Brownfield site

What are the barriers to brownfield development?

As the government looks to unlock more brownfield land for the delivery of new homes, Development Finance Today has asked the industry what barriers developers and lenders could face when approaching a brownfield scheme.

According to the latest research from Campaign to Protect Rural England, brownfield sites have enough space to deliver at least one million new homes across the country.

The analysis revealed that there were 17,656 brownfield sites identified by local planning authorities, covering over 28,000 hectares of land.

This land could provide enough space to build 1,052,124 homes in the UK, with the figure possibly rising to 1.1 million as soon as all registers are published.

What are the barriers to brownfield land development?

Harworth Group’s Waverley advanced manufacturing park development in Rotherham

Because of brownfield land’s previous industrial uses, Iain Thomson, associate director of partnerships and communications at Harworth Group, explained that the principal barrier to bringing such sites forward for redevelopment was the cost of preparing the land for reuse. 

“These early costs often include demolition, the removal of environmental liabilities, the importation of new soil to refill where extracted land previously lay and the re-engineering of services and utilities for future occupiers to use. 

“For some, challenging cash flow positions can often stop brownfield developments coming forward.”

Noel Meredith, executive director at United Trust Bank, added: “Issues for brownfield sites are often around contamination, but this will not deter experienced developers, nor specialist development finance lenders, because effective means of dealing with contamination exists and are tried and tested.

“Although the project timelines can be longer than usual, the end results have been some very attractive properties from starter homes to large, luxury houses.”

Paul Markovitz, director at Argyll Property Partners, believed that contamination and perception were two key barriers to developing on brownfield land.

“[The] public may feel uneasy about occupying homes on former brownfield sites, so managing this perception is key, especially if a site had a long established prior use.”

Amanda Beresford, partner and head of planning at Shulmans LLP, added: “There are a number of complex barriers to developing brownfield land, and ensuring [the] viability of a site is a common issue.

“Developers must often overcome costly challenges around site contamination and clearance, problematic ground conditions and difficult land ownership arrangements.

“The challenge of ensuring brownfield developments are sufficiently profitable is exacerbated when considering many developers are also often required to offer community benefits and affordable housing as part of a project through section 106 agreement obligations or by making a community infrastructure levy payment.”

Possible contamination on a brownfield site

Gareth Belsham, director at Naismiths, added: “It is estimated [that] a million homes could be built on previously developed land in England alone, and such a huge injection of new stock would go a long way to tackling the housing crisis.

“But problems do arise when planning a brownfield development, especially if there has been any historic contaminative use.

“Though the 'polluter pays' principle prevails, the contamination may date back hundreds of years, with the offender having long since disappeared.

“I’m hugely supportive of building on brownfield – and so are planners – because it reassigns economically obsolescent land.”

Alex Harrington-Griffin, land director at TrustedLand, believed that existing employment and contamination were common issues.

“As many developers will tell you, often what lies beneath the surface of [what was] previously [a] working site can be hard to pinpoint, and this can be expensive.

“Sites such as petrol stations contain the obvious contamination, but often less commonly redeveloped sites – such as storage units and rural nurseries – can host some less expected barriers, such as industrial waste or sewage pipes.

“Fifty years ago, it was easier for the original builders to overlook what was underneath, or avoid asking questions.”

Chris White, director at CPMG Architects, added: “As architects, we are being asked to develop an increasing number of design concepts for new developments on brownfield sites, with the most common design briefs being for residential and mixed-used developments.

“Large brownfield sites do tend to be in areas which are part of wider regeneration plans, which could influence planning decisions.

“But if anything, planners are happy to encourage developments – as long as [they meet] the right requirements and align with planning policy.

“One of the major requirements is ensuring the scheme complements its wider surroundings.

“A pre-application meeting with the relevant local authority can often engender a ‘working with’ attitude to the development of an ambitious scheme.”

Funding brownfield schemes

Michael Dean, principal at Avamore Capital, claimed that a lender’s hesitance to lend on a brownfield site should primarily be limited to concerns relating to its previous use.

“The presence of contamination in the soil or asbestos or other deleterious or harmful materials above ground are the key areas for concern, bearing in mind that there is potential for geotechnical issues on both brownfield and greenfield sites.

“We are currently in legals to fund a housing site, which had a former petrol station on site, for example, which can give rise to organic compounds having penetrated the soil and, in addition, there may be former petrol tanks buried beneath the forecourt concrete.

“Usually these sites can be readily remediated if suffering from previous contaminated uses.

“However, a cost is usually associated with remediation.

“Providing the developer has budgeted for remediation and has carried out all the necessary phase I and phase II surveys, then there should be little issue for a lender lending against these sites.”

Noel added: “UTB [is] experienced in working with developers seeking to transform brownfield sites and although there are no specific incentives to fund brownfield developments, we are very happy to lend to developers who understand the demands and demonstrate a strong track record of delivering successful brownfield projects.

“Often it is SME rather than large developers that will seek to utilise brownfield land as they are more adept at dealing with the intricacies and challenges they pose.

“Some developers even specialise in seeking out difficult sites, knowing that their expertise can add value and we work with several such companies.”

Gareth explained that before lenders released funds for a development on a brownfield site, they would typically want more comfort from borrowers and an increased level of due diligence.

“Technically, the process should run smoothly thereafter, as long as a clean bill of health has been achieved.

“Building on brownfield is vital for the regeneration of Britain’s old industrial towns, many of which are now suffering extreme housing pressure.”

Early stages of construction

Paul believed that lenders were less hesitant to lending on brownfield schemes than in the past.

 “…[Lenders] realise that the only way Britain is going to meet the demand for new houses is if local authorities release these into the stock of sites available, either through local or regional planning policy changes, and so will need to lend on this type of [development].

“Underwriting and due diligence on the part of lenders should always be thorough.

“The wrong approach to this part of the processes prior to completion of a loan could leave the lender with an unsaleable site later on, if they had to enforce their security or take over the development itself due to the borrower running out of funds as unforeseeable costs arise in the clean-up process.

“Less certainty with evaluating cost and programme time was a major factor, but as more sites come onstream, the process of estimating these variables should improve in accuracy.”

Chris Whitney, senior broker at Enness Development, said that in its experience, lenders were more than happy to lend against schemes using brownfield land.

“Such schemes are a fantastic use of otherwise derelict spaces and, utilised properly, could provide a serious solution to the UK housing crisis.

“Lenders will typically want the client to build in a 10% contingency into their build costs to cover unexpected costs.

“However, as brokers, we will always work to ensure all checks have been carried out properly to ensure our clients aren’t in this position.”


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