Nigel Chism, FD at Kajima Partnerships, gives his views on the year ahead
What have been the biggest challenges for your business over the past year, and what role did finance play in addressing them?
Unsurprisingly Brexit caused a momentary arrest in property development domestically, both from UK and European investors looking to develop projects in the UK market.
At Kajima we straddle both commercial and public sector estate development. Our immediate focus has been to ensure that, despite volatility, we continue to deliver the highest quality projects for our education, healthcare, manged accommodation and property clients, on time and to budget.
This new reality of uncertainty, nevertheless, presents opportunity. As FD it is my job to work closely with our senior management team to chart and develop a strategy for growth in this environment, and ensure the funding is in place to deliver on that strategy, be it from internally funded commercial projects, to PFI developments and public private partnership projects.
What are the key political and economic risks/opportunities you face in the year ahead?
Political instability continues to hang over the market and we remain vigilant for the business until there is precise clarity on what the UK’s steps to exiting the European Union will be.
Recent elections in the US have further unsettled markets, and upcoming elections in Germany and France are putting off many investors who will adopt the wait-and-see approach. However, we are confident in the long-term resilience of the UK real estate market and already have a strong pipeline of prospective projects in the coming next year.
In fact, post-Brexit we have seen a surge of interest from international investors beyond Europe looking to increase their UK property portfolios. The depreciation of the sterling should continue to drive inward investment.
Which capex projects will you be focusing on in 2017, and how will these be financed?
Kajima is a multi-faceted business with diverse needs for its different business sectors.
Given the high level of uncertainty the UK has faced this year, Kajima has focused on self-financing the majority of its capex projects. If increased levels of uncertainty continue to unsettle investors we will maintain our focus on financing projects from the internal capabilities of Kajima.
We have a strong and stable office base in London, which we will seek to maintain, invest in and grow.
Advice for other FDs for the coming year?
Uncertainty can be the biggest enemy of business. In order to manage uncertainty, I believe it is important to have sufficient business planning in place, but equally ensure that business models are robust but flexible to allow adjustment as needed in periods of volatility and uncertainty.
One such example would be the property sector where developers, investors, and construction companies alike are all trying to judge in which direction the market is heading.
As valuations are in flux, and the level of future investment flows are hard to predict, the key challenge will to be understand who the prospective clients are, anticipate their needs and deliver developments which are more than just buildings, but are exceptional places for people to work and live.