We’ve got to keep schemes moving, say developers
While questions remain over how long construction sites will stay open, developers are continuing to progress designs for projects in their pipelines and are calling for “understanding” from their funders if schemes already on site are delayed.
Place North West spoke to developers active in the office and residential sectors, predominantly with sites in Manchester city centre and also schemes across Greater Manchester, Liverpool, and Lancashire.
Following the Prime Minister’s announcement yesterday of further restrictions on movement and an instruction to work from home “unless travelling to work is essential”, confusion remains about how the rules apply to workers in the construction sector and whether activity should continue on site.
One developer said they were keeping “a watching brief since yesterday evening”, but suggested sites are unlikely to close unless specifically instructed by the Government to do so.
“Even for the sites that are open, construction won’t be happening as quickly. There are a lot safer working guidelines and health and safety initiatives in place which are getting more serious, but will slow speed of delivery, also factoring in fewer people able to come in to site.”
One Manchester-based developer said insurance policies would vary when it came to construction projects. He said: “On contracts, there are some insurance policies which will pay if contractors stop, others will not. This will impact on developer profits. We’ve still got the same loans to pay, the Government hasn’t yet said they would offset the interest.”
A developer specialising in the office sector presented a similar situation when it came to live projects. “Developers have a responsibility to communities, but we don’t have the right to overhaul what contractors choose to do.
“Of course we want buildings to be finished, and delays past that time are a cost to developers. Delays will be costly and will eat into our contingency budget.”
When asked if a delay in hitting project milestones would impact the drawing down of funding, developers remained optimistic about the potential for flexibility, and for funding to continue once the crisis was over. One explained “we would hope there would be an understanding from funders as this situation impacts everyone… we all need to pull together and understand each other’s issues, as they have in other sectors.”
In the office market, “funders have shut up shop and have put everything on hold. Conversations with a substantial European funder have paused, they have said the deal isn’t off, but is now on hold until there’s a more positive climate. They also have to do a risk analysis, as existing tenants in their portfolios ask for rent holidays, this then impacts their future pipeline.”
Despite the continuing uncertainty, many are continuing to progress schemes. “Overall it’s business as usual; we’re still working on planning applications, we’re holding design team meetings, we’re still planning a start on site on projects in the summer. We’ve got to keep it moving but we’re playing it day by day.”
Another confirmed: “We’ve not paused design team meetings on proposed projects, they’re already in our cashflow plan, and are part of our pipeline, and as a developer that’s where we get our income.”
Local authority involvement in the development sector could also be hit, with many projects requiring council backing in the form of funding, publicly owned land or underwriting leases, all to provide viability. As councils face challenges over how to continue with meetings and progressing key decisions, developer partners called for local authorities to “hold their nerve”.
One developer said: “We need to remember it is temporary, even if that’s medium-term temporary. The issue is the economic impact in the meantime.
“Local authorities need to take a long-term view. The challenge is when there is this inevitable bounceback, the bounceback won’t come to the smaller cities or towns as quickly, as is always the case following recessions. The smaller local authorities in particular need to hold their nerve on developments so progress can return.”
Another company with partnerships with local authorities said the joint ventures were still ongoing, although questions remained about processes councils would use to continue making decisions.