A huge amount has changed since that blog was published, with Covid-19 changing the face of the finance industry for the foreseeable future. I therefore thought that it would be rather timely to look at 2020 and beyond — focusing on debt brokering and how an advisory-centric approach is now crucial, with the days of simply introducing deals to a lender long gone.
The finance market we see today takes a much more professional approach. The graduates and talent that the industry attracts are a lot more qualified. A number of individuals have a degree in real estate, and some even have a Masters degree in banking and finance. Such individuals also have access to educational material of a high quality. In addition, developers are becoming a lot more sophisticated in their thinking and approach in order to achieve their corporate short-, medium- and long-term strategies.
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So why has this happened?
Over the last decade, we have seen a large growth in loan-on-loan and mandated lending. The development market was once controlled by the clearing banks who used to structure the senior debt, and potentially the mezzanine, in house. Now, due to balance sheet and capital requirements, as well as sheer employment costs, the banks and institutions have spread their risk through the funding of lending platforms. Here, they can achieve good origination through specialist teams, and access different markets at speed, and with reduced risk. This change has led to the growth in the number of smaller niche lending platforms. But, due to the size of their teams, they rely heavily on the adviser to underwrite and structure the deal before it lands on their desk, so to speak.
Changes to who is developing
The past decade has also seen a huge change in who is delivering the housing stock. There is an underlying housing shortage in the UK, and we rely on our national housebuilders to deliver against housing targets. The number of people with the relevant skill sets to develop has expanded, and so has the debt and equity offerings in the market. The small SME developer used to struggle to deliver a number of units and scale up their business. Now, with the expansion of the finance market, the SME housebuilder has the opportunity to grow and scale. Local councils and government agencies have seen that by supporting the SME market, this will help them to achieve their housing targets.
The right team
Due to the market changes outlined above, this has placed increased demand on the debt advisory market, and for them to become more professional and broader in their product knowledge and offering. The SME housebuilding sector will rely heavily on a holistic approach to the financial market and lean on the skill set that the advisory firms have to deliver their corporate strategies. Therefore, 2020 and beyond will no doubt place pressure on existing brokers to upskill in order to remain prominent and retain their edge in the market.