Author: David Furniss (BNP Paribas Real Estate). Published by kind permission of North East Times
For some time it has been apparent to Developing Consensus that private sector-led speculative development in the North East region has marginal liability in key markets and locations
The balance of costs, values and commercial risks does not encourage the private sector to invest, says Developing Consensus (DC).
As a consequence, the stock of buildings in the North East is ageing and the supply of modern accommodation in the right locations is diminishing.
In an era where the needs of businesses are changing at an ever-increasing pace, we believe that this market inertia is fundamentally bad for the North East as it is inhibiting economic development and growth, and makes the region unresponsive to inward investment activity.
The life cycle for a project to create a new property that meets occupational needs is simply too long, and without a pipeline of projects the growth of existing and establishment of new businesses is being held back.
The view of DC is that delivery of the North East LEP’s Strategic Economic Plan will be undermined unless a proactive approach is adopted by all participants in the sector to ensure the property pipeline is unblocked.
The current strategy of enabling sites through provision of support to remediate and service is not on its own effective at enabling building delivery.
DC believes that the North East region must regard speculative development of new buildings as key infrastructure projects that are critical to the future success of the economy.
Without them there will be no homes for new business. In order to facilitate activity we would advocate a five-step approach:
1. Establish a region-wide approach to inward investment and growth that is consistent and easily understood. Co-ordination and cooperation across administrative boundaries are essential.
2. Prioritise the right projects by pro-actively seeking out opportunities to bring forward projects, removing those projects that meet regional priorities and avoid creating unnecessary competition between projects.
3. Facilitate the development process at a regional level through the creation of delivery teams who take a pro-active approach to enable development and make facilitating planning permissions a strategic priority.
4. Focus on building delivery by establishing a range of funds on a region-wide basis to unlock strategic sites, for example, through funding site assembly, preparation and infrastructure or the deployment of tax-based incentives for building and developing priority projects.
5. Pivot funding toward investment in projects with commensurate risks and rewards. To facilitate this, establish a package of interventions that can be enjoyed by developers subject to shared returns. This could include enhanced planning support, reduced or deferred S106 contributions, empty rates mitigation or deferment.
The region’s building stock is ageing and business requirements are changing at an increasingly rapid rate in response to new global and technological pressures. DC believes that the principles briefly outlined here are the way forward and would encourage the public sector to engage with us to make it happen.