Developers have to better align themselves with funders, especially public sector sources, to secure backing for new schemes, according to two of the region's most active firms.
Matt Crompton, joint managing director of Muse Developments, and Tim Heatley, director of Capital & Centric, addressed the Place AGM at the Lowry, sponsored by Davis Blank Furniss, Cowgill Holloway Property & Construction and WHR Property Consultants.
Crompton told delegates at the event: "There is funding but not as we know it. Traditional funders are not coming back anytime soon. What funding is out there is predominantly coming from the public sector, and that's likely to continue up to the next election. Outside London development needs some form of public subsidy."
By the end of 2013, Muse Developments will be on site with £230m of construction, delivering 1,000 residential units across the country, although only 275 will be in the North West, plus a mix of commercial development.
Crompton added: "It can be frustrating that the different public funding streams – essentially all backed by the same lender, the government – require completely different applications and criteria, even for the same scheme, but the common theme is that schemes need to be demonstrably viable. You do have to be tenacious to access the funding."
On the positive side, Crompton firmly believes developers are in a position to help landowners and local authorities prepare for the upturn. "There will be less capital so we have to be more innovative. We can help them to find the funding to unlock their assets. Now is the time for landowners and authorities to plan for the next stage. Redesign that masterplan, get those planning permissions in the bag, don't wait until the market is flying to get started because by the time you've gone through the process it will be too late.
Tim Heatley, director of Capital & Centric, set up in 2009 with business partner Adam Higgins, has bought and sold 350,000 sq ft in the last two years and by the end of this year will have spent £30m on construction.
Heatley said the firm has an aversion to bank debtand seeks alternative funding streams such as tax structured products and European Union programmes.
Projects must fit into the strong corporate ethos of good design and job creation provide something different for the local market, to persuade occupiers to move to new premises.
Heatley added: "We have to provide an aspirational move. Building to BREEAM 'excellent', for example, reduces the life cycle costs of the building for the occupier, that is a good reason to move. Great location, great design, regeneration potential, bringing jobs to areas of low employment, all will help you get European funding."
Capital & Centric has secured European Regional Development Fund cash towards many of its projects. Another approach has been to ask private landowners to consider more unusual payment arrangements for their land.
Heatley explained: "We look to share risk. That can be with the landowner or the local authority agreeing deferred payment on the land for example, a forward thinking landowner will see the benefit of that. You can also seek to work with the contractor, where they put up some capital as equity. There's tax incentive schemes such as the Business Premises Renovation Allowance which allows investors to fund a development, but can be very complex to arrange; as well as crowd sourced funding, traditional joint ventures and other government funding.
"To access public funds you have to build a case for the authority to want to help you. Sometimes this means saying ' what do you want to see here, what will help your community' and aligning your plans with their aims.
"The future will see a lot more public private partnerships. So far this sort of arrangement has been directed to the larger, more established corporates but you don't have to be a big set-up to get involved. I see there being more of this in the short term in order to get regeneration moving."