1 February 2023
DEVELOPMENT ACTIVITY REMAINS POSITIVE ACROSS THE SOUTH EAST
Development, SHW News
Despite higher build costs and debt finance costs, activity remains positive in both the residential and commercial development markets in London and the South East, according to SHW’s Q1 2023 South East Development Focus.
In South London, increasing build costs are having a substantial effect on residential land prices, creating a gulf between vendors’ aspirations and purchasers’ current appraisals. In terms of financing, for the residential development market, mainstream development funding options are relatively limited at present, with interest rates increasing.
Richard Plant, Residential Development Partner at SHW says: “Delays in the planning process are continuing to stall development sites that are subject to planning, leading to a shift towards seeking unconditional purchases, creating high demand for consented sites.
Although this may appear negative, activity in the market remains relatively buoyant. And although the rate of house price growth has flatlined and turned negative in some areas, the effects of the cost-of-living crisis are yet to be fully felt in the resales market.”
In the South M25 region, the residential development market continues to show good interest, with an ongoing scarcity of ‘oven ready’ sites for sale. Despite this, rising construction costs and interest rates have had an impact on land prices and, given the uncertainties surrounding future demand and values of new homes, buyers have become more selective in their purchasing of sites.
For commercial development in the South East, the continued good demand from logistics operators has continued to bolster demand for sites in prime logistics locations and where planning for warehouse use is guaranteed. Although, with ever increasing build costs and higher debt costs, many sites have been re-priced and like the residential sites there is often a gap between vendors’ aspirations and purchasers’ current appraisals
Alex Gale, Commercial Development Partner at SHW adds: “Despite the changing economy, occupier demand continues – albeit with less demand from manufacturing operators, unless specialist manufacturing. However because of the economic concerns, sites with restricted planning uses or operating hours restrictions are being discounted by developers (and occupiers) in favour of other sites or locations.”
To read more and to see the latest residential and commercial land values, the Development Focus is available upon request.
