up to $300 million and hold up to $150 million in companies with a minimum of $10 million EBITDA. American Capital and its affiliated funds have invested approximately $12 billion in over 270 portfolio companies in support of leading private equity firms’ company buyouts, refinancings, add-on acquisitions, dividend recapitalizations and growth opportunities. For more information about American Capital’s portfolio, go to www.AmericanCapital.com/Our-Portfolio.
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Construction of New English Homes at 8-Year High New homes are being built at an increased rate across Britain as the nation recovers from the impact of the 2008 economic crash which caused the loss of 250,000 construction jobs. Conveyancing Marketing Services responded to the news. According to the government, housebuilding has been a key part of their economic plan over the past five years. They say that work began on 140,500 homes in the year to March – a 5 per cent rise from the previous year. More than 40,000 homes were started between January and March in 2015, equating to a 31 per cent increase to the last quarter of 2014. This is 136 per cent higher than six years ago, meaning that housing starts are at their peak since 2007.
Harewood Associates managing director Peter Kiely offers his opinion on the lastest pension and investment opportunities. Peter Kiely, the managing director at thriving North West property investment company, Harewood Associates, in Bolton, Lancashire, has delivered a strong supporting case for investing in property over a pension. This year’s budget has been and gone with varying response; on the one hand it is the best there ever was, but listening to others there is no help for anybody and we are all worse off. In this age of 24/7 news, we have all manner of opinions, from various sources that seek to justify their opinion with a vast array of facts and figures, some accurate, some so outrageously untrue they border upon the ridiculous. The first time buyer ISA appears to be a good idea and the changes to the way pension benefit can be passed onto partners and spouses is sensible and just. However, for those reaching pension age, there are alternative investment options to traditional methods of stocks, shares and ISAs, especially as a common thread for the majority of people is the frustration at the level of return offered through these more conventional investment options. A lot of these options can also end up being complicated financial structures where asset backed security, such as bricks and mortar, is much more widely understood. Property ventures also offer greater
freedom within pension investment options, a crucial point. Unfortunately, times have seen the industry awash with the ‘upfront fee’ brigades, lining up in order to tempt consumers to part with their hard earned cash in return for, in their opinion, Midas touch assistance. To be trusted to invest someone’s money should be seen as a privilege and treating with honesty and integrity, putting the client and their interest first to maximise their returns. This should be the basis of any strong ethically aware business. There seems to be a real move towards property development investment occurring, as these are security and asset backed with an ever-increasing value in today’s housing market. It is, however, vital to research any property investment companies to ensure there is a strong set of accounts and testimonials present. Questions should be asked and having access to any legal agreements through the Land Registry is essential. Put simply, a fiduciary duty of care and a respect for client’s investment should be at the forefront of any investors mind.
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Housing Minister Brandon Lewis spoke about the importance of building new properties: “Housebuilding is at the heart of our plan to ensure the recovery reaches all parts of our country. We’re turning around an industry that was devastated and getting the country building again. It is vital we maintain this momentum, getting workers back on sites and homes built - giving more people the chance to own their own home.” However, these figures do not tell the whole story according to Sharon Buthlay, a director at Conveyancing Marketing Services: “Whilst the housebuilding surge is good news to those waiting to buy a property it isn’t the entire answer to the problems the property industry and home buyers are facing. Not everyone wants to buy a brand new home and there is not always a nice, newbuild estate where buyers need and want to buy. “The real problem is that second, third and fourth time buyers are trapped in homes that they can’t sell because they can’t afford to get onto the next rung of the property ladder. To buy a property, even with a hefty deposit, means borrowing thousands or hundreds of thousands in some cases and people’s earnings just aren’t enough to afford the astronomical monthly payments this entails. “Interest rates are low, so that’s not the problem but monthly affordability is. The Council for Mortgage Lenders (CLC) need to work with the Government to provide more imaginative mortgage products than the same old 25-year loan they have been peddling for the past 25 years. Mortgage terms need to be longer - paying back a mortgage over 40 or even 50 years rather than the industry standard 25 makes the monthly mortgage payment much more affordable, thus borrowers can borrow more and afford to move onwards and upwards to accommodate growing families and aspirations.” Conveyancing Marketing Services were established as an online conveyancing firm in 1995 and their qualified Property Lawyer has over 30 years of experience. Their solicitors are members of the Law Society and they offer a bespoke legal service for both estate agents and financial intermediaries.
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Northwood Investors To Sell The New York Palace Hotel To Lotte Hotels & Resorts Northwood Investors, a New York-based real estate investment and management firm, confirms that it has entered into a contract to sell The New York Palace Hotel to LOTTE Hotels & Resorts, a Korea-based owner and operator of luxury hotels. The transaction is scheduled to close later this summer subject to satisfaction of customary conditions. “I am pleased we were able to restore and revitalize The New York Palace to its position as one of the best luxury hotels in the world” said John Kukral, President and Chief Executive Officer of Northwood Investors. “We are honored to have had the opportunity to work with many dedicated employees at The New York Palace without whom the transformation would not have been possible. We are pleased that such a well-regarded owner as LOTTE will continue The Palace’s tradition of unparalleled service and luxury.” The LOTTE Group is one of the biggest Korean conglomerates with 79 affiliates and annual revenue of $74 billion in 2013. LOTTE Hotels & Resorts, as a member of the LOTTE Group, is ranked number 1 in the Korean lodging market. “LOTTE is a highly-experienced hotel operator and we are excited that they have chosen to acquire The New York Palace as part of their continued global expansion” said Jonathan Wang, Managing Director of Northwood Investors. “We look forward to seeing the company build on its success through its ownership of The Palace.” About The New York Palace The New York Palace, a luxury midtown hotel on the corner of 50th & Madison, completed a $160 million redesign in the fall of 2013. The renovation transformed the property’s premier rooms and suites in The Towers, a hotel-within-a-hotel. Additional upgrades included new lobbies, specialty suites and restaurants and bars including Trouble’s Trust, The Lobby Lounge, Tavern on 51, Rarities and Pomme Palais. In addition to 24,000 square feet of updated event space, The Palace is home to private spaces located in the historic Villard Mansion that feature 19th century interiors and are ideal for lavish weddings, events and dinners. With 909 rooms and suites, The Palace is known for unparalleled splendor, spectacular views, spacious rooms and exquisite service. Located across the street from St. Patrick’s Cathedral and only steps from Rockefeller Center -- the hotel’s world-renowned courtyard incorporates motifs from several 15th-century Italian cathedrals and has served as the entranceway to the historic Villard Mansion since 1882. The New York Palace gracefully blends the landmark Villard Mansion with a contemporary 55-story tower.
Commercial Property Investments Up 45%, Reports Colliers International Colliers International Group Inc. has issued its first U.S. Capital Flows Research and Forecast report, which shows that commercial property investments are up 45% in the first quarter of 2015. According to the analysis of data from Real Capital Analytics, office and apartment transactions led the market, with quarterly sales of $33.5 billion and $33 billion respectively. “Overall, we are seeing investor confidence continually emboldened, as evidenced by the increase in cross-border investments across property types,” said Brian Ward, President, Capital Markets & Investment Services | Americas for Colliers International. “However, it is important to keep this encouraging data in perspective. For example, although apartment transactions increased up to 68% over the same period last year and office sales saw a 43% increase; both property types experienced declines from their Q4 2014 levels.” Key takeaways from this report include: - Cross-border investment more than doubled (+111 percent) this quarter over one year prior, capturing $22.2 billion in properties across all major types - Office and apartment sales lead the way with quarterly sales of $33.5 billion and $33 billion, respectively - Traditionally leaders in cross-border investment into the US, Canadian investors were edged out by sovereign wealth funds from Asia. Examples include GIC’s acquisition of the huge IndCor industrial portfolio from the Blackstone Group
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Entity-level transactions make significant jump in Q1 2015, with $21.5 billion worth of companies acquired. This was nearly equal to the 2014 full-year total Liquidity events refresh coffers: Industrial transaction volume, which totaled $21 billion in Q1 2015, saw by far the largest jump this period, up 97 percent from $10.6 billion in Q1 2014 and 23 percent from $17.1 billion in Q4 14, due entirely to an unprecedented spike in entity-level deals. At $9.2b, Q1 2015 was the biggest quarter for industrial mergers since RCA started tracking the market. The bulk of this was due to one major transaction by Blackstone Private equity takes profits: Blackstone was looking to cash out, and the word on the street was that an $8 billion IPO was in the works for their industrial subsidiary IndCor Properties. But when the Singapore Govt. Investment authority GIC Group came knocking with $8.1 billion the deal was done Private to public REIT shift: Private, non-traded REIT CCIT, managed by Cole Capital, also found an exit strategy. After acquiring its portfolio of industrial and office properties between 2012 and 2014, including over $2 billion in property acquisitions in 2013. The bulk of these were single properties and small portfolios purchased from local developers Outlook for interest rates uncertain: Long-term interest rates have been somewhat volatile in 2015 as Wall Street attempted to handicap the timing and magnitude of the first post-recession increase in the Federal Funds Rate.
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HMRC to target fast growing businesses for risk assessments HM Revenue & Customs (HMRC) is writing to thousands of businesses in order to discuss their tax affairs, with a view to improving compliance and ultimately boosting tax receipts explains Mark Webb, chairman of the property and construction group at Smith & Williamson, the accountancy and investment group. Initially, 100 of the fastest growing small and medium-size enterprises (SMEs) in the UK will be targeted, along with mid-sized businesses with a group structure. HMRC has said that, in time, they plan to contact 138,000 businesses with turnover from £20m £200m to discuss their tax affairs. These plans are likely to affect a number of property and construction groups, particularly sub-contractors or those within the supply chain. The campaign has been initiated as HMRC estimates that almost £15 billion, or 44% of the £34billion tax gap, is due to SMEs non-compliance. HMRC data suggests that much of this shortfall is caused by errors and failure to take reasonable care, as opposed to avoidance.
HMRC is targeting not only small, but also midsized businesses, many of which have group structures. These will often be long established family-owned businesses or property entities with separate SPVs often structured to cater for legal and commercial issues. “Businesses should expect HMRC to check their systems and particularly how they manage VAT and PAYE matters. Additionally, it is likely to be looking at expenditure on capital equipment and repairs, plus claims for business expenses. These are routine accounting matters for businesses up and down the country but can be fraught with difficulty,” explained Webb. This new campaign follows on the success of the large business unit, which focuses on improving compliance among companies defined as large or ‘large & complex’, including many listed companies. What many smaller businesses may be unaware of is the length of time and effort involved in compiling information for the revenue for seemingly small requests. They need to take steps to ensure they have a full understanding of tax issues in their business and sector before HMRC ask.
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Reading List
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BIM Managers: Breaking Ground
IM Managers are a wholly new of professional. They B breed emerged internationally in less than a decade, most markedly in larger tier 1 architecture and engineering practices. By strengthening integration across disciplines and project phases, BIM Managers become the conduit for facilitating the information exchange between the design, delivery, construction, and operation of projects. They play a central role in deciding where BIM is heading.
A Role in Transition Describing what BIM Managers do is a difficult task. What was once associated with responsibilities for overseeing BIM model development is now more and more associated with information management, change facilitation, process planning, technology strategies, and more. Such is the veracity and speed of development surrounding BIM that the job description of any BIM Manager is in constant flux. Given the ever wider On a practical level, BIM Managers are group of stakeholders BIM encomthe custodians responsible for innovation passes, there exists an increasing to occur within their organization and in fragmentation of the BIM Manager’s collaboration across project teams. They role into specialized responsibilities: empower project stakeholders to understand On one end of the spectrum the role and engage with the high level of complexity of Model Managers emerges, who associated with a BIM workflow. They help assist in-house teams on individual them to align their skills with the added beneprojects, at times complemented fits offered by data-centric and rule-based by specialist BIM Librarians (or delivery of projects. Content Creators). On the other end of the spectrum, Model Coordinators specialize in the oversight of the multidisciplinary integration of BIM. BIM Managers may now also report to Design Technology Leaders or Project Information Managers who directly report to upper management. In some instances, an organization calls for a Strategic BIM Manager (as opposed to providing more technical support on the floor). All of the above descriptions depend on the size and characteristic of an organization. In smaller companies, the BIM Manager may well be tasked to incorporate all those roles, while acting as Project Architect and BIM Modeler at the same time. There is likely to be a time where BIM Managers become obsolete and their responsibilities will become part of project management in general. A good number of Change Management activities will have been implemented and construction industries globally will accommodate BIM as a matter of course in their project delivery methods. For now, we still go through a major transition in adopting BIM. BIM Managers need to balance between the possible and the appropriate. Their strategic view will influence which opportunities can and should be aligned with the cultural and professional context of their organization. They also help to map out how such alignment can be achieved.
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Reading List
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In the end, BIM Managers may not be the ultimate decision makers in facilitating change. They are the ones who provide upper management with decision support in order to do so and they are the ones accountable for BIM implementation “on the floor.” What makes a good BIM Manager, or even an outstanding one? In order to answer that question feedback is consolidated here from the world’s top BIM Managers to make it accessible to everyone. These managers work for leading Architecture, Engineering, Quantity Surveyor (Cost Engineers or Cost Managers in the United States), and Construction firms. They report on pitfalls and the common mistakes associated with BIM to then highlight what makes BIM tick in practice.
The Rise and Rise of BIM BIM use has been expanding continuously since 2003,making BIM Management a moving target. Back then, BIM became the accepted industry acronym for a range of descriptions such as Virtual Design & Construction (VDC), Integrated Project Models, or Building Product Models. Until that point, different software developers had branded their tools with these varying acronyms, while essentially talking about the same object-oriented modeling approach that was first introduced to a wider audience by Chuck Eastman in the mid-1970s. Around 2002–2003, it was AEC Industry Analyst Jerry Laiserin who played a pivotal role in promoting the single use of the acronym “BIM” which had been coined by G.A. van Nederveen and Tolman in 1992 and which later became the preferred definition of Autodesk’s Phil Bernstein. It was the starting point for an industry-wide journey to holistically address planning, design, delivery, and operational processes within the building lifecycle. This journey raises a great number of culturally sensitive and professionally relevant issues: By nature a disruptive process, the adoption of BIM overturns decades of conventions related to the interplay between architects, engineers, contractors, and clients. BIM Managers are drawn right into the center of these changes in practice.
This is an edited extract from The BIM Manager’s Handbook –ePart series, (ePart 1 Best Practice BIM (ISBN: 9781118987858) by Dominik Holzer, published by Wiley in six parts, with paired releases – May, August and November, 2015, £9.99 each, E-books. www.wiley.com/go/bimmanagerhandbook
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Construction
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Top 10 Location Considerations When Developing Sites There’s a lot more than the price tag to consider when selecting new development sites. Charlie Davies, Technical Director at iGeolise, explains how you can you make sure your next build delivers on location, location, location. Transport preferences How your end customer travels should play a big part in selecting a new location and it goes further than planning enough space for parking. It’s about fully understanding the required transport links if public transport is a priority, or creating well-lit streets if walking is preferred. Calculating timings will make this as accurate as possible. What’s nearby? Overlaying local services in the area is essential when planning new developments. To make it as accurate as possible think about how your target market will travel to them too, because this has a big impact on the time it takes to reach them. This is excellent information to utilise not just when making plans, but also when compiling information for the potential buyers. If you have the know-how on the local schools, GPs and dentists their level of research goes down and they’re more likely to convert. Where’s your market? A good way of understanding if a site is suitable for your prospective market is to profile the ideal buyer and work backwards. If you have an idea of the type
of customer you’re trying to attract at the end of it you’ll make more accurate decisions throughout. When it comes to location, people in the UK are generally commuting an average of 54 minutes to work, although it does vary slightly depending on the area. It’s also worth knowing that men are more likely to travel longer than women. If you have an idea of where the people you’re looking to appeal go to work you can suss out if its suitable for their lifestyle. Direct marketing, straight to the people that matter The typical way of direct marketing by location is to target people within X miles radius of the development. The problem here is that not everyone is close by. Next time you look at an X miles radius circle, you’ll realise that some of that area is super easy to get to, whilst other places are very tricky to access. It’s better to think about how the users get there and how long it will take – and adjust your campaign materials to this. A carbon neutral future Before you even contemplate a single solar panel gets you can begin to think green by selecting locations based on public transport network accessibility and access to local amenities. It’s a simple way of showing that the development is cutting down on the need to drive. Venn diagrams When you’re deciding between multiple locations, it’s a good idea to map out where they are in relation to other things. For example, you can specify that the new care home must be close by, yet nearby shopping is preffered but not essential. Adjusting the catchment area that’s acceptable lets you compromise on things that may be lower than the list than others.
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Congestion A prospective location could be considered ‘close by’ in mileage but if the congestion on public transport or car traffic is particularly bad, you may want to think again. With traffic jams recorded as one of the biggest causes of stress it’s no wonder buyers are looking at this. The pre-existing resident’s routine How familiar are you with the future development area? It’s easy to model, estimate and predict what is the biggest problems and plus points in each location – but how reflective are your results of real life experiences? I’d recommend speaking to those already in the area to make sure your estimations are correct because nothing beats stories of those that live it daily. You’ll start to realise why they avoid a particular ring road and the reason why the school run is longer than expected. It also means you can avoid the same mistakes made before. Planning ahead When the Crossrail development was announced the market jumped to – some prices rose by 82%. Knowing the plans for new motorways and transport links means you can be one step ahead and build your network to fit well with the plans. Use location in your favour If you plan using journey times rather than miles radius you’ll be able to see where the council may need to step in to provide new bus routes and road networks. If you can show the amount of people this will be for, their transport needs and the costs required to develop this, you’re onto a winner. It’s also worth suggesting the commercial impact this investment will have on the local area. As you’ll know the area like the back of your hand, you’ll also be able to suggest garbage collection routes and other services needed.
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Slight Rebound in Construction Output Growth in May, Helped by PostElection Bounce in New Orders • Business activity rises at faster pace than April’s 22-month low • Rate of job creation at five-month high • Confidence regarding year-ahead outlook hits highest level since February 2006 Build Magazine
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Construction
UK construction companies recorded a slight rebound in output growth during May, but this only partially reversed the loss of momentum seen in April ahead of the general election. Looking ahead, business confidence across the construction sector picked up sharply over the month, with the degree of positive sentiment the highest since February 2006. According to survey respondents, this was driven by signs of a post-election bounce in clients’ willingness to spend, which in turn supported a further sharp upturn in employment levels. The headline seasonally adjusted Markit/ CIPS UK Construction Purchasing Managers’ Index® (PMI®) registered 55.9 in May, up from 54.2 in April and well above the neutral 50.0 threshold. That said, the latest reading was still the second-lowest since June 2013. Anecdotal evidence suggested that weaker new business gains during March and April had acted as a drag on overall output growth in May. Although the upturn in UK construction activity during May was less marked than seen through much of the past two years, the latest survey marked the first acceleration in output growth since February. The modest rebound was driven by a sharp and accelerated increase in residential building activity, alongside a return to growth in the civil engineering sub-sector. Meanwhile, commercial building work expanded at the slowest pace since August 2013. In line with the trend for business activity, growth of incoming new work picked up for the first time in three months during May. Survey respondents commented on improved underlying client confidence and an associated post-election bounce in new order volumes. Moreover, construction companies indicated a sharp rebound in their outlook for business activity over the next 12 months. More than half of the survey panel (58%) anticipate a rise in output levels, while only 4% forecast a reduction.
Anecdotal evidence cited ongoing investment plans, new project wins and reduced uncertainty towards the business outlook. Staffing levels rose at a sharp and accelerated pace in May, with the latest increase in payroll numbers the fastest seen so far in 2015. Greater workloads and efforts to guard against worsening sub-contractor availability were factors supporting sustained job creation, according to survey respondents. Substantial skill shortages in turn led to the third-fastest rise in sub-contractor rates since the survey began in 1997 (exceeded only by those recorded in March and April). On the price front, May’s survey pointed to a rebound in input cost inflation from the 62-month low registered in April. However, on a more positive note, latest data indicated the least marked deterioration in supplier performance since June 2013. Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®, said: “May’s survey provides the first sign of a postelection bounce in the UK construction sector. With a sustained period of policy uncertainty no longer on the horizon, business confidence surged back to its highest level since early-2006. “Additionally, construction firms experienced an upturn in new business growth from April’s near two-year low and job creation was the fastest recorded so far in 2015. “However, it is far from certain whether the relief rally in construction confidence will usher in a lasting turnaround in output volumes on the ground. “Despite a client spending rebound in May, all three key areas of construction activity have lost considerable momentum over the past 12 months. The scale of the construction slowdown since 2014 is such that it will not be fully reversed through the release of pent up demand after the election alone.
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“Moreover, substantial supply chain pressures and acute sub-contractor shortages persisted during May, especially across the UK house building sector, in turn driving up operating costs and hampering productivity gains at construction firms.” Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: “The brakes are now off for the construction sector as it makes up some of the losses over the last few months with a steady and comfortable improvement. Though nothing like the highs of 2014, the quietly confident approach after the restraint displayed before the General Election, shows business confidence at its highest since February 2006. “Suppliers continue to experience pressure on their stocks, but extra capacity has come back on line and it seems like the worst phase of raw material shortages has passed. Construction companies also reported wages were also on the rise, but from a low base after the pummelling the sector took during the recession. “Input prices showed uplift after the lows of oil and raw materials costs that had been benefitting the sector for some time. Firms favoured in-house training of staff instead of sub-contractors who were in shorter supply and demanding higher wages, demonstrating business confidence in the future of the sector and the ability to meet future demand. “Of course the real strength and longevity of this new momentum will be played out in the coming months but the expectation is the sector is likely to trundle along rather than produce the same elevated progress of last year.”
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The True Legacy of Building Stadiums for the FIFA World Cup New research from Saïd Business School identifies the seven key factors that led to overdesigned and under-utilised stadiums after the FIFA 2010 World Cup in South Africa.
The ‘legacy’ of hosting a major sporting event, such as the FIFA World Cup or the Olympics, is the prevailing argument made by host countries to justify the huge expense of the event. South Africa, Brazil, and Qatar have all stated that hosting the World Cup would provide their countries with significant progress towards their development goals, including poverty alleviation, infrastructure provision, increase in public sector investment, and job creation. However, it is increasingly suggested that the lasting impact of major events does not justify the massive expense.
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New research from Saïd Business School, University of Oxford, shows how the management of the South Africa 2010 FIFA World Cup stadium programme shaped the current legacy of an oversupply of overdesigned and underused stadiums. Dr Eamon Molloy, Associate Fellow at Saïd Business School, and Trish Chetty, Director at K40 Group and alumna of the MSc in Major Programme Management at Saïd Business School, found that the South African stadium programme for the World Cup adopted a fragmented approach to building stadiums
from the bid stage. They concluded that the lack of a single clear strategy that integrated all of the stadium projects into one major programme was the critical factor in the discord between the expected legacy and the reality. The research identifies seven main factors that explain the disparity between the expected benefits and the legacy outcome in the South African stadium programme: • Overoptimistic estimating • Lack of national direction on funding • Political decision making, that took precedence over economic rational decision making • Unclear requirements from FIFA, including lack of knowledge about the complexity of hosting the World Cup • Focus on technical overdesign beyond the country’s needs • Opportunities for collusion and corruption • Failure to engage key stakeholders
The final stadiums used for the South African FIFA World Cup were six new and four existing upgraded stadiums. Instead of the economic growth the stadiums were intended to stimulate, six newly built stadiums all have annual
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Inside the Industry
Porth Elizabeth stadium dedicated to Nelson Mandela, April 3, 2010 in Pretoria South Africa jbor / Shutterstock.com
maintenance costs which exceed their revenue, and five out of six require ongoing taxpayer support. The exact maintenance costs of each stadium are estimated to be between R30 million and R70 million per annum meaning that the legacy of these stadiums is having an undeniably negative effect on South Africa. “As the trend for developing countries hosting mega-events is increasing, with Brazil hosting the Olympics in 2016 and Qatar holding the World Cup in 2022, emphasis will continue to be placed on the positive legacy of the games,” says Dr Molloy. “For countries to ensure the legacy they promise when bidding for an event is fulfilled, an overarching strategy has to be put in place to manage all direct infrastructure and venue construction. Our recommendation is that countries should establish a World Cup Development Authority to oversee all of the direct infrastructure programs. Failure to improve management of infrastructure around major sporting events means that the world’s sporting entertainment will be paid for by those least able to afford it.”
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Eco Building
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Eco Building
BCC Research Anticipates by 2019 the U.S. Market for Green Building Materials will Expand to $69 Billion
According to the new report from BCC Research, the U.S. market for green building materials reached nearly $40.0 billion and $43.8 billion in 2013 and 2014, respectively. This market is expected to grow at a compound annual growth rate (CAGR) of 9.5% to nearly $69.0 billion over the period 2014-2019. More than 500 U.S. companies are involved in the production of green building materials and the design and construction of green buildings. This number is likely to grow rapidly as more building owners and investors become aware of the potential of green building. BCC Research estimates the value of the U.S. green building materials market at nearly $43.8 billion in 2014 amid further growth in the U.S. construction market as the housing market continues its recovery. By 2019, BCC Research expects that the market for green building materials will have grown to nearly $69 billion, a compound annual growth rate (CAGR) of 9.5%. The market for green building materials has seen rapid growth in recent years. As of Oct. 17, 2014, more than 3.3 billion sq. ft. of building space had been certified by the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED) Program. An article in the June 2006 issue of the Harvard Business Review accurately predicted that green construction would become a mainstream technology in the next five to 10 years following its publication. The article’s author, Charles Lockwood, went so far as to note that the ultimate impact of green building becoming mainstream will have as profound of an effect on commercial real estate as the invention of central air conditioning in the 1950s and 1960s or elevators in the 19th century.
“These trends provide an opportunity for both existing players and new entrants into the green building materials market,” says BCC Research analyst Erik Vickstrom. “Softwood framing lumber had by far the largest sales of any green building product in 2013, and is expected to remain the leading seller through 2019. Oriented strand board structural sheathing made up the second-largest selling product category in 2013, and it is expected to remain in this position through 2019.” The U.S. Market for Green Building Materials (ENV007C) provides detailed analysis of green building technologies with the greatest commercial potential over the next 5 year period. The report estimates the potential U.S. markets for green building technologies and analyses the technical, commercial, and other prerequisites of success in these markets. Manufacturers and distributors of green building materials and other technologies will gain understanding of technical, economic, and other factors that will influence the ability of different green building technologies to compete for a share of their respective market(s).
“These trends provide an opportunity for both existing players and new entrants into the green building materials market,”
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Promoting Green and Efficient Energy for Europe’s Regions
The European Commission has launched the European Smart specialisation platform on energy, which will support regions and Member States in using Cohesion Policy funding more effectively for promoting sustainable energy. The Platform will help regions to share their expertise on sustainable energy investments and especially on the deployment of innovative low-carbon technologies. By supporting the optimal use of Cohesion Policy funds for sustainable energy projects, the Platform will directly contribute to the European Energy Union Strategy. It will also aim to better align innovation activities in the field of energy at national, regional and local level with a view to setting up a joint strategic agenda on energy priorities. The platform, which has been set up by the Commission’s in-house science service, the Joint Research Centre (JRC), will contribute to boosting economic growth in the regions by ensuring sustainable, competitive and secure energy supply. Commissioner Corina Creţu, European Commissioner for Regional Policy commented: “For 2014-2020, more than EUR 38 billion of Cohesion Policy funding will be invested in achieving the Energy Union Strategy and boosting the shift towards a low-carbon economy in all sectors. This represents more than a doubling of funding compared to the previous period. Cohesion Policy funding offers many opportunities, but it also poses important challenges for the regions in terms of implementing EU co-funded energy projects. That is why I welcome the new Platform on Energy which will pool joint know-how on sustainable energy and will help regions in making efficient use of the funding available to invest in innovative solutions.”
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Commissioner Tibor Navracsics, in charge of Education, Culture, Youth and Sport, and responsible for the JRC, said: “Building a true Energy Union will require a solid scientific basis, and I am pleased that the Commission’s in-house science service, the Joint Research Centre, plays a vital role in ensuring this. The Smart Specialisation Platform combines scientific expertise and innovative networking tools. It will help regions to access information and to exchange ideas and best practices - generating new expertise and turning them into building blocks of the Energy Union.” To mark the launch of the platform, a high-level conference is taking place today in Brussels in the presence of Commissioner Tibor Navracsics. Two parallel sessions, organised in Andalusia and Scotland, will join via vidoelink. The event gathers policy makers, public officials, energy experts and researchers to reflect on and discuss a strategic agenda and the next steps in the development of Smart Specialisation in the energy sector. The project is based on a joint cooperation between DG Regional and Urban Policy (REGIO), DG Energy (ENER) and the Joint Research Centre (JRC). It draws from positive experience with the existing Smart Specialisation Platform focused on research and innovation strategies (S3 Platform).
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Currently 172 regions or countries accounting for over 80% of the EU regions participate in the activities of this platform. More than two-thirds of these have chosen energy as their area of Smart Specialisation. Smart specialisation is an innovative approach developed by the European Commission to foster economic growth and prosperity at regional level. It encourages efficient and targeted use of public investment in research and innovation to create competitive advantages and enable regions to specialise in the field of their relative strengths. It is also a precondition for benefiting from European Structural and Investment Funds. The new Platform on Energy will provide information, knowledge and expertise on investing in energy projects, in line with the needs of policy makers, authorities and stakeholders in charge of energy and research. It will also develop ways of matching Member States and regions with similar interests and planned investments in energy innovation. The EU plans to invest about EUR 38 billion in the period 2014-2020 in the framework of its Cohesion Policy including EUR 2 billion for investments in smart grids. The objective is to facilitate the shift towards a low-carbon economy by supporting projects in energy efficiency, renewables as well as in sustainable urban mobility and research and innovation.
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Products & Innovation
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Smart City Building with Huawei
CommunicAsia2015 Summit speaker and exhibitor, Huawei, shares how innovation and technology are driving the Smart City reality.
hat do you envision when you of Smart Cities? While flying W think cars, holographic communication screens, or even teleportation seem far-fetched, the hyper-connectedness of today’s world and the Internet of Things (IoT) is making Smart City living a reality. Huawei, leading ICT solutions provider, sees the following four areas of opportunities where technology and innovation play a key role in the building of smarter cities: City planning and management with sustainability With Asia Pacific accounting for nearly half of global greenhouse gas emissions, one of the key areas that the United Nations Environment Programme focuses on is the role of technology in adapting to climate change whilst tackling the issue. Environmental and economic reasons are key push factors pointing to why non-renewable fuel sources are becoming less viable as options for powering everyday lives – particularly in the area of transportation. Almost all the energy sourced to power our modes of transportation is non-renewable. Environmental and climate
woes aside, security of energy supply is another area of concern as cities develop, driving the shift to smarter transportation alternatives. As part of building a Smart City, Huawei sees Smart Transportation categorised into the following: Better utilisation of existing infrastructure, vehicle reduction and changing the mix of vehicles. Huawei innovates solutions such as smart sensors that are capable of constantly measuring and optimising vehicle resources to lower current vehicle carbon emissions leading to lower carbon emissions and extending vehicle lifespan and smart traffic diversion which reduce wear and tear of roads. Reducing the number of vehicles on our roads involves encouraging commuters onto smarter public transport. Finally, the introduction of electric cars and bio-fuel vehicles leverage sustainable energy resources, making active transport modes safer and more accessible.
“Huawei has globally committed to strengthening our energy management and smarter city initiatives. In the transportation sector, Huawei has worked closely with both public and private sector partners in developing innovative solutions that address environmental and climate change issues. Achieving sustainable change in this space isn’t trivial but Huawei’s diverse portfolio of technology and business solutions are well positioned to help realise greener, smarter transport options,” said Barry Lerner PE, Regional Chief Information Officer, Huawei Solutions Marketing Southern Pacific Region.
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Products & Innovation
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Products & Innovation
Enabling communications for knowledge transfer and efficiency for businesses Knowledge and skills transfer is a priority for most businesses, and often encouraged by governments around the world, including Singapore. Businesses need to be equipped with infrastructures and applications to support knowledge and information transfer – this is where technology and innovation play an important role in enabling education in particular. For students, whether the young or working professionals furthering their studies, hyper-connectedness driven by high mobile penetration has changed how education is being consumed. In the past, the majority of students would most likely enter University after High School and attend the campus in person. Now, many students are mature in age, others attend lectures remotely and still others access online content which the university has made available. Huawei sees digital technology as a key driver of change providing the education sector the competitive edge. To help create a more connected world, Huawei provides a range of solutions that speak to content access (with E-Course), to enabling students with physical and virtual classroom presences (with E-Class) and ease in management of resources and lecture materials (with E-Management).
“Asia is constantly growing, with increasingly diverse cultures, and Singapore is in a unique position to be the MOOC (Massive Open Online Courses) provider of Asia. Huawei believes that Singapore can also utilise digital technology to bring education to Smart End Devices within a MOOC, taking advantage of new innovative IoT devices such as wearable devices, smart glasses, smart tablets, and more, to take knowledge consumption to the next level,” added Lerner PE. Smarter Home Living to enable consumers’ digital life Consumers’ lives are becoming increasingly digitised bringing future families the opportunity to realising the concept of automated smart homes that protects, educates, entertains while ensuring the use of utilities are environmentally friendly. As part of Huawei’s work in building a better connected world, they have developed a range of products which seek to address key components of a holistic Smart Home and families’ digital life that enables connectivity with high-speed fibre optic broadband to support HD TVs, and a tool to manage multiple devices with the Smart Home Controller. “Huawei is at the forefront of the provision of innovative solutions which enable families to improve their digital life. As part of our work in building a better connected world we have developed a range of products which seek to address key components of an holistic Smart Home and family digital life,” said Lerner PE.
“As part of enhancing each family’s digital life, there is a move to automate the smart home and Huawei is heavily involved in this process as well. We understand that no one vendor has all the solutions so Huawei is taking an open and collaborative approach to enable an IOT ecosystem which will provide the greatest benefit for consumers of this technology,” continued Lerner PE.
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Real Estate
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Walkable Urban Places
are the Future of Real Estate Development
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Real Estate
Realtors® from across the US gathered last month to learn about the importance and benefits of walkable urban communities in real estate development during a panel organised by the REALTOR® University Richard J. Rosenthal Centre for Real Estate Studies during the REALTORS® Legislative Meetings & Trade Expo.
“Creating walkability with restaurants and stores can help transition an edgy part of town into one that is hip and hopping with pedestrians,” said National Association of Realtors® Chief Economist Lawrence Yun. “This type of real estate development transforms the community for the better.”
The panellists also discussed the importance of looking at current zoning regulations in major cities and how those regulations could be slowing down the development of walkable places. The panellists all agreed that the lack of development could be holding back economic growth.
Residential walkable communities generate four times the tax revenue compared to regional and business malls, bringing more value to the area, according to panellists.
“We’ve been bumping along at 2 percent GDP growth, and we should be at 3.5 percent, and obsolete zoning is what is holding us back,” said Leinberger. “Less than 10 percent of land would need to be rezoned, and that is where 80 percent of the development is going to go.”
“Walkable urban regions in the U.S. have a 41percent higher Gross Domestic Product over non-walkable regions,” said Christopher Leinberger, professor at George Washington University School of Business and president of Locus, a national coalition of real estate developers and investors who advocate for sustainable, walkable urban development in metropolitan areas. “That’s the difference between countries like Germany and Romania.” Walkable areas provide financial benefits not only to the community but also to the individuals living there. Despite the rising prices commonly frequently seen in walkable areas, those communities are inherently more affordable since individuals living in walkable areas usually spend about 43 percent of their income on housing and transportation, as opposed to those living in non-walkable areas, who spend about 48 percent.
“If a family can get rid of one car, they can increase their mortgage capacity by as much as $150,000,” “If a family can get rid of one car, they can increase their mortgage capacity by as much as $150,000,” said Leinberger.
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The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. The Richard J. Rosenthal Centre for Real Estate Studies is a think tank/real estate research laboratory designed to provide timely hands-on and results oriented real estate data and analysis relevant to industry trends and policy issues from a practical standpoint and provides high quality practical research that raises the credibility and profile of Realtors®.
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Comment
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Comment
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What Does the Tory Victory Mean For Property Investment Options? he Conservative Party have won a majority in the UK general election. Property expert Simon Morris discusses what this means for the property investment option policies the Tories said that they would implement, such as the ‘Help to Buy ISA.’
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In the 2015 budget, UK Chancellor George Osborne announced a new policy for the UK residential property market called the Help to Buy ISA, which is designed to help first time buyers get onto the property ladder. Osborne said that the new ISA wrapper would launch in autumn 2015 and it would allow first time buyers to save £200 a month from the taxman. The government said that they would give people 25p for every £1 they save in a Help to Buy ISA, up to a maximum of £3,000 for £12,000 stored in the account. The account will have a minimum requirement of £1,000. As a result of a Tory majority, Simon Morris commented that this means the Help to Buy ISA will become law immediately. “We couldn’t have predicted this. Every poll suggested that there’d be no clear winner on 7th
May and the strong surge of the SNP in Scotland indicated that Cameron’s Conservatives might have been locked out of the halls of power all together in favour of a Labour-SNP coalition. “This means that the Conservatives have a clear path to implement their vision for the UK’s property market. In the run up to the national poll the Tories outlined a number of policies designed to boost the UK’s residential sector including intentions to build 200,000 starter homes in England by 2020 and the Help to Buy ISA. “The Help to Buy ISA in particular has the potential to make the UK’s residential sector a more attractive property investment option. The fact that it’s designed to help people save will persuade more first time buyers to purchase a home and inject capital into the market.” Morris continued; “As an ISA wrapper, the Help to Buy ISA can be a lucrative investment option when property bonds and funds are used within it. This strategy allows investors to capitalise on tax advantages.
“I would recommend that investors research any potential in-direct property investment option and choose a regulated product before they commit if they want to reap healthy returns. I would advise investors to use the serviced of an Independent Financial Advisor where property investment products are concerned. An IFA will weigh up their appetite for risk against their expectations concerning yield to show them the right financial product for their circumstances.” The property expert added; “I’d also advise those thinking of investing in property to read the free guide to property investing in 2015 before making up their mind on how to invest. This guide was written to provide private and commercial investors with the information they need to ensure they are making the right enquiries before they take out any financial product.” To read more about Simon Morris please visit his blog: http://www.simonmorrisuk.com The Guide to Property Investment 2015 can be downloaded below: http://www.simonmorrisuk.com/guide-to-property-investment-2015/
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Regulation
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Will heat regulations leave landlords hot under the collar? Build Magazine
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Landlords may need to act on the new Heat Regulations. Winckworth Sherwood’s Colin Hall and Niall Carey explain. Colin Hall is a partner and Niall Carey a senior associate in the Community Infrastructure team at Winckworth Sherwood. Winckworth Sherwood has prepared a more detailed briefing on the new Heat Regulations that can be found at www.wslaw.co.uk
Landlords managing existing buildings of any type will need to ask themselves the two following questions before the end of this year: • Are any of those buildings heated, cooled or supplied with hot water from a central internal or off-site boiler or chiller? • If so, is it caught by The Heat Network (Metering and Billing) Regulations 2014? If the answer to these two questions is yes, you could be what the regulations call the ‘heat supplier’ with responsibility to: • Tell the National Measurement and Regulation Office that your central system exists and to provide them with technical details so that they can build a map. • Consider putting in meters to measure the heat consumption. • Maintain meters so that they remain accurate and always in operation. • Use the meters to provide customers with detailed information on the heat bills. What buildings are caught by the new regulations? A building is probably caught by the Heat Regulations if it receives heat from a boiler shared with other buildings, or if the building has its own boiler which serves more than one customer. This covers a potentially very wide range of buildings including: • Residential/commercial and mixed use developments • Existing blocks of flats • Flat conversions and bedsits (with a central boiler) • Leisure centres (with concession holders) • Supermarkets (with concession holders) • Shopping centres • Office buildings with more than one tenant • Some university campuses
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Are meters needed in all buildings? New buildings must have them installed from the start. For existing buildings, there is time to consider whether it is feasible to install them. There are various rules and exceptions, but if the building is caught, meters must be installed by 31 December 2016. Feasibility depends on two questions – would meters be cost effective, and are they technically feasible? These depend on the use of the building and its fabric. Once installed, meters must be kept accurate and bills fully loaded with the information they record. If meters are not feasible, landlords will have to consider whether ‘heat cost allocators’ would be a feasible alternative. Who is responsible? The ‘heat supplier’ must perform these new duties – that is the person who sells the heat (or cooling) to a ‘final customer’, or the person who actually consumes the heat. So what action should you take? The starting point is to look at the heat supply contracts to decide if you are the heat supplier. On large developments the management company may fulfil that role, unless they have outsourced it all to an energy services company. In a smaller entity the landlord may have the role, in which case they need to make sure they know who is performing the duties. Enforcement of the new duties is by an escalating regime that includes a formal compliance notice, possible compensation to tenants, civil penalties and criminal sanctions as well as publication of offenders’ names.
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Capital Allowances: One Year On
In April 2014 legislative changes kicked in that potentially rob CEOs of substantial tax relief known as capital allowances, perhaps worth hundreds of thousands of pounds. However, it is not too late to claim! Capital allowances allow commercial property owners and many leaseholders to write off over time the cost of items (or assets) bought for use within a business against taxable profit.
purchaser or even a claw back from HMRC.
With all the new fixtures legislation from the Finance Act 2012 now in effect, if properties are not assessed and capital allowances pooled, recorded and transferred to the new owner when a premises is bought or sold, then the opportunity to claim is lost forever. It is estimated that property owners have already missed out on many millions of pounds of available tax relief.
Capital allowances relate to plant and machinery. The more obvious items that qualify include computers, factory equipment, vehicles and office or kitchen equipment. However, certain fixtures and integral building features may also qualify. This can include heating, air conditioning and cold water systems, lifts and even electrical wiring.
Of course some saw these changes as a move by the Government to erase part of the latent multibillion pound call on unused tax relief and felt the treasury was working on a “they won’t miss what they never knew they had” basis. Because of their technical nature, these changes have had little coverage even though they affect thousands of transactions every year.
Claiming on these is highly technical and outside the breadth of expertise of many accountants. This means property owners lose money because they pay more tax than they need to. Property owners need to consult a tax specialist to get the most value from capital allowances.
However, a year later, if purchasers are advised correctly by a tax specialist they can still claim capital allowances in many instances, even when the vendor has made no previous claims or doesn’t know what capital allowances are. But to walk this road alone, unaware of the pitfalls, could mean the loss of all entitlement to allowances, potentially devaluing a property or leading to a surprise tax charge. Property sellers especially need to be advised correctly to protect themselves from the double risks they now face at the hands of a potentially tax savvy
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What can be claimed under capital allowances?
For chargeable periods that relate to corporation tax and begin on or after 1 January 2014, or that relate to income tax and begin on or after 1 January 2014, HMRC allows a 100 per cent ‘annual investment allowance’ (AIA) on the first £500,000. This can allow taxpayers to deduct up to £500,000 from their taxable profit. Previously set at £250,000, the AIA was doubled last year to stimulate business investment in the economy by providing an increased time-limited incentive for businesses to invest in plant or machinery. From 1st January 2016 it is set to drop all the
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way back to ÂŁ25,000, so there has never been a better time to claim for capital allowances. What are the benefits? Accurately assessing qualifying items and processing an effective claim will in many cases form the basis of a substantial write off against the profits of a business, resulting in a lower tax charge or in some cases a cash rebate for previous years. Individual claims can sometimes amount to as much as 35% of the value of a freehold i.e. ÂŁ350K of tax relief for a building bought for ÂŁ1m. Capital allowances can also add to the monetary value of a commercial property. This is great news for sellers in what is still a slow market for commercial freeholds. Case study An investor buys a block of flats. The vendor confirms they have claimed substantial amounts of allowances in the past but neglects to fix a transfer value or include any capital allowance related terms in the purchase agreement. Fortunately, the investor is well advised and with the aid of a tax specialist, post completion makes a representation to a tax tribunal to fix a transfer value. A transfer value is fixed that puts the investor in a very strong position and triggers a substantial and unexpected (and certainly unwelcome) tax charge on the vendor. So if you are buying, selling or simply holding on to a commercial property, a review by a capital allowances tax specialist in this field could save you tens, perhaps hundreds of thousands of pounds.
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