Before he went on to found commercial property manager Cowiesburn in 2009, in any job interview he would spend a good half hour explaining why he had “such a weird CV”, the firm’s partner says, laughing.
Indeed, Simpson is speaking just hours after passing his old faculty at his alma mater, the University of Nottingham.
Having changed his focus from paintings to programming and then property, Simpson now leads a company that manages a portfolio approaching £1 billion – and rising.
Spanning the management categories of property, finance, facilities and investment, it covers commercial property across all sectors, from single-let shops to industrial estates and large multi-let office buildings across the UK.
In October, it hailed turnover growth of more than 100 per cent over the previous 12 months, also flagging key new instructions including “trophy” office buildings and business parks in Glasgow, Leeds, Manchester and Birmingham.
“With several large-scale clients still looking to expand their portfolios, this growth is anticipated to continue in the foreseeable future,” the firm said at the time.
Cowiesburn is made up of investor-focused commercial property management specialists who provide a bespoke service backed by what it describes as a “cutting-edge” cloud-based online property management and reporting system which enables property owners to manage live information from anywhere in the world.
The independent firm also boasts what Simpson says is now one of the biggest management teams of its kind in Scotland. “Some of the big, big private practices might have a few more people – but on the headcount we’re getting there.”
Cowiesburn was formed after Simpson became a software developer. When he graduated in the late 1990s, “just about anybody with a degree could walk into IT”, he says.
He was hired by consulting, technology services and digital transformation firm Capgemini and later did a spell as a freelancer, doing work for lenders including Royal Bank of Scotland and Lloyds Banking Group, with his remit including foreign exchange systems and credit risk modelling.
His opportunity to get into property came about when a small fund was looking to automate a lot of its systems. But when the credit crunch kicked in, the fund stopped investing, and Simpson saw the system that had been written to manage its single portfolio made multi-portfolio, sparking the creation of Cowiesburn to manage other people’s property.
In his view, much of the commercial property sector is “slightly in the Dark Ages” from a technology standpoint compared with other sectors, such as banking.
Many management systems are, or were until recently, Windows-based, and firms have found it a big jump to join the cloud-based, software-as-a-service space. “Because we did that from day one, we’re way ahead of the game because even as these guys are coming online now, we’re just about ten years ahead. We’ve kept an eye on what other people are doing and we still feel we’re ahead.”
Cowiesburn says its “unique” system gives clients real-time access to all financial information on their investments, along with a full model of their portfolios. Having started out in core management it stepped into the financial side, holding deposits, for example. Its move into facilities management has been boosted by the hire of Kash Bhatti, formerly of Galbraith, to lead this part of the business in Glasgow. That office is also expanding its finance team. “Underpinning everything, we need to deal with the client’s money,” Simpson insists.
The firm is headquartered in Edinburgh and has opened up in Manchester, where it is also looking to boost the ranks. Total staff currently number about 16, although this would be over 20 “if we had all the people we wanted and needed”.
It is seeking someone to cover the M4 corridor, which stretches from London to south Wales and is deemed a key tech hub, with the firm’s remit including the UK capital, Bristol and Cardiff, as well as Peterborough, Liverpool and Newcastle and beyond.
Cowiesburn is active in Scotland, covering the central belt, Aberdeen, and Inverness. “All over,” says Simpson. “We’ve got dots on the map pretty much everywhere now.”
And not only does the firm’s IT system eliminate the need to wait months for paper-based reporting, “or PDFs that are probably out of date by the time you’ve even read them”, Simpson also sees it as attractive to international investors that see the UK as an attractive property investment market.
Ironically this overseas interest was piqued by the strong impact of the pound’s fall in value on the back of the Brexit vote in 2016. “Everything became about 15 per cent cheaper overnight if you were buying in a non-sterling denomination and I think we’ll see that again,” says Simpson, referring to the impact of Britain’s imminent departure from the EU.
But while the Bank of England is forecasting a 48 per cent drop in commercial property prices in the event of a no-deal Brexit without a transition period, Simpson is sceptical over whether there will be any fall given the continued shortage of new property.
Edinburgh, for example, has “very little” decent office space, and Barclays building its own campus in Glasgow “is indicative of the fact that they couldn’t find what they wanted pre-built”. The lender’s 470,000-square=foot purchase at Buchanan Wharf contributed to the city’s most active year in the office space market since records began in 2018, according to property consultancy JLL. Simpson also highlights the success of the Eurocentral industrial estate off the M8 in attracting tenants.
Business rates have been widely blamed for stifling speculative development, a view shared by Simpson who previously criticised the move to slash discounts on rates for empty commercial property premises to 10 per cent in Scotland.
Simpson acknowledges that here have been successes, such as 2 Semple Street, the 40,000 sq ft grade A office and retail space in Edinburgh’s Exchange District, as well as Atria nearby, now home to IBM and The Law Society of Scotland. But both sites were extremely well-placed to attract a lot of interest, he says.
“Properly speculative development doesn’t really exist any more in any sector.” This in turn pushes up rents and has a detrimental effect on high streets which are already suffering, he argues.
The latest CBRE monthly index found that the contrast in performance during 2018 between the UK’s flourishing industrial and troubled retail sectors – at total returns of 18.1 per cent and 1.8 per cent respectively – was the worst in its 19-year history.
Nonetheless, returns for UK property amounted to 6.3 per cent for the year, in line with Investment Property Forum consensus forecasts.
Simpson is bullish about Cowiesburn’s prospects, arguing its recent turnover growth could be repeated, given the aces up its sleeve, including a recent major client win, a fund it looks after having a large supply of offshore capital to invest, and promising talks with several sizeable names. “If they all come through, we’d probably double again next year from a turnover perspective.”
However, he notes that maintaining margin at the desired level is a tricky task given the pace of its growth, although he stresses that Cowiesburn is a relatively high-margin company in a low-margin industry.
“We’ve never dropped much below 25 per cent margin, and that’s quite unusual in our line of work, which is generally seen as not being very profitable, but again our system gives us massive efficiencies.”
Expecting the firm to continue pursuing its UK expansion, Simpson is looking to tie up with a partner to develop its system and push it out into the market, turning it into a “software as a service” management system as it seeks to bring about a “paradigm shift” in how property data is held.
Improving on Cowiesburn’s current offering, it would see control of the data move away from the managers and back to the investors, with the latter able to appoint any manager they wish to use in any region globally and give them access through the browser or app to the relevant elements of the system they will use in place of their managing agents’ systems. It means the investor will have all of their management data in real time, aggregated into a familiar format and owned internally.
“It’s an interesting concept, and it’s the way everything’s going these days. It’s just a matter of time before someone does it.”