I went to see a development in the South East of London. It was a mixed use derelict property. It was clear the whole site needed to be demolished in order to make way for something fresh and new.
On the way to the property I saw two women break into a verbal altercation with each other, with one threatening to stab the other. It reminded me of Hackney, a couple of decades ago, which had the same vibe. I remember witnessing a helicopter landing in the middle of the street coming to retrieve a body which had been shot in the middle of Kingsland Road. Now, the prices of this location have increased due to its proximity to the city, specifically Liverpool Street Station.
The average price per sq. ft. of property in the location is said to be about £850 per sq. ft. It is clearly an area which is trying to break free from its past and emerge upwards. The neighbours on both sides have done what seems from the outside a very high end expensive development, with an outdoor space which serves as a light well in between. The length of the property stretches what looks like about 800 to 1000 feet. There is enough floor space to do something substantial.
The neighbouring development has set precedent. One way to see if something is possible in planning terms is to see who else has done the same on the street previously. This always serves as a good initial indication. It seems highly probable a scheme such as the neighbouring one would be granted on this site. However, the build, in my opinion, would be just in excess of £1M; and who knows what it would be by the time planning is granted.
It seems we are on the precipice of a collapse. The lending rates have risen sharply in a short space of time, and will continue to creep upwards. The inflation rate, we have been told, is not based on reality. It is a figure which has been reverse engineered. People like to quote headlines, without the need to lift up the bonnet and rummage around. The rate of inflation has been understated. The market will tip further. This puts a deal like this into question, as you have two major variables to contend with; the lending rates and the build costs. Something which if you get it wrong could cripple the project.
If you’re a cash buyer and able to fund the development cost as well, this will put one variable to bed. But then the question asked would be why would you bury this much money into a project? Could your funds not work harder elsewhere?
It is an interesting deal; but not one for us, for the reasons given. This is a time to pick up deals, but with more certainty, an in and out scenario. Ideally with the build cost being reduced by working within the existing fabric of the building. This makes the cost more tangible and easier to control.