The key word for development and regeneration in 2013 will be collaboration. The new norm of restricted debt finance across all regional property markets and particularly for development projects, has forced the regeneration community to innovate and think creatively about how to structure deals in a new way.
No matter what part you play in the regeneration process, a detailed understanding of the issues facing the land owner, developer, funder, occupier and end property purchaser is critical to achieving a deliverable project. The best players are evolving their approach quickly to deliver against their objectives.
In my opinion, the best examples of collaboration in the North West can be seen in various public-private partnerships.
Councils need clear vision, commitment, strong leadership
Whether it is using a local authority's covenant strength through a lease structure specifically designed to appeal to investors, or using council land to create a new business district, the approach is not about giving handouts to developers, but recognising the role to be played by the public sector in de-risking a project just enough to attract private sector investment in the context of an otherwise unattractive risk versus reward profile.
The common theme on successful projects in the coming years will be a local authority that is determined to see their strategic projects progress in spite of the financial hurdles facing the market, and specifically their appointed development partner. These councils need a clear vision, commitment, strong leadership and ability to think creatively.
I am sure we will see the more cautious local authorities follow suit when they see the great strides being made by their peers who are willing to participate in a limited amount of risk to achieve results.
However, successful collaborations are not only limited to the public-private model. For most regional businesses targeting property development returns, the days of 'going it alone' are long gone, unless they are fortunate enough to have access to substantial cash reserves.
There are still great prospects for creating healthy profits through property development but due to the lack of bank debt for anything other than secure long term income investment deals, we will see the old model being replaced with partnerships that are forged by complementary businesses to share the load of financing projects.
Whilst collaboration may be perceived by some as an unfamiliar and inherently modern term; perhaps associated with technology, pop music or social media as opposed to property; the success and longevity of these relationships, like any other, will be built upon old fashioned principles.
A shared goal, trust, respect, integrity and a commitment to work together to resolve problems that inevitably arise during a complex project are at the heart of a successful collaboration. The starting point, however, is a realistic expectation on the share of returns taken by each participant, based upon what they bring to the table, particularly when it comes to financial resource.
We all know that the current trends of economic stagnation and restricted debt finance are here to stay and property development is wrestling with those challenges more than most industries. The message is simple, we must collaborate with like minded people to succeed.
- Andrew Purdon, associate director, national land and development, CBRE North West