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Development back - but to a cautious start

Simon Toseland, a Director at Prop-Search

Property investors and developers will be aware that, whilst there are been activity in the commercial property auction rooms - as some investors with cash return to the market - there remains understandable nervousness about acquiring development land reports commercial property agent Prop-Search.

However, those in the business of residential or commercial development will at some time need to return to the market, unless they leave the sector altogether.

The slowdown, or in some cases the complete halt of development activity, has led to a lack of supply of buildings. Poor choices of allocations by Local Authorities - or a lack of foresight in allocating land at all - has also led to a very poor supply of land with planning permission for development, or that is about to obtain planning permission for development.

Simon Toseland, a Partner at Prop-Search, said: “The key element in any development project is to undertake a thorough viability assessment and ascertain that the numbers work through. Whilst the property industry has been, and to a degree remains in recession, costs associated with developing have risen. This will impact on land values. Where the normal supply and demand equation - with demand outstripping supply - would suggest land values should increase, the fact is that development costs will in the foreseeable future probably counter and uplift in land values”

Funding from certain commercial lenders is starting to become available in principle, but in general only to established developers who can meet lenders' revised criteria or that have cash reserves. These hurdles have less to do with loan to value calculations, and more to do with stress-testing the borrower's ability to service the debt and its business acumen.

Simon added: “Where funding is available, it might be on the basis of a phased development and will be more tightly controlled than before, to include regular site visits by the lender or its agents.”

Prop-Search predicts that pockets of activity across the County could soon be seen whilst there is a lack of supply, but until funding becomes more readily available there is unlikely to be a significant increase in development land market activity in the short-term. However, that being said, there are sectors of the market specifically looking for commercial sites and requirements going unfulfilled due to the lack of supply.

Further information or advice can be obtained from Prop-Search - Tel: 01933 223300 / 01604 492000 or its website: www.prop-search.com

 


Tuesday, November 5, 2013