Pendle Borough Council
DEVELOPMENT VIABILITY STUDY DECEMBER 2013
COLLIERS INTERNATIONAL UK PLC Company registered in England and Wales no. 4195561 Registered Office: 50 George St London W1U 7GA
Tel: +44 (0) 20 7935 4499 www.colliers.com/uk
Andrew Delaney Director Colliers International 1 Marsden Street Manchester M2 1HW
Tel: +44 (0) 161 831 3300
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TABLE OF CONTENTS
1 INTRODUCTION 4
2 POLICY CONTEXT 6
3 PROPERTY MARKET 22
4 METHODOLOGY AND APPRAISAL ASSUMPTIONS 41
5 DEVELOPMENT APPRAISALS 70
6 CONCLUSIONS & RECOMMENDATIONS 94
APPENDICES
1 POLICY COST IMPLICATIONS 100
2 RESIDENTIAL DEVELOPMENT APPRAISALS 101
3 COMMERCIAL DEVELOPMENT APPRAISALS 102
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1 INTRODUCTION
1.1 Colliers International, in partnership with Aspinall Verdi, has been instructed by Pendle Borough Council to assess development market conditions in the borough as a whole including the town centres of the three main towns; Nelson, Colne and Barnoldswick.
1.2 The purpose of the work is to assess the viability of the Pendle Local Plan Part 1: Core Strategy and inform the evidence base for the Pendle Local Plan Part 2: Site Allocations and Development Management Policies. It will be used to inform the appraisal of demand for and viability of sites, in particular that site allocations and development management policies for various uses are realistic and deliverable.
1.3 More specifically, the study work will:
Provide the basis for assessing the deliverability of new housing, from a viability perspective, as required by Policies SDP1 and LIV1 on the Pendle Core Strategy, which promote regeneration through the use of previously developed land in the first instance, followed by other viable sites within a defined settlement boundary, unless market conditions dictate otherwise;
Provide the evidence base to enable the council to assess whether proposed site allocations are realistic and deliverable (viable) in the light of market conditions;
Provide an easily updated framework (model) to allow the Council to carry out subsequent work to test the viability of development on individual sites;
Provide a method for testing the potential of residential sites to include an element of affordable housing, in relation to the target set in the 2013 SHMA of up to 40%;
Form a central element of the evidence base relating to viability and the level of developer contribution achievable under the proposed Community Infrastructure Levy (CIL) on different sites.
SUMMARISING THE BRIEF
1.4 The brief provides clear instructions for the scope and the outputs of this study. The study will provide an analysis of the main influences on the Borough's local development market for a variety of uses and the main influences on the marketplace.
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1.5 The study will consider the transactional evidence available to inform the demand and viability of the Borough's portfolio of sites in the following sectors:
• Housing
• Offices
• General industry (B1c, B2 & B8)
• Retail.
1.6 The study will be used to help to ensure the Borough has a suitable and readily available portfolio of sites, or at least potentially readily available, to support the local economy and amenity of residents.
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2 POLICY CONTEXT
2.1 Our economic viability appraisal for both the Local Plan and CIL (Community Infrastructure Levy) has been carried out having regard to the various statutory requirements comprising primary legislation, Statutory Regulations and mandatory guidance.
2.2 The main statutory requirements are contained within the following documents:
The CIL Regulations 20101, as amended in 20112 and 20123
The National Planning Policy Framework (NPPF) - March 20124
DCLG Community Infrastructure Levy (CIL) Guidance - April 20135
2.3 We set out below the key issues arising from the regulations of significance for our economic viability appraisal.
2.4 We also set out below the emerging local plan context and the significance of specific policies for our economic viability appraisal. The emerging Local Plan is the ‘Local Plan for Pendle Core Strategy Publication Report September 2012’.
NATIONAL POLICY CONTEXT
THE NPPF
2.5 The National Planning Policy Framework (NPPF) places viability and deliverability at the fore. Paragraph 173 deals explicitly with ensuring viability and deliverability. Paragraph 173 states that:
Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened. To ensure viability, the costs of any
1 The Community Infrastructure Levy Regulations 2010 coming into force 6 April 2010 under section 222(2)(b) of the Planning Act 2008 2 The Community Infrastructure Levy (Amendment) Regulations 2011 coming into force 6 April 2011 under section 222(2)(b) of the Planning Act 2008 3 The Community Infrastructure Levy (Amendment) Regulations 2012 made 28 November 2012 under section 222(2)(b) of the Planning Act 2008 4 Department of Communities and Local Government (March 2012) The National Planning Policy Framework ISBN: 978-1-4098-3413-7 5 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008
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requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable6. (our emphasis)
2.6 This is important because:
it requires Local Planning Authorities to assess plan wide viability and deliverability. This objective is a key component of this study.
it requires careful attention to viability and costs in plan-making e.g. the Pendle Local Plan and CIL Charging Schedule
the sites and the scale of development identified in the Plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened e.g. the Strategic Objectives and allocated sites
requirements for affordable housing, standards [e.g. Code for Sustainable Homes / BREEAM], infrastructure contributions or other requirements should be taken into account, although these may change over time, and
the development should provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable.
2.7 In terms of affordable housing, the NPPF specifically requires that local planning authorities should:
use their evidence base to ensure that their Local Plan meets the full, objectively assessed needs for market and affordable housing in the housing market area, as far as is consistent with the policies set out in this Framework, including identifying key sites which are critical to the delivery of the housing strategy over the plan period;7
2.8 Furthermore, in terms of commuted sums the NPPF states that,
where they have identified that affordable housing is needed, set policies for meeting this need on site, unless off-site provision or a financial contribution of broadly equivalent value can be robustly justified (for example to improve or make more effective use of the existing housing stock) and the agreed approach
6 Department of Communities and Local Government (March 2012) The National Planning Policy Framework ISBN: 978-1-4098-3413-7 paragraph 173 7 Department of Communities and Local Government (March 2012) The National Planning Policy Framework ISBN: 978-1-4098-3413-7 paragraph 47
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contributes to the objective of creating mixed and balanced communities. Such policies should be sufficiently flexible to take account of changing market conditions over time.8 (our emphasis).
2.9 This is a direct acknowledgement to the previous policy statement (PPS3 – Housing) (superseded by the NPPF)9.
2.10 Finally the NPPF sets the context for planning obligations (S106 Agreements) following the introduction of CIL. The NPPF sets out the following tests:
Planning obligations should only be sought where they meet all of the following tests: 10
necessary to make the development acceptable in planning terms;
directly related to the development; and
fairly and reasonably related in scale and kind to the development.
2.11 It is important to note that the CIL Regulations limit the use of planning obligations to a maximum of five S106 agreements in order to limit the use of pooled S106’s to fund infrastructure and (therefore) encourage the uptake of CIL.11
2.12 Furthermore the CIL Guidance requires that Charging Authorities are clear about the relationship between CIL and S106 Affordable Housing to avoid ‘double dipping’ – i.e. no actual or perceived ‘double dipping’, with developers paying twice for the same item of infrastructure.12 – see paragraph 2.24 below.
CIL REGULATIONS AND GUIDANCE
2.13 The April 2013 guidance was issued by the Secretary of State under section 221 of the Planning Act 2008. S221 states that,
The Secretary of State may give guidance to a charging authority or other public authority (including an examiner appointed under section
8 Department of Communities and Local Government (March 2012) The National Planning Policy Framework ISBN: 978-1-4098-3413-7 paragraph 50, third bullet point 9 Department of Communities and Local Government (June 2011) Planning Policy Statement 3 – Housing ISBN: 978 011 753976 7, paragraph 29 fifth bullet point 10 Department of Communities and Local Government (March 2012) The National Planning Policy Framework ISBN: 978-1-4098-3413-7 paragraph 204 11 The Community Infrastructure Levy Regulations 2010 coming into force 6 April 2010 under section 222(2)(b) of the Planning Act 2008, Regulation 123 12 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 85
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212) about any matter connected with CIL; and the authority must have regard to the guidance13. (our emphasis)
2.14 The April 2013 CIL guidance is therefore mandatory.
2.15 A fundamental part of the Regulations is about judging the “appropriate balance”. Regulation 14 requires that,
a charging authority must aim to strike what appears to the charging authority to be an appropriate balance between (our emphasis) a) the desirability of funding from CIL (in whole or in part) the actual and expected estimated total cost of infrastructure required to support the development of its area, taking into account other actual and expected sources of funding; and b) the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across its area14.
2.16 This is a difficult concept to interpret, but the Secretary of State has provided additional guidance on the appropriate balance in the April 2013 guidance which states:
By providing additional infrastructure to support development of an area, the levy is expected to have a positive economic effect on development across an area. In deciding the rate(s) of the levy for inclusion in its draft charging schedule, a key consideration is the balance between securing additional investment for infrastructure to support development and the potential economic effect of imposing the levy upon development across their area. The Community Infrastructure Levy regulations place this balance of considerations at the centre of the charge-setting process. In meeting the requirements of regulation 14(1), charging authorities should show and explain how their proposed levy rate (or rates) will contribute towards the implementation of their relevant Plan and support the development of their area. As set out in the National Planning Policy Framework in England, the ability to develop viably the sites and the scale of development identified in the Local Plan should not be threatened.15 (our emphasis)
2.17 Therefore the appropriate balance is a balance to be struck between setting the CIL rates too high and ‘choking-off’ development such that economic growth and development is prevented (and CIL revenues reduced); and setting the CIL rates too low such that there is not
13 S221 The Planning Act 2008 14 The Community Infrastructure Levy Regulations 2010 coming into force 6 April 2010 under section 222(2)(b) of the Planning Act 2008 Regulation 14 15 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 8
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enough revenue funding for the Authority to deliver the required infrastructure to support the future development. This is clearly a very fine balance.
2.18 Given the current economic climate and the reduced availability of funds to pay for much needed infrastructure, local authorities do have to consider alternative funding mechanisms (for example, Regional Growth Fund). CIL will be part of a ‘cocktail of funds’ and part of this consideration of the appropriate balance is to ensure that the CIL is not set right up to the margins of viability. This is also confirmed in the April 2013 Guidance:
Charging authorities should avoid setting a charge right up to the margin of economic viability across the vast majority of sites in their area. Charging authorities should show, using appropriate available evidence, including existing published data, that their proposed charging rates will contribute positively towards and not threaten delivery of the relevant Plan as a whole at the time of charge setting and throughout the economic cycle.16 (our emphasis)
2.19 This is important, because the cost and value assumptions for the appraisals across Pendle vary widely and when compared to the specific circumstances of actual sites coming forward for development. In an appraisal of this nature development cost and value assumptions must be informed by appropriate available evidence to assess economic viability for the majority of sites in the area. Development cost and value assumptions must be relevant for the broad range of site specific circumstances for a given development scenario in a market area to ensure the plan wide viability appraisal is true to the vast majority of sites. In this way any proposed charging rates will be appropriate for the vast majority of sites and not threaten the delivery of the plan.
2.20 The legislation (section 212(4)(b))17 only requires a charging authority to use ‘appropriate available evidence' to inform their charging schedules. The April 2013 guidance expands on this, explaining that:
the available data ‘is unlikely to be fully comprehensive or exhaustive’, and that;
16 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 30 17 S212(4)(b) The Planning Act 2008
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Charging authorities need to demonstrate that their CIL rates are informed by evidence that is ‘consistent across their area as a whole’.18
2.21 This is important because the appraisals can only be ‘high-level’ and therefore the evidence supporting CIL needs to be proportionate. It is not possible for a study of this nature to assess every nuance of every potential development site and sub-market price difference.
2.22 Furthermore, the Guidance requires that,
a charging authority should sample directly an appropriate range of types of sites across its area in order to supplement existing data, subject to receiving the necessary support from local developers. (such as brownfield sites) where the impact of the levy on economic viability is likely to be most significant. In most instances where a charging authority is proposing to set differential rates, they will want to undertake more fine-grained sampling (of a higher percentage of total sites), to identify a few data points to use in estimating the boundaries of particular zones, or different categories of intended use.19
2.23 This is what we have done by analysing values and development monitoring data across Pendle (see below) to establish and appraise the relevant typologies and then ‘sense check’ with local stakeholders (see section 10).
2.24 Finally, we have paid particular attention to the relationship between CIL and S106 to avoid ‘double dipping’. The April 2013 Guidance describes this interaction between S106 and CIL:
the Government expects charging authorities will work proactively with developers to ensure they are clear about charging authorities’ infrastructure needs and what developers will be expected to pay for through which route. This is so that there is no actual or perceived ‘double dipping’, with developers paying twice for the same item of infrastructure.20
2.25 We have sought to identify those S106 obligations (at both District and Lancashire County level) that will be picked-up by CIL and those
18 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 30 19 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 27 20 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 85
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site specific obligations (see 2.9 above) that will remain with developers.
2.26 Finally, the CIL Guidance requires that Charging Authorities should seek to,
Avoid undue complexity, and limit the permutations of different charges that they set within their area. However, resulting charging schedules should not impact disproportionately on particular sectors or specialist forms of development…21
2.27 This is important because the cumulative impact of both CIL Charging Zones and different housing market areas for the purposes of S106 Affordable Housing could lead to a complex matrix of charges and levies which could become unworkable.
LOCAL PLAN CONTEXT 2.28 The current Local Plan for Pendle is the Replacement Pendle Local Plan 2001-2016 (adopted May 2006). This is due to be superseded by the emerging Local Plan for Pendle. It comprises of two documents, Pendle Local Plan Part 1: Core Strategy and Pendle Local Plan Part 2: Site Allocations and Development Policies. The Core Strategy Publication Report was published for public consultation in September 2012, and will be republished once the evidence base has been updated to address comments made to this consultation. The Site Allocations and Development Policies Preferred Options Consultation is anticipated in early 2015.
EMERGING LOCAL PLAN 2.29 The Core Strategy is a strategic document which will:
Guide development and growth in Pendle over the next 15 years, by setting out:
1 The amount of development that will be required over the plan period and the broad areas in which this development should take place; in particular:
WHAT we want to see
WHERE it should be located
HOW much is needed
21 Department of Communities and Local Government (April 2013) Community Infrastructure Levy Guidance issued by the Secretary of State under section 221 of the Planning Act 2008 paragraph 37
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WHEN it is required
WHO will make it happen
2 The strategic policies that will guide development towards the most sustainable locations and those which address issues of widespread concern such as climate change; protection of the environment and good design.
2.30 The Site Allocations and Development Policies will:
1 Identify those sites that are considered to be best placed to help deliver the strategic objectives set out in the Core Strategy, and their proposed use.
2 Establish the boundaries for areas where development will be resisted, or required to meet higher standards of design.
3 Set out detailed development management policies that will be used to inform day-to-day decisions on planning applications.
KEY ISSUES
2.31 The Core Strategy Publication Report identifies a range of key issues that need to be addressed in Pendle up to 2028. These include:
Address the implications of a potential 9.1% growth in the population by 2028.
Accommodate a projected rise of 10% the number of household spaces by 2028; in particular a rise in the number of single households.
Cater for the needs of an ageing population.
Consider the implications of a reduction in the working age population.
Recycle and regenerate previously developed (brownfield) land.
Support the growth and diversification of the local economy.
Improve access to employment opportunities.
Reduce worklessness and deprivation.
Refurbish and regenerate housing in the inner urban areas.
Improve the thermal efficiency of homes to help minimise levels of fuel poverty, contribute towards carbon reduction and negative impacts on climate change.
Improve the health of children and young people.
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Increase levels of educational attainment and skills within the workforce.
Address issues relating to community cohesion.
Improve transport linkages, both within and outside the borough.
Protect and enhance our valuable natural and built heritage.
Reduce the fragmentation and isolation of habitats.
Seek to establish green corridors and stepping stones within built- up areas.
STRATEGIC OBJCETIVES
2.32 The Core Strategy incorporates 11 Strategic Objectives in order to address the key issues above.
1 Establish a hierarchy of settlements to assist regeneration by promoting the re-use of existing buildings and Brownfield sites and directing growth to the most sustainable locations.
2 Ensure that infrastructure is capable of supporting both new and existing development, thereby helping to create sustainable communities.
3 Promote high quality design in new developments, our streets and public spaces, to create fully accessible, attractive and safe places to live, learn, work, play and visit.
4 Respond to the causes and potential impacts of climate change through a process of prevention, mitigation and adaption.
5 Deliver sufficient, quality housing that is both appropriate and affordable, contributing to the creation of a balanced housing market.
6 Strengthen the local economy by facilitating economic growth, particularly where it supports economic diversification and rural regeneration.
7 Increase the choice, variety and quality of the retail offer and promote uses that contribute to the creation of a well-balanced, safe and socially inclusive night-time economy in our town centres.
8 Reduce inequalities by ensuring that new community, education and health care facilities and their services are fully accessible.
9 Protect, enhance and improve access to our green open spaces, sport and recreation facilities to improve health and well being
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through the promotion of more active lifestyles, encouraging a greater appreciation of the enjoyment they provide and the valuable contribution they may make to biodiversity, landscape, the local economy and carbon reduction.
10 Ensure that new development respects our natural and man-made heritage, by seeking to protect, maintain and enhance those sites and habitats which are valued for the positive contribution they make to the character of our landscape, townscape or biodiversity.
11 Deliver a safe, sustainable transport network that improves both internal and external connectivity, reduces the need to travel by car, supports long-term growth and contributes to an improved environment.
PLAN POLICIES
2.33 Beneath these Strategic Objectives are a series of 26 policies in the emerging Pendle Local Plan Part 1: Core Strategy. In order to appraise the Local Plan viability we have analysed each of the Policies in order to determine which policies have a direct or indirect impact on development viability. Those policies with a direct impact on viability have been factored into our economic assessment below. Those policies with an indirect impact have been incorporated into the viability study indirectly through the property market cost and value assumptions adopted.
2.34 It is important to note that all the policies have an indirect impact on viability. The Council’s Local Plan sets the ‘framework’ for the property market to operate within. All the policies have an indirect impact on viability through the operation of the property market and via site allocations which shape supply over time. For example, allocating insufficient sites to meet housing need will likely drive up house prices due to housing supply shortages. Equally, house prices will be affected by the location of site allocations given the prevailing market prices for the area in which any given site is allocated – house prices on a site in strong market areas (i.e. rural Pendle) are likely to higher than those on a site in a weaker market area (i.e. Colne or Nelson).
2.35 The following table (Table 2.1) shows the outcome from the analysis of each of these policies, identifying whether we consider they will have a direct or indirect impact on viability. More detailed analysis of the cost implications of these policies is provided in the table at Appendix 1, and for policies considered to have a direct cost, our assumptions about the potential costs to be included in the economic viability assessment.
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Policy Policy Direct Cost Reference Implication SD1 Presumption in Favour of Sustainable No Development SDP 1 Spatial Development Principles No SDP 2 Housing Distribution No* SDP3 Employment Distribution No* SDP4 Retail Distribution No SDP 5 Infrastructure Requirements Yes ENV 1 Protecting and Enhancing Our Natural and No Historic Environments ENV 2 Achieving Quality in Design and Yes Conservation ENV3 Renewable and Low Carbon Energy Yes Generation ENV 4 Promoting Sustainable Travel No ENV 5 Pollution and Unstable Land No ENV 6 Waste Management No ENV 7 Water Management No LIV 1 Housing Provision and Delivery No LIV 2 Housing Needs No LIV 3 Affordable Housing Yes LIV 4 Designing Better Places to Live Yes WRK 1 Strengthening the Local Economy No WRK 2 Employment Land Supply No WRK 3 Retailing and Town Centres No WRK 4 Tourism, Leisure and Culture No WRK 5 Designing Better Places to Work Yes SUP 1 Community Facilities Yes SUP 2 Health and Well-being No SUP 3 Education and Training No SUP 4 Designing Better Public Places Yes Table 2.1 – Policy Cost Implication
* The distribution policies SDP2 and SDP3 could have a viability implication if more housing is required in a weaker market area as opposed to a stronger market area. However, the impact of these policies is tested through analysis of the comparative viability of each of the housing development scenarios in each of the sub-market areas.
AFFORDABLE HOUSING
2.36 The affordable housing policy has a significant impact on the viability of the Local Plan. It is also inextricably linked with the CIL rate. It is important that the Affordable Housing viability is established first because the delivery of affordable housing is a key duty for the Authority.
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2.37 This was considered in the recent report on the examination of the draft mid Devon District Council community infrastructure levy charging schedule (February 2013)22. Here the Inspector determined that the proposed residential CIL rate did not reflect the Council’s target for the provision of affordable housing (as set out in the Development Plan) and because the rate was set too high, there was a serious risk to affordable housing provision and thus the overall development of the area. Therefore the Inspector recommended that the rate of £90 per sqm charge for dwelling houses be replaced by a charge of £40 per sqm.
2.38 The Development Plan policies – including where appropriate the affordable housing targets - will remain the starting point in the consideration of any planning application. The key test is therefore whether or not the assumptions upon which the proposed level of CIL are based would undermine the delivery of the DP targets, particularly with regard to affordable housing provision. The Charge Setting and Charging Schedule Procedures advises that consideration should be given to the implications of the charge for the priorities that the Council has identified in its DP and the specific example of affordable housing targets is given.23 (our emphasis)
2.39 It is therefore crucially important that the Affordable Housing viability is established first so that the Authority can be confident in the deliverability of affordable housing and so that the affordable housing percentage can be fed into the financial model(s) for the calculation of CIL.
CURRENT AFFORDABLE HOUSING POLICY
2.40 The current approach to affordable housing is set out in the Interim Housing Policy Statement (2009), although it will be replaced by the emerging Pendle Local Plan Part 1: Core Strategy in time.. It states that:
Where proposals are for 15 dwellings or more, the developer will be required to include an element of affordable housing on site. The overall affordable housing needed for the Borough is 45%.
However this is an unviable target in the current economic climate. The Affordable Housing Site Viability Study (AHSVS) indicates that the viability of sites to incorporate affordable housing is variable.
22 Hogger, D (20 February 2013) Report on the Examination of the Draft Mid Devon District Council Community Infrastructure Levy Charging Schedule, The Planning Inspectorate, PINS/Y1138/429/11 23 Hogger, D (20 February 2013) Report on the Examination of the Draft Mid Devon District Council Community Infrastructure Levy Charging Schedule, The Planning Inspectorate, PINS/Y1138/429/11 paragraph 13
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Taking this into account it will not be possible to apply a standard range of percentages to new proposals to determine the number of affordable homes that should be delivered. Developers will be required to show for each site the financial viability of the development in order to determine the amount of affordable housing that should be provided. Developers will also be required to pay for their assessments to be independently appraised. In circumstances where sites are viable to provide an element of affordable housing, consideration should be given to the ward level housing market balance requirements set out in the SHMA to help determine the amount of affordable housing for each site. Once the housing market recovers the Council will set requirements for the percentage of affordable units to be provided on sites.
The tenure split of the affordable dwellings should be 80% social rented and 20% intermediate housing.
EMERGING AFFORDABLE HOUSING POLICY
2.41 Emerging affordable housing policy is set out in Policy LIV3. It states that:
Proposals for new open market housing will be required to incorporate an element of affordable housing in order to contribute to the achievement of a borough wide affordable housing needs target of 45% over the lifetime of the plan.
The Council recognises that a fixed target is not always deliverable due to changing economic circumstances. To ensure the deliverability of new housing schemes is not adversely affected by efforts to secure the maximum level of affordable housing provision, the Council will use the 'Dynamic Viability Model' (DVM) to set flexible targets for affordable housing.
Table LIV3a provides the base affordable housing targets for each spatial area (derived from the DVM) and the site size thresholds to which the targets apply. Table LIV3a will be updated in the Annual Monitoring Report and will set the affordable housing targets for the following year.
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Table LIV3a – Affordable Housing Targets*
Area M65 Corridor West Craven Rural Pendle Towns
Site Size 15 15 0-4 5-9 10+ Threshold
Base 0% 0% N/A 15% 20% Affordable Housing Target
*the resultant number of affordable homes should be rounded to the nearest whole dwelling
The targets set by the DVM will be used as a basis for negotiations with applicants to determine the amount of affordable housing to be provided for each individual scheme. In addition, when assessing the amount of affordable housing to be provided the Council will take account of:
the viability of individual sites (tested through the submission of a financial viability assessment by the applicant);
the availability of grant funding.
Where a scheme is granted permission and work does not start within two years, the Council will require the viability of the scheme to be re-tested and the most up-to-date affordable housing targets be applied.
The tenure of affordable housing should be split using the following percentages as a guide: 80% social rented or affordable rented and 20% intermediate housing.
2.42 The emerging affordable housing policy set out in Policy LIV3 is to be revised in light of the findings and recommendations of the SHMA 2013.
BURNLEY AND PENDLE STRATEGIC HOUSING MARKET ASSESSMENT 2013
2.43 Pendle Borough Council and Burnley Borough Council appointed Consultants in May 2013 to undertake a study into the Future Population, Household Projections and Housing Needs of the area. The work will replace the 2008 Strategic Housing Market
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Assessment. The study provides policy advice for affordable housing policy. The advice is that an affordable housing target of up to 40% would be appropriate for Pendle, with a tenure mix of 30% social rented, 20% affordable rented and 50% intermediate. This policy advice is based upon affordable housing needs in the borough and not informed by a viability assessment.
2.44 The revised affordable housing target must be viable. This study has tested the viability of achieving this revised target of up to 40% affordable housing. The viability analysis of the 40% affordable housing target is based upon the revised tenure mix. The different tenures of affordable housing don’t have an impact on development costs, in that it will cost the same to build a housing unit irrespective of its future tenure. However, the different tenures do have different values. A widely accepted valuation principle identifies the following discounts against open market value:
Social rented – 50% discount
Affordable rented – 20% discount (assuming affordable rent is 80% of market rent)
Intermediate – 30% discount
2.45 Policy choices on the delivery of affordable housing will need to balance affordability against the deliverability of social rented, affordable rented and intermediate tenures (intermediate being generally cheaper to deliver per unit than social rented and affordable rent offering a new choice and opportunity for delivery).
2.46 The amount of income from affordable housing varies depending on the type of tenure proposed. This is not generally related to the costs of building the dwelling (although the specification may be slightly higher for intermediate rather than social rent) but to the sale price to Registered Providers [RPs]. RPs are generally able to pay more for intermediate stock because they receive part of the purchase price and market rent from the future occupier. This means that housebuilders receive a premium for this type of tenure which assists the viability of the development as a whole. In addition, housebuilders are often able to make a greater provision of intermediate housing due to the reduced implications on market sales and the higher premium from RPs. This form of tenure also provides tenants part ownership of their property which helps first time buyers to enter the property market.
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2.47 Housebuilders determine the affordable housing they prefer to provide based on the financial implications for the development. In particular, housebuilders prefer to provide intermediate housing because there is less market resistance amongst house purchasers to buying houses next to intermediate tenures; indeed much of the concern over social housing relates to the implications for house sales nearby. As a consequence, the plots adjacent to the affordable housing units are generally sold at a discount with the greatest discount reserved for those properties close to social rented accommodation.
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3 PROPERTY MARKET 3.1 This section of the report provides an overview of the local property market. It introduces the characteristics of the local commercial and residential property markets and identifies the available evidence (including land values, rent and freehold values and yields).
3.2 The study will consider the transactional evidence available to inform the demand and viability of the Borough's portfolio of sites in the following sectors:
• Housing (popular and executive markets) • Offices in the three town centres of Nelson, Colne and Barnoldswick • Employment uses (Use Classes B1-B8) within designated employment areas and uses in the B1(a) Use Class on the edge of the three town centres Retail (Use Classes A1-A5) in, and on the edge of, the three town centres; three local shopping centres (Brierfield, Barrowford and Earby); and at defined out of centre shopping areas.
3.3 The study has been further informed by a Developers’ workshop held at Nelson Town Hall. This meeting tested the findings of the market assessment and delegates (and non-attenders) were invited to submit further evidence during the period after the workshop.
PENDLE – THE BOROUGH 3.4 The Borough of Pendle was formed during local government reorganisation in 1974, it is one of twelve district councils in the county of Lancashire and together with Blackburn‐with‐Darwen, Burnley, Hyndburn, Ribble Valley and Rossendale it forms part of the Pennine Lancashire sub‐region.
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3.5 Over 89,500 people currently live in Pendle. Over two‐thirds of the population live in the densely populated Lancashire ‘mill towns’ in the south of the borough, whilst to the north is the largely rural area of West Craven, which was formerly part of the West Riding of Yorkshire.
3.6 The south of the borough is on the M65 motorway, giving Pendle accessibility to Manchester, Leeds and Liverpool. It should be noted that connectivity is not ideal and access into the regional centre (Manchester) needs to improve if the area is to truly compete.
3.7 Pendle is largely rural and contains some of the most affluent areas in the North West. The town centres contain a wide variety of independent shops primarily serving local residents. Boundary Mill Stores outlet in Colne and the niche shops offering high quality designer clothing in Barrowford attract shoppers from across the North of England.
3.8 The continued strength of the local economy derives enormous benefit from the aerospace sector which is a source of high value employment. Whilst average earnings in Pendle are below the county and national figures, the positive effects from commuter flows mean that wage rates in the authority are higher by place of residence in comparison to place of work.
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PROPERTY MARKET – NATIONAL PICTURE 3.9 In August 2013, after a long period of stagnation, the national economic picture is improving and the economy is starting to grow. Service sector output increased and manufacturing and construction are also showing signs of growth. These indicators point towards a sustained economic recovery. The Gross Domestic Product growth in the second quarter of 2013 looks positive and inflation is stable. This optimism is also reflected in the financial markets, with the FTSE 100 reaching 6600 for the first time since 2007.
INVESTMENT MARKET
3.10 This positive news is leading to more confidence in the property market. Nationally, in the investment market, the stock being transacted in 2013 is up 33% on the same time in 2012. The status of the UK as a ‘safe haven’ is reflected in the fact that foreign pension funds and insurance companies made the top six April purchases accounting for £1.1bn, or half of the total. The largest of these purchases was the CPPIB (Canada) / Hammerson JV purchase of a one third stake in Birmingham’s Bull Ring for £307m at an initial yield of 5.7%. This is followed by Oxford Properties’ purchase of 10 Paternoster Square (London Stock Exchange) for £225m at an Initial Yield 5.3%. In the continued absence of bank finance, cash and forward purchases have been the main sources of funding in 2013.
3.11 Improvement in the national economic picture and in property as an asset class is leading to increased investment across regions. It is likely that this interest will initially focus on core cities (including Manchester and Leeds) and will filter out into more peripheral markets (like Lancashire) subsequently.
RETAIL
3.12 The continued improvement in consumer-related economic indicators clearly bodes well for retail property rents, with the recent lack of new development raising the scope for hotspots to emerge outside London. But with a broad-based occupier demand recovery far from apparent yet, all retail rental values probably have further to fall this year before starting to edge higher in 2014.
3.13 In other words, occupier markets still seem too weak in too many locations for a recovery in all-retail rents this year to be a plausible central forecast. Indeed, with the consumer spending recovery itself
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still facing some headwinds (e.g. falling real wages), it is considered by Capital Economics that all-retail rental values will only begin to edge higher next year. And for the poorest quality and/or smallest in-town space, rents may not even find a floor until 2015 or later.
3.14 That said, there is optimism that a slightly more active housing market and demand for ‘big-ticket’ items (e.g. furniture) will help retail warehouse rental growth to tick back into positive territory in the next few quarters. Finally, the recent lack of development means that there is a prospect of lack of a supply of new property as the recovery takes hold and the economy moves into a period of growth(the same is true of all sectors).
OFFICES
3.15 In London, large requirements are increasing and the shortlist of suitable alternative spaces for large corporates will shrink further and become hotly contested, with incentives falling and net effective rents rising.
3.16 In the regions Grade-A space is disappearing in several CBDs and rental pressure is increasing. Outside city centres there is an increase in activity, although the picture is one of intermittent transactions.
3.17 This is exemplified in the regional centre of the North West. In Manchester, annual take-up for 2013 looks on course to surpass 1 million sq.ft for the first time since 2010. Interest in top quality space is consistent. The latest Regional Purchasing Managers’ Index suggests that business activity in the North West is the strongest in the UK outside London, currently at a 27 month high. Equally significant, in terms of new business, the North West is outpacing all other UK regions.
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3.18 As sentiment and the fundamental indicators turn positive, key regional markets are attracting significant interest from investors once more. There is evidence that vacant possession freehold prices are on the rise. Smaller scale refurbishments are evidence of renewed landlord confidence in demand for better quality second- hand accommodation.
3.19 It remains to be seen when this demand will filter out from the regional centre into more peripheral locations but the signs are positive and this is likely to follow in the near future.
3.20 The accompanying map shows regional data for the last available year (2012). The picture in September 2013 is largely the same. As can be seen, the demand in Manchester (and Leeds) is considerably greater than the other main centres in the region and it is only in these two areas that viable development is likely to be achieved in the present market.
3.21 Preston is currently showing rental levels of £130/sq.m (£12/sq.ft) in the out of town market and £108/sq.m (£10/sq.ft) in-town for ‘Grade A’ space and second hand stock is trading at circa £20/sq.m and
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£16/sq.m (£8/sq.ft and £6.50/sq.ft) respectively. These rental levels are comparable with the figures achieved across much of Lancashire.
INDUSTRIAL
3.22 Manufacturing confidence is improving and goods exports rose by 5% month on month in March, with non-European markets improving. The sector is stabilising and it appears that occupier demand may also be stabilising across all regions.
3.23 Colliers reports that prime UK small shed rents were increasing by 2% year on year in the first quarter of 2013, with Outer London up 6% and the South East up 2.3%. Big shed prime rents were also up 2.5% year on year, with the East Midlands and West London up 9.5% and 8% respectively. Take-up rates suggest that the UK has only two years supply remaining, with acute Grade-A shortages in London, South East, Eastern, North East and Wales. Speculative projects look increasingly to be on the agenda.
3.24 Take-up in the North West region in 2012 was for 600,000sq.m (5.8 million sq.ft) of industrial space. This was an increase of 42% from the previous year and this was the highest level of activity in all UK regions. This massive take-up of space has led to a major shortage of large sheds for distribution space and this is likely to increase as the demand for distribution hubs continues to rise and the new ‘Post Panamax’ shipping terminal is built at the Port of Liverpool.
3.25 Over the page is a snapshot of the Colliers International Interactive Rent Map showing the current market for small industrial sheds across the North West and West Yorkshire areas. This shows that the current market in Lancashire is achieving rentals of £54/sq.m (£5/sq.ft) for prime units, with secondary stock renting at £38/sq.m (£3.50/sq.ft) and land values of circa £500,000/ha (£200,000/acre). These rents are in the prime areas of the M6 corridor and the values likely to be achieved in East Lancashire are likely to be considerably lower, as the demand for industrial stock is much less in this location. This is down to a combination of factors including poor access to the motorway network and a small, localised market.
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3.26 These figures are considerably below the rentals being achieved in Manchester, where figures of £62/sq. m (£5.75/sq.ft) and £46/sq. m (£4.25/sq.ft) are prevalent, with land values of £750,000/ha (£300,000/acre). The market is similar in Leeds and the returns achieved in Bradford are also considerably in excess of the Lancashire figures.
RESIDENTIAL
3.27 The residential market is starting to show positive signs of recovery. Rightmove reported that asking prices have seen seven monthly increases in a row and two consecutive record months as the price of newly marketed property increased by 0.3% in July, up from 1.2% in June. Rightmove has revised their 2013 average asking price
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forecasts up from 2% to 4% as ‘aggregation of marginal gains’ fuels recovery
3.28 UK house prices increased by 0.3% between April and May 2013. In May 2013, prices paid by first-time buyers were 4.1% higher, on average, than in May 2012. For existing owners, prices increased by 2.5% for the same period.
3.29 It is reported that website hits were twice the June 2012 rate and asking prices rose 7% in the month following the ‘Help to Buy’ announcement. Barratt Developments reports buyer interest at a five year high. A RICS poll also shows that the scheme impacted the market immediately. The Office for Budget Responsibility worries that there is a risk of house price inflation without an improvement in supply.
3.30 The Land Registry in June 2013 has reported the average house price in the North West of England is £152,296. There were 14,074 houses sold in the region during the year and there was 0.9% growth in value over the year, although this was tempered by a 1.5% decline in the last quarter. The breakdown of price per house type is shown in the table below.
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House Type Sales Value Detached £265,985 Semi-detached 150,101 Terrace 103,923 Flat 113,387
3.31 In Lancashire over the same period, the average house was at a lower value of £148,579. There were 2,636 houses sold in the county and house values grew faster than the regional average with a 3.7% rise over the year. The most recent quarter has shown a marginal decline of 0.5%
House Type Sales Value Detached £248,979 Semi-detached £140,419 Terrace £97,586 Flat £105,285
3.32 The table below compares the position across Lancashire. This shows that the highest average values are being achieved in Ribble Valley, with West Lancahsire and Fylde the other most desirable areas. The East Lancashire boroughs show the weakest demand, with the lowest values in Burnley and Hyndburn.
Area Average Price Quarter Annual Sales Ribble Valley £231,934 12.2% 9.9% 157 West Lancashire £210,198 17.8% 19.3% 225 Fylde £179,491 -7.2% -3.8% 195 Chorley £166,221 -4.5% 2.1% 287 Wyre £154,847 -2.0% 10.4% 278 Lancaster £150,096 -3.5% 2.5% 280 South Ribble £146,040 0.0% -4.2% 256 Preston £130,519 -6.5% -2.2% 240 Rossendale £120,537 0.5% -13.8% 131 Pendle £105,859 -1.0% -1.3% 216 Hyndburn £93,305 -6.9% 0.3% 175 Burnley £84,307 -12.1% -6.1% 194
RESIDENTIAL BUILD-OUT RATES
3.33 We have been asked to provide current build out rates for residential development. In the current market, developers are building out at an annual rate of 2 units per month (24 per annum). If there are two schemes going ahead, this will equate to circa 40-50 units and three phases, it will be 65-75. .
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THE PROPERTY MARKET IN PENDLE 3.35 Rising confidence in the national economic and property markets have so far had little positive impact in East Lancashire. Pendle’s property market presents both challenges and opportunities for developers.
3.36 The towns of Nelson and Colne were part of the Housing Market Renewal Pathfinder area in East Lancashire. Parts of these towns are typified by an over-supply of pre-1919 terraced stock and a limited choice of housing supply; with a decreasing number of people owning their own property. In addition to this, there is high long-term employment and benefit dependency due to the overall decline in manufacturing.
3.37 The retail picture is mixed. Some centres are performing well but others are struggling in the current economic conditions. Nelson is underperforming, as is demonstrated by its designation as one of the recent ‘Portas Pilots.’ Demand for office space is limited. This is true of anywhere in a peripheral location. Apart from the public sector, the main demand is from local small and medium sized enterprises. These will often desire either converted shop premises or edge of town self-contained buildings.
3.38 Yet this does not tell the whole story. The borough has some areas of affluence comparable to anywhere in the North West. It is home to several established advanced engineering companies, for instance Rolls Royce at Barnoldswick, as well as several fast growing ‘gazelle’ companies.
PENDLE SUB-MARKETS
3.39 The Pendle Employment Land Review (2008) identifies that within Pendle, two key geographical property market areas are evident; the M65 Corridor and West Craven. The M65 Corridor includes Brierfield, Nelson, Barrowford, Colne and surrounding rural areas. This market area is well connected to the national motorway network and, in particular, to other areas of Lancashire via the M65. A significant proportion of the existing employment land in Pendle is located within this area, including two large industrial estates (Lomeshaye and Whitewalls) developed principally through the 1980s and 90s, as well as more traditional industrial areas dominated by former textile mills (for example Valley Mills and Hallam Road, Nelson).
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3.40 The West Craven market area includes Barnoldswick, Earby and surrounding rural areas. It is particularly reliant on the larger manufacturing companies based within the Borough such as Rolls- Royce.
3.41 The local market is dominated by locally based developer. In the current economic climate, development in peripheral locations such as Pendle has been at a minimal level.
3.42 Pendle’s Employment Land Review (2008) comments that a large loss of floorspace has occurred in factories over the past 30 years. This has seen the closure of many of the larger mill premises, as well as branch plants. In contrast increases in both warehousing and office accommodation appears to have compensated for these losses.
3.43 The largest concentration of employment space, particularly industrial and workshops, is on the M65 corridor. The Lomeshaye Industrial Estate is the largest of these estates and also has the largest concentration of modern industrial workspace.
3.44 The Lancashire Town Centre Offices Study (Lancashire County Council 2008) has identified that a small growth in the total office floor space reflects the advent of call centres and centralised back- office activities. The study identifies that there is just over 20,000sq.m between the four town centres, Pendle as a borough has the fourth largest town centres offices stock in Lancashire.
3.45 The study office stock in all four centres is overwhelmingly old. The percentages of pre 1940’s stock range from 71 to 100 per cent. Nelson’s rate is just under 83 per cent, but it does have a small amount of stock that has been built since 2000
3.46 The prominence of Nelson, as the main location for town centre offices in the borough, is evidenced by the fact it has 50 per cent more properties than the other three centres combined. Outside Nelson town centre are the following developments:
• Barrowford Business Park – 9ha allocation of B1 offices. The owners, Peel Holdings, have commenced and completed the first phase of development.
• Pendle Enterprise Haven provides incubator space
• Bridgewater House, Junction 13, M65 a speculative development, completed by the Hurstwood Group
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• Four buildings, including Pendle Innovation Centre, Pendle Enterprise Centre and The Innovation Centre, each incorporating some office space
RESIDENTIAL MARKET 3.47 The average house price in Pendle is £105,589 in October 2013. According to Land Registry figures, this figure has declined by 1.3% in the last year. The figures have declined by 1% in the last quarter. Two hundred and sixteen houses have been sold in the last twelve months.
House Type Average Sales Value Detached £269,050 Semi-detached £117,195 Terrace £81,397 Flat £97,125
3.48 In effect there are three clearly distinguishable market areas in Pendle, each with its own characteristics:
1. M65 Corridor – Nelson, Colne, Brierfield and Barrowford
2. West Craven Towns – Barnoldswick and Earby
3. Rural Area – open countryside containing 16 widely dispersed villages and hamlets
3.49 The tables below show the average values that are currently being achieved in the three market areas of Pendle. The values have been sourced from Zoopla (www.zoopla.co.uk) and were tested with the delegates at the developers’ seminar held in Nelson Town Hall on 12 June 2013.
3.50 It should be noted that these values provide an average figure that covers second hand as well as new build property.
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M65 Corridor Property Type Avg Current Avg £/sq.m Avg # beds Value (£/sq.ft)
Detached £173,958 £1,500 (£140) 3.4
Semi-detached £112,626 £1,065 (£99) 3.0
Terraced £62,056 £678 (£63) 2.5
Flats £74,643
3.51 It is considered that even within the M65 Corridor there are two distinct sub-markets – North and South of the M65. The sites to the north are attractive edge of town sites that command higher values than sites to the south of the motorway, which tend to be urban and are often on former industrial sites. The typical values achieved are shown below.
M65 Corridor North Property Type Avg Current Avg £/sq.m Avg # beds Value (£/sq.ft)
Detached £201,791 £1,740 (£161) 3.4
Semi-detached £135,891 £1,285 (£119) 3.0
Terraced £82,192 £898 (£83) 2.5
Flats £74,643
West Craven Towns Property Type Avg Current Avg £/sq.m Avg # beds Value (£/sq.ft)
Detached £237,428 £2,120 (£197) 3.6
Semi-detached £145,445 £1,484 (£138) 3.1
Terraced £90,943 £1,054 (£98) 2.7
Flats £85,254 1.8
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Rural Area Property Type Avg Current Avg £/sq.m Avg # beds Value (£/sq.ft)
Detached £327,733 £2,044 (£190) 3.8
Semi-detached £180,810 £1,700 (£158) 3.2
Terraced £108,004 £1,452 (£135) 2.5
Flats £98,026
3.52 Further evidence of current schemes on-site in Pendle has been provided by Barnfield Construction and these values are as shown in the following table;
3.53 Barnfield has advised that construction costs (all in) ranges from £1,130/sq.m to £1,345/sq.m (105sq.ft to £125sq.ft). This rate is an ‘all-in’ figure including fees, contingencies, abnormals etc.
3.54 With regard to the construction costs, it should be noted that as Barnfield Construction has an in-house construction division, the company can build new property at a more cost-effective rate than some other developers. This is due to their lower overheads. They will also pay a lower rate for their professional advice as they have many of the necessary skills as employees.
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Address Asking Value/sq.m Type of Property Size Density/ Price ha
Holden Road, £175k £1517 Family House 4 bed 25 Brierfield
£180 - £1565- Mill Conversion 4 bed 45 £205k £1780
Quaker Canal Side Mews £170k £1478 4 bed 45 Heights, Houses Nelson 45 £140k £1400 Family House 3 bed
Detached Homes The Locks, £375k to 4,5 and 25 Barrowford £2,000+ On A Superior £500k 6 bed Site
The 3, 4 Hallows, £160k to £1600 - Family House and 5 33 Reedley £285k £1900 beds
Stanroyd Court, £200k £1740 Family House 3 bed 45 Colne
DEVELOPER SENTIMENT 3.56 As has been previously mentioned, in the economic circumstances of summer 2013, there is relatively little development activity in East Lancashire, including Pendle. There has been a dearth of construction activity in recent years with very few national, or even regional, developers taking much of an interest in the borough. Consultations indicate that developers feel that there is only a limited local market and the borough’s peripherality and relatively poor access to the regional centre (Manchester) lessens demand from further afield. 3.57 Until recently the focus for development activity was the regeneration of small pockets of inner urban deprivation in the M65 Corridor through the HMR programme. This approach, together with tightly drawn settlement boundaries has effectively limited development in the more desirable locations of Barrowford, Earby,
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Barnoldswick and peripheral areas of Colne. Indeed, it was asserted at the developers’ seminar that if sites were to become available in these settlements, then there would be considerable market interest. 3.58 Barnfield Developments is the developer who has been most active in the borough in recent years. It currently has a number of joint venture companies (Pearl) in place with Pendle Council. They have been actively engaged in the preparation of this study and attended the developers’ seminar that was held in Nelson Town Hall on 12th June 2013. 3.59 In the residential sector, Barnfield considers that there is a strong requirement for new housing in the area, but there is a disconnection between the perception of value and the real value of land. House prices are low and the cost of construction is closer to sales values than ever before.
VALUES
Industrial
3.60 There has been limited new speculative development over the last three years but there have been bespoke units constructed. The construction costs were circa £590/sq.m to £750/sq.m (£55 - £70/sq.ft), with rental values circa £38/sq.m to £59/sq.m (£3.50 to £5.50/sq.ft).
3.61 We have analysed the Co-Star database for industrial deals done in Pendle since 2009. Examples of rents paid include £61/sq.m (£5.67/sq.ft) for 300sq.m in Valley Forge on Reedyford Road in Nelson, £59/sq.m (£5.49/sq.ft) for 50sq.m in Lomeshaye Bridge Mill and £4.25/sq.ft for 300sq.m on the same estate.
Retail
3.62 We have done a search of the Co-Star database, run by Focus. Recent deals in the area include £113/sq.m (£10.50/sq.ft) for the B & Q in Nelson; £133/sq.m (£12.35/sq.ft) for North Valley Retail Park; £108/sq.m (£10/sq.ft) for the NTS unit in Nelson. Deals have been done in Pendle Rise at £290/sq.m (£27/sq.ft) and the Greggs Bakers on Market Street let at £119/sq.m (£11.10/sq.ft).
3.63 Other recent retail evidence in the wider Lancashire area includes a deal of £140/sq.m for a discount food retailer in Clitheroe. This evidence came from discussions with Trevor Dawson Chartered Surveyors. Although this is in Ribble Valley, the food retail market is
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consistent across the Northern region and similar values would be expected in Pendle.
3.64 Another recent food retail deal in Lancashire was a letting to Booths in Poulton-le-Fylde. Reflecting the higher value of premium retailer, this deal broke down at £200/sq.m (£18.85/sq.ft) and a likely yield of circa 5.25%. The source of this evidence was Maple Grove Developments ltd.
Offices
3.65 Shackleton Hall, a new office and retail development in Colne, also provides office space. Barnfield achieved rental values of £108/sq.m (£10/sq.ft). The construction cost was £1.6million for 1,400sq.m (15.000sq.ft) of commercial space. At Vantage Court in the centre of Nelson values range from £108/sq.m to £124/sq.m (£10.00/sq.ft to £11.50/sq.ft). The construction cost was £1080/sq.m (£100/sq.ft) and 16.000sq.ft of space was created.
3.66 The co-star database shows that recent office lettings in Nelson have rented at £129/sq.m (£12/sq.ft) for unit sizes ranging from £50/sq.m to £150/sq.m in Bridgewater House in Surrey Road and rental of £125/sq.m to £155/sq.m at Bizspace on Turner Road. Suites of 100–120sq.m at Kenyon Business Centre on Kenyon Road have let for £70/sq.m (£6.50/sq.ft)
3.67 In Colne, offices at Spring Lane have been let at £128/sq.m (£11.90/ sq.ft) and the Linden Business Centre has let at £86/sq.m (£8/sq.ft). Offices at Turner Road, Barnoldswick have also let at £86/sq.m (£8/sq.ft).
SUMMARY
3.68 After a long period of stagnation, the UK economy is starting to show signs of growth. The positive news is leading to more confidence in the property market. There is increased activity across the English regions, although this is focused on the core cities of Manchester and Leeds.
3.69 Despite this increasing confidence, occupier markets across all sectors continue to struggle, particularly in the retail and office sectors. The strongest demand is for industrial property.
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3.70 The Pendle Employment Land Review identifies that there are two geographical property market areas for commercial property – the M65 Corridor and West Craven.
3.71 The residential sector is also starting to show signs of recovery and the introduction of the Government’s Help to Buy scheme has stimulated demand for new homes and most regions of the UK are seeing rising values. It is likely that confidence will rise again as the second phase of Help to Buy establishes itself. .
3.72 In Lancashire, the average house price is £148,579 and there has been a 3.7% rise in values over the last year. This is circa £3,500 below the regional average. House prices in Pendle are more affordable, with the last twelve months showing an average sale price of £105,859. This is a decline of 1.3% from the year before.
3.74 According to the Land Registry, the average value of a detached house in the borough, as of August 2013 is £269,050. A semi- detached is £117,195; a terrace is £81,397 and a flat for £97,125.
3.75 There are three distinct sub-markets in Pendle. These are the M65 Corridor (Nelson, Colne, Brierfield and Barrowford), West Craven Towns (Barnoldswick and Earby) and Rural Pendle (16 widely dispersed villages and hamlets). The highest values are achieved in the West Craven Towns (£197/sq.m) with similar figures in the Aural Area (£190/sq.m.). These values will support viable development.
3.76 Market sentiment at the developers seminar held in Nelson Town Hall on 12th June 2013 considered that there are two elements to the M65 Corridor market. Sites to the north of the motorway are more attractive than those to the south. Several of these on the urban fringe will generate values close to those in the West Craven Towns.
3.77 The most active developer in the borough considers that there is a strong requirement for new housing in the area.
3.78 There has been limited development of new industrial accommodation during the economic downturn. The rental values of new stock are circa £60/ sq.m.
3.79 Retail property lets at £110-£130/sq.m on out of town retail parks and town centre shops also rent out at about the same level. Recent deals in Pendle Rise have shown rental of circa £290/sq.m. Food retail units are letting at circa £140/sq.m
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3.80 The market for offices is slow at the present time. Offices in the centre of Nelson are offered to the market at £108/sq.m. There have been recent lettings between £125 and £155/sq.m. Offices in Colne have let at circa £125/sq.m and in Barnoldswick at £86/sq.m.
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4 METHODOLOGY AND APPRAISAL ASSUMPTIONS
4.1 In this section of the report we set out our generic methodology to establish the viability of the various land uses and development typologies described in the following sections. We also set out the professional guidance that we have had regard to in undertaking the economic viability appraisals and some important principles of land economics.
4.2 We have appraised each of the development typologies having regard to open Market Values of land and normal levels of developers profit to establish whether there is any development surplus which could form CIL/Affordable Housing.
PROFESSIONAL GUIDANCE 4.3 In carrying out our Economic Viability Appraisal we have had regard to the following professional guidance and reports that have been published by various bodies to facilitate this process, as follows:
Homes and Communities Agency (July 2009) Investment and planning obligations - Responding to the downturn, Good Practice Note
Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report)
RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012
4.4 A key aspect of all appraisals is the land value assumption. The above documents provide useful guidance on this important area at length.
HOMES AND COMMUNITIES AGENCY GUIDANCE
4.5 In 2009, the Homes and Communities Agency published a good practice guidance manual ‘Investment and Planning Obligations: Responding to the Downturn’24. This defines viability as follows:
24 Homes and Communities Agency (July 2009) Investment and planning obligations - Responding to the downturn, Good Practice Note
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A viable development will support a residual land value at a level sufficiently above the site’s existing use value (EUV) or alternative use value (AUV) to support a land acquisition price acceptable to the landowner.25
4.6 This is fine in respect of Development Management functions where the Council is dealing with a specific application on a specific site which has a specific existing use value. This was not really designed for CIL and Local Plan viability modelling, but provides useful context.
THE HARMAN REPORT
4.7 The Harman report ‘Viability Testing Local Plans’26 (June 2012) refers to the concept of ‘Threshold Land Value’ (TLV). We adopt this terminology as it is a precise description of the important value concept. Harman states that the ‘Threshold Land Value should represent the value at which a typical willing landowner is likely to release land for development.’27
4.8 The Harman report also advocates that when considering the appropriate Threshold Land Value, consideration should be given to ‘the fact that future plan policy requirements will have an impact on land values and owners’ expectations’.28 In this context Harman is concerned that ‘using a market value approach as the starting point carries the risk of building-in assumptions of current policy costs rather than helping to inform the potential for future policy’ 29. (our emphasis)
4.9 Harman does still acknowledge that reference to market values will still provide a useful ‘sense check’ on the Threshold Land Values that are being used in the appraisal model, however, ‘it is not
25 Homes and Communities Agency (July 2009) Investment and planning obligations - Responding to the downturn, Good Practice Note page 21
26 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) 27 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 28 28 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 29 29 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 29
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recommend that these are used as the basis for input into a model’.30
4.10 Harman recommends that ‘the Threshold Land Value is based on a premium over current use values and ‘credible’ alternative use values’.31 However, the report accepts that ‘alternative use values are most likely to be relevant in cases where the Local Plan is reliant on sites coming forward in areas (such as town and city centres) where there is competition for land among a range of alternative uses.’32
4.11 The Harman report does not state what the premium over existing use value should be, but states that this should be ‘determined locally’ – but then goes on to state that ‘there is evidence that it represents a sufficient premium to persuade landowners to sell’33. This takes us back to a Market Value approach (see RICS guidance below).
4.12 The guidance further recognises that in certain circumstances, particularly in areas where landowners have ‘long investment horizons’ (e.g. family trusts, The Crown, Oxbridge Colleges, Financial Institutions), ‘the premium will be higher than in those areas where key landowners are more minded to sell’34. An example of this is in relation to large urban extensions where a prospective seller is potentially making a once in a lifetime decision over whether to sell an asset. In this scenario the uplift on current use value will invariably be significantly higher than those in an urban context. In reconciling such issues, Harman stresses the importance of using local market evidence as a means of providing a sense check.
4.13 The Harman report clearly favours an approach to benchmarking which is based on current / existing use value plus a premium. However, this is very ambiguous and has been interpreted out of context. We interpret existing use value and alternative use value
30 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 29 31 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 29 32 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 29 33 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 29 34 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 30
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as in the Harman Report to be a subset of Market Value as it is not possible to be site specific in a District-wide strategic context. At numerous points throughout the document, Harman advocates, that the outcome of this approach will need to be ‘sense checked’ against local market evidence (pages 29, 30, 31, 34, 36, 40).
4.14 Indeed the report does acknowledge that, ‘if resulting Threshold Land Values do not take account [local market knowledge], it should be recognised that there is an increasing risk that land will not be released and the assumptions upon which a plan is based may not be found sound.’35
RICS GUIDANCE
4.15 The RICS guidance on Financial Viability in Planning36 was published after the Harman report in August 2012 (the Harman Report was published in June 2012) and it is much more ‘market facing’ and less academic in its approach.
4.16 The RICS guidance is grounded in the statutory and regulatory planning regime that currently operates in England and is consistent with the Localism Act 2011, the NPPF and Community Infrastructure Levy (CIL) Regulations 2010.
4.17 Whilst the RICS Guidance and that from the Local Housing Delivery Group can be seen as complimentary the RICS guidance provides more technical guidance on determining an appropriate site / benchmark value.
4.18 The RICS Guidance defines financial viability for the purposes of town planning decisions as:
An objective financial viability test of the ability of development to meet its costs including the cost of planning obligations, whilst ensuring an appropriate site value for the landowner and a market risk adjusted return to the developer37
4.19 In other words will the development provide an appropriate return to the developer and land owner having taken account of all
35 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 30 36 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012
37 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 paragraph 2.1.1
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development costs, including planning costs (i.e. s106 contributions and the costs of meeting planning policies).
4.20 In assessing the impact of planning obligations on the viability of the development process, the Guidance does not specify a prescriptive tool or financial model - albeit it does recognise that it is accepted practice to use a residual valuation model as the appraisal framework.38
4.21 However, it does emphasise the ‘importance of using market evidence as the best indicator of the behaviour of willing buyers and willing sellers in the market’39. The Guidance warns that
Where planning obligation liabilities reduce the Site Value to the landowner and return to the developer below an appropriate level, land will not be released and/or development will not take place. This is recognised in the NPPF.40
4.22 In other words where the site value and / or developers profit are so eroded by planning costs, landowners will not sell their sites for development and the level of profit to developers is too low for them to accept the risk of development.
4.23 The RICS Guidance defines ‘site value’, whether this is an input into a scheme specific appraisal or as a [threshold land value] benchmark, as follows:
Site value should equate to the market value subject to the following assumption: that the value has regard to development plan policies and all other material planning considerations and disregards that which is contrary to the development plan (Box 7) (our emphasis)
4.24 The guidance also advocates that any assessment of site value will need to consider prospective planning obligations and recommends that a second assumption be applied to the aforementioned definition of site value, when undertaking Local Plan or CIL (area wide) viability testing. This is set out below:
Site value (as defined above) may need to be further adjusted to reflect the emerging policy / CIL charging level. The level of the adjustment assumes that site delivery would not be prejudiced.
38 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 page 16 39 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 paragraph 3.1.4 40 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 paragraph 2.1.4
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Where an adjustment is made, the practitioner should set out their professional opinion underlying the assumptions adopted…..(Box 8)
4.23 As mentioned above emerging practice has tended to use the existing use value plus premium approach to land value. This is useful to help ‘triangulate’ the market value for a particular site, but the emphasis does have to be on property market evidence if the scheme is to be grounded in reality and therefore deliverable. We therefore commend the RICS Guidance.
MAYOR OF LONDON CIL
4.24 The impact on land value of future planning policy requirements e.g. CIL [or revised Affordable Housing targets] was contemplated in the Examiner’s report to the Mayor of London CIL (January 2012)41.
Paragraph 32 of the Examiner’s report states:
…the price paid for development land may be reduced. As with profit levels there may be cries that this is unrealistic, but a reduction in development land value is an inherent part of the CIL concept. It may be argued that such a reduction may be all very well in the medium to long term but it is impossible in the short term because of the price already paid/agreed for development land. The difficulty with that argument is that if accepted the prospect of raising funds for infrastructure would be forever receding into the future. In any event in some instances it may be possible for contracts and options to be re-negotiated in the light of the changed circumstances arising from the imposition of CIL charges. (our emphasis)
4.25 This is a very important principle for the Local Plan (Affordable Housing) viability and CIL viability. Whilst we have every sympathy with landowners whose values have fallen or stagnated due to the economic climate since the credit crunch in 2007 there does have to be recognition that without funding for essential infrastructure development may not be able to take place at all. This brings us back to the discussion on the appropriate balance (see pp 10-11 and particularly paragraph 2.17 above).
THRESHOLD LAND VALUE SUMMARY 4.26 A very important aspect when considering CIL is an appreciation of how the property market for land works in practice.
41 Holland, K (27 January 2012) Report on the Examination of the Draft Mayorall Community Infrastructure Levy Charging Schedule, The Planning Inspectorate, PINS/K5030/429/3
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4.27 Developers have to secure sites and premises in a competitive environment and therefore have to equal or exceed the landowners aspirations as to value for the landowner to sell. From the developers’ perspective, this price has to be agreed often many years before commencement of the development. The developer has to subsume all the risk of: ground conditions; obtaining planning permission; funding the development; finding a tenant/occupier; increases in constructions costs; and changes to the economy and market demand etc. This is a significant amount of work for the developer to manage; but this is the role of the developer and to do so the developer is entitled to a ‘normal’ developer’s profit. In this respect we have included an allowance of 20% developers profit (see Profit, Finance, Overhead pp 37-38) as many developers (and there funders) require this level of return given the current economic circumstances. The developer will appraise all of the above costs and risks to arrive at their view of the residual site value of a particular site.
4.28 To mitigate some of these risks developers and landowners often agree to share some of these risks by entering into arrangements such as Market Value options based on a planning outcome, ‘subject to planning’ land purchases’, and / or overage agreements whereby the developer shares any ‘super-profit’ over the normal benchmark.
4.29 From the landowners’ perspective, they will have a preconceived concept of the value or worth of their site. This could be fairly straight-forward to value, for example, in the case of greenfield agricultural land which is subject to per hectare benchmarks. However, in the case of brownfield sites, the existing use value could be a lot more subjective depending upon the previous use of the property; the condition of the premises; and/or any income from temporary lets, car parking and advertising hoardings etc. Also, whilst (say) a former manufacturing building could have been state- of-the-art when it was first purchased by the landowner, in a redevelopment context it might now be the subject of depreciation and obsolescence which the landowner finds difficult to reconcile. Accordingly, the existing use value is much more subjective in a brownfield context.
4.30 Furthermore, where there is a possibility of development the landowner will often have regard to ‘hope value’. Hope value is the element of open market value of a property in excess of the existing use value, reflecting the prospect of some more valuable future use or development. It takes account of the uncertain nature or extent of such prospects, including the time which would elapse before one
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could expect planning permission to be obtained or any relevant constraints overcome, so as to enable the more valuable use to be implemented42. Therefore in a rising market landowners may often have high aspirations of value beyond that which the developer can justify in terms of risk and in a falling market the land owner my simply ‘do nothing’ and not sell in the prospect of a better market returning in the future. The actual amount paid in any particular transaction is the purchase price and this crystallises the value for the landowner.
4.31 Hence land ‘value’ and ‘price’ are two very different concepts which need to be understood fully when formulating planning policy and CIL. The incidence of any tax/CIL to a certain extent depends on this relationship and the individual circumstances. For example, a farmer with a long-term greenfield site might have limited ‘value’ aspirations for agricultural land – but huge ‘price’ aspirations for residential development. Whereas an existing factory owner has a much higher value in terms of sunk costs and investment into the existing use and the tipping point between this and redevelopment is much more marginal.
BROWNFIELD/GREENFIELD LAND ECONOMICS 4.32 CIL has its roots in the perceived windfall profit arising from the release of greenfield land by the planning system to accommodate new residential sites and urban extensions43. However, lessons from previous attempts to tax betterment44 show that this is particularly difficult to achieve effectively without stymieing development. It is even harder to apply the concept to brownfield redevelopment schemes with all attendant costs and risks. The difference between greenfield and brownfield scheme economics is important to understand for CIL rate setting.
4.33 The timing of redevelopment and regeneration of brownfield land particularly is determined by the relationship between the value of the site in its current [low value] use (“Existing Use Value”) and the value of the site in its redeveloped [higher value] use (“Alternative Use Value”) – less the costs of redevelopment. Any tax or levy which impacts on these costs will have an effect on the timing of redevelopment. This is relevant to consider when setting the ‘appropriate balance’.
42 Estates Gazette Glossary of Property Terms 43 See Barker Review (2004) and Housing Green Paper (2007) 44 the 2007 Planning Gain Supplement , 1947 ‘Development Charge’, 1967 ‘Betterment Levy’ and the 1973 ‘Development Gains Tax’ have all ended in repeal
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4.34 Fundamentally, CIL is a form of ‘tax’ on development as a contribution to infrastructure. By definition, any differential rate of tax/CIL will have a distorting effect on the pattern of land uses. The question as to how this will distort the market will depend upon how the CIL is applied.
4.35 Also, consideration must be given to the ‘incidence’ of the tax i.e. who ultimately is responsible for paying it i.e. the developer out of profit, or the landowner out of price (or a bit from each).
4.36 This is particularly relevant in the context of brownfield sites in the town centres and built up areas. Any CIL on brownfield redevelopment sites will impact on the timing and rate of redevelopment. This will have a direct effect on economic development, jobs and growth.
4.37 In the brownfield context redevelopment takes place at a point in time when buildings are economically obsolete (as opposed to physically obsolete). This is illustrated in figure 4.1. Over time the existing use value of buildings falls as the operating costs increase, depreciation kicks in and the rent falls (by comparison with modern equivalent buildings). In contrast the value of the next best alternative use of the site increases over time due to development pressure in the urban context (assuming there is general economic growth in the economy). Physical obsolescence occurs when the decreasing existing use value crosses the rising alternative use value.
Figure 4.1 – Timing of Redevelopment – Brownfield Land
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4.38 However, this is not the trigger for redevelopment. Redevelopment requires costs to be incurred on site demolition, clearance, remediation, and new build construction costs. These costs have to be deducted from the alternative use value ‘curve’. The effect is to extend the time period to achieve the point where redevelopment is viable.
4.39 This is absolutely fundamental for the viability and redevelopment of brownfield sites. Any Tariff, Tax or Obligation which increases the costs of redevelopment will depress the net alternative use value and simply extend the timescale to when the alternative use value exceeds the existing use value to precipitate redevelopment.
4.40 Contrast this with the situation for development on greenfield land. Greenfield sites are constrained by the planning designation. Once a site is ‘released’ for development there is significant step up in development value – which makes the development economics much more accommodating. There is much more scope to capture development gain, without postponing the timing of development.
4.41 That said, there are some other important considerations to take into account when assessing the viability of greenfield sites. This is discussed in the Harman Report45.
4.42 The existing use value may be only very modest for agricultural use and on the face of it the landowner stands to make a substantial windfall to residential land values. However, there will be a lower threshold (Threshold Land Value) where the land owner will simply not sell. This is particularly the case where a landowner ‘is potentially making a once in a lifetime decision over whether to sell an asset that may have been in the family, trust or institution’s ownership for many generations.’46 Accordingly, the ‘windfall’ over the existing use value will have to be a sufficient incentive to release the land and forgo the future investment returns.
4.43 Another very important consideration is the promotional cost of strategic greenfield sites. For example, in larger scale urban extension sites there will be significant investment in time and resources required to promote these sites through the development plan process. The threshold land value therefore needs to take into account of the often substantial planning promotion costs, option fees etc and the return required by the promoters of such sites.
45 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) pp 29-31 46 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 30
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‘This should be borne in mind when considering the [threshold] land value adopted for large sites and, in turn, the risks to delivery of adopting too low a [threshold] that does not adequately and reasonably reflect the economics of site promotion…’47
4.44 This difference between the development ‘gain’ in the context of a greenfield windfall site and the slow-burn redevelopment of brownfield sites is absolutely fundamental to the success of any regime to capture development gain such as CIL. It is also key to the ‘incidence’ of the tax i.e. whether the developer or the land owner carries the burden of the tax.
VIABILITY MODELLING 4.46 The policy review and property market conditions above underpin the development typologies and the basis of the Economic Viability Appraisals.
4.47 The general principle is that the CIL will be levied on the increase in land value resulting from the grant of planning permission. However, there are fundamental differences between the land economics and every development scheme is different. Therefore in order to derive the potential CIL and understand the ‘appropriate balance’ it is important to understand the micro-economic principles which underpin the viability analysis.
Figure 4.1 below, illustrates the principles of a viability appraisal.
47 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 31
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Figure 4.2 – Elements Required for a Viability Assessment (Harman)48
GROSS DEVELOPMENT VALUES (GDV)
4.47 The Gross Development Value (or GDV) is the total gross value of any particular development scheme on completion.
4.48 The valuation approach will depend upon whether the scheme is residential (e.g. comparable approach) or commercial (e.g. investment approach: rent £ per annum capitalised at the appropriate yield %).
4.49 Furthermore, in the case of residential development, the total GDV has to take into consideration quantum of affordable housing provision (i.e. if a particular unit is to be allocated for affordable housing it cannot be sold at full private market value and there is a corresponding impact on the GDV of the scheme). Our specific assumptions in respect of housing mix, tenure and values for the residential financial appraisals are set out below.
4.50 In terms of commercial property, we have used an investment approach to valuation based on the estimated rental value (per sq.ft) for the use type and capitalised by the appropriate yield for each property class, taking into account investment purchasers’ costs. The yield for any particular property will depend upon the location of the property; the specification; use; and crucially the
48 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 25
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covenant strength of the tenant. For this exercise we have had regard to market yield benchmarks and discussions with property agents. Our value assumptions for the various commercial uses (rents, yields etc) are set out below.
AMOUNT REQUIRED FOR LANDOWNERS TO SELL
4.51 This is the ‘Threshold Land Value’ described above.
4.52 The land values adopted are based on market land values as far as we have been able to ascertain from a range of sources including: VOA, reported deals, agents and developer consultations. These land values reflect the ‘prices paid’ for land and sites in the District for various potential uses. The land values assumptions exclude the cost of decontamination and/or site clearance which is included as a separate cost item in the viability models.
4.53 Our assumptions as to the Threshold Land Value are set out in the relevant section for each use.
POLICY REQUIREMENTS
4.54 This is the cumulative impact of the Local Plan (including Affordable Housing and CIL) policy requirements. In Pendle it will include the emerging Pendle Local Plan Part 1: Core Strategy and the future Pendle Local Plan Part 2: Site Allocations and Development Policies.
4.55 The direct financial impact of Local Plan Part 1: Core Strategy policies is assessed above in section 2 and at Appendix 1: Policy Cost Implications.
4.56 We have had specific regard to the emerging Affordable Housing policy.
4.57 In addition we have had had regard to the Local Plan Part 1: Core Strategy requirements for elevated design standards (Code for Sustainable Homes, Building for Life, Lifetime Homes and BREEAM (Core Strategy Policy LIV4 and WRK549).
4.58 Local Plan Part 1: Core Strategy Policy LIV4 requires that:
The Council will require the provision of well-designed housing to meet the needs of Pendle's population. Proposals should take account of the general design principles set out in Policy ENV2 as well as the criteria in this policy.
49 Local Plan for Pendle Core Strategy Publication Report September 2012
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All new housing should be designed and built in a sustainable way in order to: increase the energy efficiency of new dwellings, reduce
CO2 emissions, help adapt to climate change and build sustainable communities. To achieve this, the Council will encourage and support the use of the following initiatives and standards:
Energy Hierarchy (Applicants should: i) reduce the need for energy usage, ii) maximise energy efficiency, iii) provide on-site renewable energy – Policy ENV3 requires all new developments to secure 10% of their predicted energy requirement from Renewable and Low Carbon sources);
Code for Sustainable Homes;
Building for Life Standards (Applicants of major housing schemes (10 dwellings or more) should submit their Building for Life assessment with their application for consideration by the Council's trained assessors);
Lifetime Home Standards In this respect, Code 3 is the current requirement on all sites.
4.59 In terms of commercial development, Local Plan Part 1: Core Strategy Policy WRK5 requires that,
The Council encourages the provision of well-designed workplaces that meet the needs of businesses and their employees and contribute towards the aim of zero carbon growth in Pendle. Proposals should take account of the general design principles set out in Policy ENV2 as well as the criteria in this policy. In the case of mixed-used developments elements of Policies LIV4 and SUP4 will also be appropriate. To help minimise any negative impacts on their immediate surroundings developers should also have regard to the requirements of Policies ENV5 and ENV7.
All development proposals should seek to deliver the highest possible standards of design in terms of both their built form and sustainability, by meeting the highest level of the appropriate BREEAM scheme and the on-site energy requirements set out in Policy ENV3.
4.60 The above policies will have an impact on the construction costs for both residential and commercial uses. Cyril Sweett has carried out cost analysis for DCLG50 of the costs for achieving different performance levels under the Code for Sustainable Homes. Cost
50 Communities and Local Government, Cost Analysis of the Code for Sustainable Homes, July 2008.
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increases are provided on a cost per unit and cost per sq.m basis for detached and end terraced houses and flats. Percentage cost increases on basic compliance with the 2006 Building Regulations are also provided. The following table summarises these costs:
CSH Level Total Cost (£) Cost £/sq.m % on 2006 Building Regs
Detached House
1 765 7 1
2 2258 19 2
3 4991 43 5
4 11733 101 13
5 22197 191 24
6 38817 335 43
Terraced House
1 795 8 1
2 2598 26 3
3 5027 50 7
4 9490 94 13
5 18738 186 25
6 31747 314 42
Table 4.1 – Cost of Achieving different Code for Sustainable Homes (CSH) levels51
4.61 Housebuilders are now typically building to CSH level 3. Requirements to build at a higher code level or meet Lifetime Home standards will increase development costs. Housebuilders have suggested that to meet Lifetime Homes standards will typically cost
51 Cyril Sweett
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up to £5,000 per dwelling. Pendle Borough Council has the discretion to lower these requirements if necessary.
4.62 We have based our appraisals on CSH level 3 and BREEAM Very Good. These accord with common industry standards. Higher CSH and BREEAM levels are achievable through design, but will have a significant impact on development viability.
4.63 Detailed policies addressing specific aspects of building design will follow in the Pendle Local Plan Part 2: Site Allocations and Development Policies.
PROFIT, FINANCE AND OVERHEAD
4.64 These are the indirect costs of development.
4.65 The cost of finance for any particular development depends upon the source of the funding (e.g. bank finance, corporate finance, shareholder equity etc) and the perceived risk of the project (e.g. residential or commercial, speculative52 or pre-let). We have incorporated finance costs in our appraisals based on Table 4.2:
Finance Fees 1% (of the total project cost) finance fees
Interest 7% interest calculated on a cashflow basis including land acquisition and associated costs (proxy) Table 4.2 – Finance Assumptions
4.66 Developers profit and overhead again vary from sector-to-sector, scheme-to-scheme and developer-to-developer.
4.67 There are different measures of profit for example - % on cost, % on GDV (gross development value), IRR (Internal Rate of Return), ROCE (Return on Capital Employed) etc. Similarly, different developers will have different requirements for the treatment of overheads. So for example a PLC house-builder who is funded by shareholder capital may prefer to analyse schemes on a ROCE or IRR measure net of overheads whereas a local builder may take a simpler approach of % on GDV (and account for their overheads and time out of gross profit).
4.68 The RICS Guidance on Financial Viability in Planning53 describes the different types of developer and the requirements for profit in
52 Note that speculative commercial development is very difficult to fund at all in the post— credit crunch banking environment 53 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st
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more detail. It notes that commercial developers tend to seek a return on cost, usually expressed as a percentage of the total development cost and the residential sector seeks a return on the GDV, commonly referred to as the sales margin54.
4.69 For the purposes of our appraisals we have adopted the following profit assumptions (Table 4.3):
Residential Profit 20% Sales Margin on GDV
Commercial Profit (Not speculative) 20% of Total Costs
Table 4.3 – Profit Assumptions
4.70 Note that some developers have suggested that development profit has to be in excess of 20% in order to attract bank funding. However, the funding proposition has to be considered ‘in the round’. For example, 20% profit on sales (for assembling the site, planning, funding and delivering both private sector and affordable housing) plus a contingency is the industry benchmark and the appropriate measure as recommended by the RICS. Higher profit margins may be supported depending on the measure for example a margin on private sale GDV only, but this is unnecessarily complicated for our ‘high level’ appraisals.
DEVELOPMENT COSTS
4.71 These are the direct costs associated with the development.
4.72 The construction cost information has been derived from the BCIS (Building Cost Information Service). It is weighted or adjusted by BCIS to reflect the Pendle market. Table 4.4 below sets out our baseline construction cost assumptions.
edition guidance note GN 94/2012 Appendix E 54 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 paragraph E.3.2.8.1
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Use BCIS £/sq.m (£/sq.ft) ‘One-off’ housing (<3 units)55 1,101 (107)
Estate Housing 720 (67)
Flats/apartments 807 (75)
Sheltered Housing 1,011 (94)
Offices 764 (71)
Factories/Warehouses/Stores (up to 500 430 (40) sq.m)
Factories/Warehouses/Stores (over 2,000 368 (34) sq.m)
Shops 656 (61)
Supermarkets (1,000 – 7,000 sq.m) 968 (90)
Retail warehouses 452 (42)
Table 4.4 – Construction Cost Assumptions (BCIS)
4.73 The above costs are based on the BCIS cost indices rebased for Pendle (accessed website June 2013).
4.74 In addition we have incorporated the following generic cost assumptions (Table 4.5). 4.75 These costs are based upon our professional experience of undertaking plan wide and site specific viability appraisals. They represent a reasonable average of typical costs, although it is acknowledged that some items will differ from our assumptions based upon the specific circumstances of individual developments.
4.76 S106/S278 costs are site specific costs that might be incurred on the particular development typology. Note that this is not to double- count with CIL. Analysis of recent developments in Pendle provides only limited evidence, but significant variations in S106/S278 costs
55 BCIS defines “one-off’ housing of 3 units or less” and “estate housing”. We have applied the “one-off” build rates to the 5x house development typologies are these are more akin to the 3 units or less than estate housing. We have discounted this back to reflect the differing market areas. We have applied the estate housing build rate to the 15x house development typology.
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between different developments. We have therefore elected not to include an assumed S106/S278 cost for the different development scenarios. Rather the residual sum resulting from the viability appraisals will need to be adjusted to include potential S106/S278 costs in judging the viability of emerging plan policy and potential for a CIL levy.
Item Assumption Stamp Duty Land Tax (SDLT) HMRC % rates Acquisition Agent Fees 1% Acquisition Legal Fees 0.5% Planning Application Professional Allowance for typology Fees and Reports Statutory Planning Fees Based on national formula
S106/S278 See explanatory note below
Demolition and Site Clearance Allowance for typology including decontamination and remediation External Works including utilities 10% allowance
Contingency 5%
Professional Fees 10%
Sale Agents 1%
Sale Legals 0.5%
Letting Agents 15%
Letting Legals 5%
Marketing and promotion 3% (residential) / 1% + RF (commercial) Table 4.5 – Other Appraisal Cost Assumptions
4.77 The residential marketing and promotion is to include show house and use of sales incentives (e.g. stamp duty paid, part exchange, white goods etc).
4.78 The commercial marketing and promotion includes an allowance for marketing collateral (e.g. website etc) as well as a rent free allowance as a proxy for rent free and tenants fit out contribution(s).
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RESIDENTIAL / COMMERCIAL DEVELOPMENT SCHEME TYPES AND UNIT MIXES 4.78 Development appraisals using the principles and methodology outlined above have been carried out to review the viability of different types of residential and commercial developments schemes for the property and land uses stated above.
4.79 The notional development schemes were all developed and discussed by the consultancy team following a review of all the information provided by the client, taking into account Local Plan Policies, the Council’s Monitoring Reports, Affordable Housing Viability Study, Strategic Housing Land Availability Assessments (SHLAA), other data and evidence.
4.80 It was necessary to determine residential and commercial development schemes most relevant and likely to come forward across Pendle. The scheme types are proposed as reasonably representative for the purposes of this viability testing study.
4.81 Our objective is to model a set of development sites that are broadly representative of the type of development that is likely to come forward in Pendle in the future.
Residential Development Schemes
4.82 For the residential schemes different scenario types were tested on notional development sites with the following mix of dwellings. Each residential development scenario is tested to assess the maximum affordable housing provision that can be viably achieved in each market area, where possible up to the SHMA affordable housing target of 40%.
4.83 The SHMA identifies only three market areas in Pendle: the M65 Corridor, West Craven Towns and the Rural Area. However, our market analysis suggests that there are distinct price differences in the M65 Corridor, with prices in the north of this corridor (i.e. north of the M65) higher than the south (i.e. south of the M65). Therefore, we have adopted four distinct sub-market areas in which to assess the development scenarios. These are:
M65 Corridor M65 Corridor North West Craven Towns Rural Area
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1 unit scheme
Unit Type No of Units Sq.m/ Unit Total Sq.m
2 bed house
3 bed house
4 bed house 1 115 115
Total 1 115
5 unit scheme
Unit Type No of Units Sq.m/ Unit Total Sq.m
2 bed house 2 70 140
3 bed house 2 85 170
4 bed house 1 115 115
Total 5 425
15 unit scheme
Unit Type No of Units Sq.m/ Unit Total Sq.m
2 bed house 5 70 350
3 bed house 7 85 595
4 bed house 3 115 345
Total 15 1290
50 unit scheme
Unit Type No of Units Sq.m/ Unit Total Sq.m
1 bed flat 2 50 100
2 bed flat 3 60 180
2 bed house 18 70 1,260
3 bed house 20 85 1,700
4 bed house + 7 115 805 garage
Total 50 4,045
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100 unit scheme
Unit Type No of Units Sq.m/ Unit Total Sq.m
1 bed flat 5 50 250
2 bed flat 5 60 300
2 bed house 35 70 2,450
3 bed house 40 85 3,400
4 bed house + 15 115 1,725 garage
Total 8,125
Commercial
4.83 The range of commercial schemes assessed is based on historical precedent as the type of schemes that are likely to come forward in a market of Pendle’s size, demographics and location. The commercial schemes are small to medium sized and aim to mainly serve the local market, rather than large scale inward investment.
Use Nelson TC Barnoldswick Retail Park Industrial Class & Colne TC
A1/A2 46 sq.m 46 sq.m
139 sq.m 139 sq.m 1858 sq.m
550 sq.m 550 sq.m
A3/A4/A5 140 sq.m 140 sq.m
465 sq.m 465 sq.m
B1 140 sq.m 140 sq.m 140 sq.m
465 sqm 465 sq.m 465 sq.m
B2/B8 140 sq.m 140 sq.m 140 sq.m
465 sq.m 465 sq.m 465 sq.m
929 sq.m 929 sq.m 929 sq.m
C1 60 Bed 60 Bed
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VALUE ASSUMPTIONS
4.84 For the residential scheme types modelled as stated above in this study a range of sales value levels have been applied to each notional scheme tested, based on market research and analysis of comparables in the surrounding area. This is in order to test the scope for and the sensitivity of scheme viability to the requirement for a range of potential CIL rates.
4.85 Affordable housing values were also researched having regard to the affordable housing tenure types.
4.86 The viability of affordable housing was tested to the point where development is unviable.
4.87 The affordable housing tenure mix is based upon the tenure mix recommended in the SHMA Update 2013.
4.88 A summary of the sales value ranges for the unit types applied for each residential notional scheme tested is shown below. These are shown as a capital values per unit, although these were then further analysed and a capital value per sq m was then adopted for each of the unit types in each appraisal.
4.89 It should be noted that no allowances have been made for the ground rents of the residential flats forming part of the notional schemes tested, reflecting the nature of the CIL Viability Testing Study.
4.90 These values were tested at the developers’ seminar held at Pendle Borough Council on 12 June 2013. This was subsequently further tested with attending and non-attending delegates via email.
Residential Development
M65 Corridor
Property Type Value Avg £/sq.m (£/sq.ft)
4 Bedroom House £180,000 £1,565 (£145)
3 Bedroom House £130,000 £1,529 (£142)
2 bedroom House £110,000 £1,571 (£146)
2 Bedroom Flat £85,000 £1,417 (£132)
1 Bedroom Flat £75,000 £1,500 (£139)
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M65 Corridor North
Property Type Value Avg £/sq.m (£/sq.ft)
4 Bedroom House £220,000 £1,913 (£178)
3 Bedroom House £140,000 £1,647 (£153)
2 bedroom House £110,000 £1,571 (£146)
2 Bedroom Flat £85,000 £1,417 (£132)
1 Bedroom Flat £75,000 £1,500 (£139)
West Craven Towns
Property Type Value Avg £/sq.m (£/sq.ft)
4 Bedroom House £250,000 £2,174 (£202)
3 Bedroom House £140,000 £1,647 (£153)
2 bedroom House £110,000 £1,571 (£146)
2 Bedroom Flat £85,000 £1,417 (£132)
1 Bedroom Flat £75,000 £1,500 (£139)
Rural Area
Property Type Value Avg £/sq.m (£/sq.ft)
4 Bedroom House £340,000 £2,956 (£275)
3 Bedroom House £180,000 £2,118 (£197)
2 bedroom House £130,000 £1,857 (£173)
2 Bedroom Flat £95,000 £1,583 (£147)
1 Bedroom Flat £85,000 £1,700 (£158)
Commercial
4.91 For the commercial schemes modelled as stated above a range of rental and sales values have been applied to each notional scheme tested based on market research and analysis of comparables in the surrounding areas. These values were tested at the developers’ seminar held at Pendle Borough Council on 12th June 2013. This was subsequently further tested with attending and non-attending delegates via email.
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4.92 A summary of the rental values/sales values applied for commercial scheme is shown below.
Nelson
Use Class Rental £/sq.m Yield (£/sq.ft)
A1/A2 £129 (£12) 8.5%
A3/ A4/ A5 £129 (£12) 8.5%
B1 £107 (£10) 10.5%
C1 £3,500 per bed
C2 Capital Value of £75,000/ bed
Barnoldswick & Colne
Use Class Rental £/sq.m Yield (£/sq.ft)
A1/A2 £107 (£10) 8.5%
A3/ A4/ A5 £107 (£10) 8.5%
B1 £92 (£8.50) 12%
C1 £3,500 per bed 7%
C2 Capital Value of £75,000/ bed
Out of Town Retail
Use Class Rental £/sq.m Yield (£/sq.ft)
Warehouse £129 (£12) 7.5%
Food Retail (Aldi) £140 (£13) 5.5%
Food Retail £188 (£17.50) 5.25% (Tesco)
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Industrial
Use Class Rental £/sq.m Yield (£/sq.ft)
B2/ B8 sub £65 (£6) 10% 500sq.ft
500 – 5,000sq.ft £48 (£4.50) 10%
5,000sq.ft+ £38 (£3.50) 10%
LAND VALUES
4.93 The weakness of the development market since as 2007 has meant that this study has found limited detailed comparable evidence of land deals that have been transacted in the Borough of Pendle. The developers’ seminar considered this issue and the opinion is that whilst there is a strong requirement for residential in the area, particularly in more desirable locations, such as Barrowford, Earby and Fence, there is a disconnect between the perception of value and the real value of land.
4.94 Considering this lack of evidence, we have assumed the following as value benchmarks. This has been done from consultation with commercial agents as well as the developers present at the meeting.
Geographical Area & Proposed Land Use Value / Net Developable Acre
M65 Corridor – Residential £200,000
M65 Corridor North – Residential £200,000
West Craven Towns – Residential £250,000
Rural Area – Residential £400,000
Pendle Borough – Employment (B1, B2 & B8) £125,000
Pendle Borough – Small Retail Parade £250,000
Pendle Borough – Small Foodstore £650,000
Pendle Borough – Large Foodstore £1,000,000
Pendle Borough – Retail Warehouse £500,000
Pendle Borough – Town Centre Retail £650,000
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4.95 The figures are presented by comparing the Pendle values achieved with the current land values being achieved in the other North West conurbations and the Central Lancashire belt.
Geographical Area Value / Net Developable Acre
Greater Manchester (Average) £700K
Merseyside £550K
Lancashire (Chorley, South Preston) £525K
East Lancashire (Rural) £300K
East Lancashire (Urban) £125K
4.96 It is interesting to note that developers would be interested in the borough if the development of sites in the more affluent (and attractive) rural area was encouraged.
MARGIN FOR CIL
4.97 Figure 4.1 clearly shows when as scheme is viable and not viable. A scheme is viable if the total of all the costs of development including land acquisition, planning obligations and profit are less than the GDV of the scheme.
4.98 Conversely, if the GDV is less than the total costs of development (including land, S106s and profit) the scheme will be unviable.
4.99 We have calculated whether there is a margin for CIL on the following basis (Figure 4.3).
4.100 The recommended maximum CIL rate is based on the margin for CIL (see Figure 4.3 above) divided by the floor area. In the case of commercial property/typologies this is the margin for CIL divided by the total GIA (gross internal area). In the case of residential typologies this is the margin for CIL divided by the total GIA of the private market residential delivered on-site (as CIL is not payable on Affordable Housing). Note that in the case of development typologies with a Commuted Sum in lieu of on-site affordable housing the margin for CIL is divided by the scheme area as this would be entirely private sector housing.
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Gross Development Value (net of affordable housing)
less Profit, Finance and Overhead
less Development Costs
less Policy Requirements (e.g. CSH / BREEAM)
= Residual Land Value (gross)
less Site Acquisition Costs / Finance on Land
= Residual Land Value (net)
If positive/viable,
less Threshold Land Value
= Margin for CIL
Figure 4.3 – Appraisal Methodology
4.101 Using the information from the evidence base we have developed a series of viability models to appraise the hypothetical development typologies identified. This is based on a simple residual appraisal model which tests the ‘margin’ for CIL beyond actual land values and ‘normal’ developers profit. This is to ensure that CIL can be accommodated without the development scenario becoming unviable.
4.102 In order to advise on any development surplus for CIL we have benchmarked land values from the market research. We have calculated the site area required for each development typology based upon the development densities typical of each typology.
4.103 Any ‘super’ development surplus beyond ‘normal’ profit and appropriate land values represents an amount for CIL.
4.104 In the event that there is a deficit in the appraisal taking into account market land values and normal developer’s profit, this shows that there is no capacity to levy CIL for that particular typology. Where there is a development surplus after Threshold Land Values and normal profit, this is an amount that can potentially be captured as CIL.
4.105 Finally, once the model has been run for the different development typologies we have carried out a sensitivity analysis on the value (+/- 20%) and construction cost assumptions (+/- 10%) to understand the potential implications of changes in the market and
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construction industry on any surplus for CIL. This is important as CIL should not be set at the limits of viability given that markets and economic circumstances change (for example, moving from CSH Level 3 to 4 in future years could add 8% to costs).
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5 DEVELOPMENT APPRAISALS
5.1 This section of the report summarises the results of our financial viability modelling and sensitivity testing. It assesses the viability of emerging Local Plan policy, including affordable housing provision and assesses the potential margin available for CIL and S106 for each of the development type scenarios identified in the previous section.
5.2 The full outputs from appraisals of various development scenarios are attached as Appendices 2 and 3.
RESIDENTIAL DEVELOPMENT 5.3 Our approach is to model a set of residential development sites that are broadly representative of the type of development that is likely to come forward in Pendle in the future. The modelled sites range from 1 to 100 dwellings.
5.4 The residential development scenarios include a mix of different sizes and types of residential development in each of the housing sub-market areas. The development scenarios have been designed to reflect the character and size of typical local development schemes. These scenarios include:
A single dwelling
Five dwellings
15 dwellings
50 dwellings
100 dwellings
A care home
5.5 Details of the mix and size of house types were provided in the previous section. Each of the residential development scenarios are tested in each of the four housing market areas to assess the different market conditions and prevailing house prices in each area of (the M65 Corridor, M65 Corridor North, West Craven Towns and the Rural Area). Prices for the care home are considered to be broadly equal in each market area and therefore a single appraisal has been prepared for this scenarios reflecting viability across the Borough.
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CHANGES IN VALUE OVER TIME
5.6 To reflect changes in the market over time (and potential rises or falls in property values and / or construction costs), a sensitivity analysis has been applied to all of these matrices. For easy understanding to the reader, we have applied a simple ‘traffic light’ colour coding to the appraisals. For example:
Values
160,623 80% 90% 100% 110% 120% 90% (134,640) 74,730 284,100 493,470 702,840 95% (196,379) 12,991 222,361 431,731 641,101 100% (258,117) (48,747) 160,623 369,993 579,363 105% (319,856) (110,486) 98,884 308,254 517,624
Construction Costs 110% (381,594) (172,224) 37,146 246,516 455,886
Table 5.1 – Appraisal Example
RED = Not viable
AMBER = Marginal Viability
GREEN = Viable
The stronger the shading, the more definite is the classification.
The residual value is negative when the figure is shown in brackets.
5.7 The Sensitivity analysis shows the impact of changing property values, rising from 80% of current market values in the left hand columns to 120% of current market values in the right hand column with incremental 10% rises in between. It shows the impact of changing construction costs rising from 90% of current costs in the top row to 110% of current costs in the bottom row with incremental 5% rises in between. The combined impact of changes to property values and construction costs is clearly demonstrated. The present residual value, based on existing values and construction costs is identified in the middle row and column of the matrix (i.e. £160,623 in the appraisal example) and repeated for ease in the top left hand corner.
SINGLE UNIT SCHEME
5.6 The following tables set out the viability results for the single dwelling typology (schemes 1-4 – M65 Corridor, M65 Corridor North, West Craven Towns and Rural Area).
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Values
(117,521) 80% 90% 100% 110% 120% 90% (128,335) (114,215) (100,095) (85,975) (71,854) 95% (137,048) (122,928) (108,808) (94,687) (80,567) 100% (145,761) (131,641) (117,521) (103,400) (89,280) 105% (154,474) (140,354) (126,233) (112,113) (97,993)
Construction Costs 110% (163,187) (149,067) (134,946) (120,826) (106,706)
Table 5.2 – Scheme 1. 1 Unit M65 Corridor
Values
(86,142) 80% 90% 100% 110% 120% 90% (103,233) (85,975) (68,717) (51,459) (34,200) 95% (111,946) (94,687) (77,429) (60,171) (42,913) 100% (120,658) (103,400) (86,142) (68,884) (51,626) 105% (129,371) (112,113) (94,855) (77,597) (60,339)
Construction Costs 110% (138,084) (120,826) (103,568) (86,310) (69,052)
Table 5.3 – Scheme 2. 1 Unit M65 Corridor North Table 5.3 – Scheme 2. 1 Unit M65 Corridor North
Values
(62,609) 80% 90% 100% 110% 120% 90% (84,406) (64,794) (45,183) (25,571) (5,960) 95% (93,119) (73,507) (53,896) (34,284) (14,673) 100% (101,831) (82,220) (62,609) (42,997) (23,386) 105% (110,544) (90,933) (71,322) (51,710) (32,099)
Construction Costs 110% (119,257) (99,646) (80,034) (60,423) (40,812)
Table 5.4 – Scheme 3 1 Unit West Craven Towns
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Values
7,992 80% 90% 100% 110% 120% 90% (27,925) (1,253) 25,418 52,090 78,761 95% (36,638) (9,966) 16,705 43,377 70,048 100% (45,351) (18,679) 7,992 34,664 61,335 105% (54,064) (27,392) (720) 25,951 52,623
Construction Costs 110% (62,776) (36,105) (9,433) 17,238 43,910
Table 5.5 – Scheme 4. 1 Dwelling Rural Area
5.7 As can be seen from Tables 5.2, 5.3 and 5.4 residential development of the single dwelling scheme is unviable in the M65 Corridor, the M65 Corridor North and West Craven Towns (i.e. there is a deficit of £117,521, £86,142 and £62,609 respectively below the threshold land value). Sensitivity analysis illustrates that even combining increased property values and a fall in constructions costs would not result in viable development.
5.8 Thus, land owners would have to considerably reduce their aspirations for land or site value for development to be viable. Without significant downward adjustments to land value aspirations there is no margin for planning contributions (i.e. affordable housing, CIL and S106 contributions).
5.9 Table 5.5 illustrates that the viability for the single dwelling scheme in the Rural Area is significantly better than the M65 Corridor or West Craven Towns (i.e. there is a small surplus of £7,992 above the threshold land value).
5.10 Tables 5.2-5.5 support the Council’s emerging Local Plan policy not to require affordable housing on the smallest residential developments across the Local Plan area. They also suggest that small scale residential development (i.e. a single dwelling) would, on the basis of current market evidence, also be unable to sustain significant policy requirements (i.e. higher design standards), CIL or S106 contributions.
FIVE UNIT SCHEME
5.10 The following tables set out the viability results for the five dwelling typology (schemes 5-8 – M65 Corridor, M65 Corridor North, West Craven Towns and Rural Area).
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Values
(38,484) 80% 90% 100% 110% 120% 90% (97,198) (47,501) 2,195 51,891 101,588 95% (117,537) (67,841) (18,144) 31,552 81,248 100% (137,877) (88,180) (38,484) 11,213 60,909 105% (158,216) (108,520) (58,823) (9,127) 40,570
Construction Costs 110% (178,555) (128,859) (79,162) (29,466) 20,230
Table 5.6 – Scheme 5. 5 Units M65 Corridor
Values
6,695 80% 90% 100% 110% 120% 90% (61,055) (6,841) 47,373 101,588 155,802 95% (81,394) (27,180) 27,034 81,248 135,462 100% (101,734) (47,520) 6,695 60,909 115,123 105% (122,073) (67,859) (13,645) 40,570 94,784
Construction Costs 110% (142,412) (88,198) (33,984) 20,230 74,444
Table 5.7 – Scheme 6. 5 Units M65 Corridor North
Values
25,438 80% 90% 100% 110% 120% 90% (49,841) 8,138 66,117 124,096 182,075 95% (70,181) (12,202) 45,777 103,757 161,736 100% (90,520) (32,541) 25,438 83,417 141,396 105% (110,859) (52,880) 5,099 63,078 121,057
Construction Costs 110% (131,199) (73,220) (15,241) 42,738 100,718
Table 5.8 – Scheme 7. 5 Units West Craven Towns
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Values
42,952 80% 90% 100% 110% 120% 90% (53,568) 15,031 83,630 152,229 220,828
n Costs nCosts 95% (73,907) (5,308) 63,291 131,890 200,489 100% (94,246) (25,647) 42,952 111,551 180,150 105% (114,586) (45,987) 22,612 91,211 159,810
Constructio 110% (134,925) (66,326) 2,273 70,872 139,471
Table 5.9 – Scheme 8. 5 Units Rural Area with 15% affordable housing
5.11 As can be seen from Table 5.6 residential development of the five units scheme is just about viable in the M65 Corridor (i.e. there is a small deficit of £38,484 below the threshold land value). Sensitivity analysis illustrates a 10% increase to property values would result in viable development in the M65 Corridor.
5.12 Alternatively, land owners would have to reduce their aspirations for land or site value for development to be viable. Without very significant downward adjustments to land value aspirations or significant property value increases there is no margin for planning contributions.
5.13 Tables 5.7-5.9 illustrate that the viability for the five unit scheme in the M65 Corridor North, West Craven Towns and the Rural Area is better than the M65 Corridor, with development steadily growing in viability (i.e. there is a modest surplus of £6,695 above the threshold land value in the M65 Corridor North, £25,438 in the West Craven Towns and £42,952 in the Rural Area). Sensitivity analysis illustrates that an increase in construction costs or reduction in property values would marginalise development viability or renders it unviable. Even in the stronger rural market area there is not a significant margin for CIL or S106 contributions.
5.14 Tables 5.6-5.8 support the Council’s emerging Local Plan policy not to require affordable housing on residential development schemes of this size in the M65 Corridor, M65 Corridor North or West Craven Towns. They suggest that this scale of residential development (i.e. a five dwelling scheme) would, on the basis of current market evidence, be unable to sustain significant policy requirements (i.e. higher design standards), CIL or S106 contributions.
5.15 Table 5.9 shows that the affordable housing policy in the emerging Local Plan, for the Rural Area (i.e. 15% provision), is likely to be viable. However, allowing for 15% affordable housing provision,
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table 5.9 suggests that this scale of residential development (i.e. a five dwelling scheme) would, on the basis of current market evidence, be able to sustain only modest additional policy requirements (i.e. higher design standards), CIL or S106 contributions.
15 UNIT SCHEME
5.16 The following tables set out the viability results for the 15 dwelling typology (schemes 9-12 – M65 Corridor, M65 Corridor North, West Craven Towns and Rural Area).
Values
(104,352) 80% 90% 100% 110% 120% 90% (282,065) (131,470) 19,125 169,720 320,315 95% (343,804) (193,209) (42,614) 107,981 258,576 100% (405,542) (254,947) (104,352) 46,243 196,838 105% (467,281) (316,686) (166,091) (15,496) 135,099
Construction Costs 110% (529,020) (378,425) (227,830) (77,235) 73,360
Table 5.10 – Scheme 9. 15 Units M65 Corridor
Values
38,713 80% 90% 100% 110% 120% 90% (167,613) (2,712) 162,190 327,091 491,993 95% (229,352) (64,450) 100,451 265,353 430,254 100% (291,090) (126,189) 38,713 203,614 368,516 105% (352,829) (187,927) (23,026) 141,876 306,777
Construction Costs 110% (414,567) (249,666) (84,764) 80,137 245,039
Table 5.11 – Scheme 10. 15 Units M65 Corridor North
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Values
102,473 80% 90% 100% 110% 120% 90% (127,948) 49,001 225,950 402,899 579,848 95% (189,687) (12,738) 164,211 341,160 518,110 100% (251,426) (74,476) 102,473 279,422 456,371 105% (313,164) (136,215) 40,734 217,683 394,632
Construction Costs 110% (374,903) (197,954) (21,004) 155,945 332,894
Table 5.12 – Scheme 11. 15 Units West Craven Towns
Values
160,623 80% 90% 100% 110% 120%
osts osts 90% (134,640) 74,730 284,100 493,470 702,840 95% (196,379) 12,991 222,361 431,731 641,101 100% (258,117) (48,747) 160,623 369,993 579,363 105% (319,856) (110,486) 98,884 308,254 517,624
ConstructionC 110% (381,594) (172,224) 37,146 246,516 455,886
Table 5.13 – Scheme 12. 15 Units Rural Area with 20% Affordable Housing
5.17 As can be seen from table 5.10 residential development of the 15 units scheme is unviable in the M65 Corridor (i.e. there is a deficit of £104,352 below the threshold land value). Sensitivity analysis illustrates a 10% increase to property values would result in viable development in the M65 Corridor.
5.18 Alternatively, land owners would have to reduce their aspirations for land or site value for development to be viable. A considerable reduction of land prices would be necessary in the M65 Corridor. Without significant downward adjustments to land value aspirations or significant property value increases there is no margin for planning contributions in the M65 Corridor.
5.19 Tables 5.11-5.13 illustrates that the viability for the 15 unit scheme in the M65 Corridor North, West Craven Towns and the Rural Area is better than the M65 Corridor, with development steadily growing in viability (i.e. there is a modest surplus of £38,713 above the threshold land value in the M65 Corridor North, £102,473 in the West Craven Towns and £160,623 in the Rural Area). Importantly, the appraisal for the Rural Area includes affordable housing provision in line with the Council’s emerging Local Plan policy target
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of 20%. Sensitivity analysis illustrates that an increase in construction costs or reduction in property values would marginalise development viability or renders it unviable in the M65 Corridor North.
5.20 In the stronger market areas of West Craven Towns and the Rural Area, development viability appears stronger and there is a modest margin for CIL or S106 contributions. The level of viability in these areas is sufficient to potentially sustain an increase of up to 10% of the affordable housing target. Tables 5.14 and 5.15 illustrate the impact of increasing the affordable housing target in West Craven Towns and the Rural Area to 10% and 30% respectively.
Values
42,310 80% 90% 100% 110% 120% 90% (176,079) (5,146) 165,787 336,720 507,653 95% (237,817) (66,884) 104,049 274,981 445,914 100% (299,556) (128,623) 42,310 213,243 384,176 105% (361,294) (190,361) (19,429) 151,504 322,437
Construction Costs 110% (423,033) (252,100) (81,167) 89,766 260,699
Table 5.12 – Scheme 11a. 15 Units West Craven Towns with 10% Affordable Housing
Values
48,106 80% 90% 100% 110% 120% 90% (224,654) (26,535) 171,583 369,701 567,819 95% (286,392) (88,274) 109,844 307,963 506,081 100% (348,131) (150,012) 48,106 246,224 444,342 105% (409,869) (211,751) (13,633) 184,485 382,604
Construction Costs 110% (471,608) (273,490) (75,371) 122,747 320,865
Table 5.15 – Scheme 12a. 15 Units Rural Area with 30% Affordable Housing
5.21 Modest increases to property values would significantly increase viability of development sites in the M65 Corridor North, West Craven Towns and Rural Area and provide further potential for increasing the affordable housing target and other planning contributions.
5.22 Table 5.10 supports the Council’s emerging Local Plan policy not to require affordable housing on residential development schemes of
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this size in the M65 Corridor. It shows that this scale of residential development (i.e. a 15 dwelling scheme) would, on the basis of current market evidence, be unable to sustain higher policy requirements (i.e. higher design standards), CIL or S106 contributions in this area. However, Table 5.11 illustrates that development is viable in the northern part of M65 Corridor. Viability is only marginal and there is not a significant surplus to sustain higher policy requirements, CIL or S106 contributions in this area.
5.23 Tables 5.12 and 5.13 suggest that affordable housing policy in the emerging Local Plan policy could be increased slightly in the West Craven Towns and Rural Area (i.e. 10% provision in West Craven Towns and 30% in the Rural Area) and development is likely to be viable. Increasing the affordable housing target would render development more marginal and a careful balance needs to be struck between affordable housing and other planning contributions (i.e. design standards or infrastructure works).
5.24 Where targets are set for affordable housing it will be important to provide scope for site-by-site viability assessment to reflect site specific costs and viability considerations.
50 UNIT SCHEME
5.25 The following tables set out the viability results for the 50 dwelling typology (schemes 13-16 – M65 Corridor, M65 Corridor North, West Craven Towns and Rural Area).
Values
(343,667) 80% 90% 100% 110% 120% 90% (888,444) (418,211) 52,022 522,255 992,488
95% (1,086,288) (616,055) (145,822) 324,411 794,643 on Costs onCosts 100% (1,284,133) (813,900) (343,667) 126,566 596,799 105% (1,481,977) (1,011,744) (541,511) (71,279) 398,954
Constructi 110% (1,679,822) (1,209,589) (739,356) (269,123) 201,110
Table 5.16 – Scheme 13. 50 Units M65 Corridor
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Values
17,761 80% 90% 100% 110% 120% 90% (599,301) (92,926) 413,450 919,826 1,426,202 95% (797,146) (290,770) 215,606 721,981 1,228,357 100% (994,990) (488,615) 17,761 524,137 1,030,512 105% (1,192,835) (686,459) (180,083) 326,292 832,668
Construction Costs 110% (1,390,679) (884,304) (377,928) 128,448 634,823
Table 5.17 – Scheme 14. 50 Units M65 Corridor North
Values
161,059 80% 90% 100% 110% 120% s s 90% (517,747) 19,500 556,748 1,093,996 1,631,243 95% (715,592) (178,344) 358,904 896,151 1,433,399 100% (913,436) (376,189) 161,059 698,307 1,235,554 105% (1,111,281) (574,033) (36,786) 500,462 1,037,710
ConstructionCost 110% (1,309,125) (771,878) (234,630) 302,618 839,865
Table 5.18 – Scheme15. 50 Units West Craven Towns
Values
210,597 80% 90% 100% 110% 120% 90% (625,325) (9,520) 606,286 1,222,092 1,837,897 95% (823,170) (207,364) 408,441 1,024,247 1,640,053 100% (1,021,014) (405,209) 210,597 826,403 1,442,208 105% (1,218,859) (603,053) 12,752 628,558 1,244,364
Construction Costs 110% (1,416,703) (800,898) (185,092) 430,713 1,046,519
Table 5.19 – Scheme 16. 50 Units Rural Area with 20% Affordable Housing
5.26 As can be seen from table 5.16 residential development of the 50 units scheme is unviable in the M65 Corridor (i.e. there is a deficit of £343,667 below the threshold land value). Sensitivity analysis indicates that a 10% rise in property values in the M65 Corridor will be necessary for development to become viable (assuming construction costs remain static).
5.27 Alternatively, land owners would have to reduce their aspirations for land or site value for development to be viable. A considerable
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reduction of land prices would be necessary in the M65 Corridor. Without significant downward adjustments to land value aspirations or significant property value increases there is no margin for planning contributions in the M65 Corridor.
5.28 Tables 5.17-5.19 illustrates that the viability for the 50 unit scheme in the M65 Corridor North, West Craven Towns and the Rural Area is better than the M65 Corridor, with development steadily growing in viability (i.e. there is a modest surplus of £17, 761 above the threshold land value in the M65 Corridor North, £161,059 in the West Craven Towns and £210,697 in the Rural Area). Importantly, the appraisal for the Rural Area includes affordable housing provision in line with the Council’s emerging Local Plan policy target of 20%. Sensitivity analysis illustrates that an increase in construction costs or reduction in property values would marginalise development viability or renders it unviable in the M65 Corridor North, West Craven Towns and the Rural Area.
5.29 In the stronger market areas of the West Craven Towns and the Rural Area, development viability appears stronger and there is a modest margin for CIL or S106 contributions. The level of viability in these areas is sufficient to potentially sustain an increase of up to 5% of the affordable housing target. Tables 5.20 and 5.21 illustrate the impact of increasing the affordable housing target in West Craven Towns and the Rural Area to 5% and 25% respectively.
Values
69,727 80% 90% 100% 110% 120% 90% (590,813) (62,699) 465,416 993,530 1,521,645 95% (788,658) (260,543) 267,571 795,686 1,323,800 100% (986,502) (458,388) 69,727 597,841 1,125,956 105% (1,184,347) (656,232) (128,118) 399,997 928,111
Construction Costs 110% (1,382,191) (854,077) (325,962) 202,152 730,267
Table 5.20 – Scheme15a. 50 Units West Craven Towns with 5% Affordable Housing
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Values
98,272 80% 90% 100% 110% 120% 90% (715,185) (110,612) 493,961 1,098,534 1,703,107 95% (913,030) (308,457) 296,116 900,689 1,505,263 100% (1,110,874) (506,301) 98,272 702,845 1,307,418 105% (1,308,719) (704,146) (99,573) 505,000 1,109,573
Construction Costs 110% (1,506,563) (901,990) (297,417) 307,156 911,729
Table 5.21 – Scheme 16a. 50 Units Rural Area with 25% Affordable Housing
5.30 Tables 5.16-5.17 support the Council’s emerging Local Plan policy not to require affordable housing on residential development schemes of this size in the M65 Corridor. They suggest that this scale of residential development (i.e. a 50 dwelling scheme) would, on the basis of current market evidence, be unable to sustain significant policy requirements (i.e. higher design standards), CIL or S106 contributions. However, Table 5.17 illustrates that development is viable in the northern part of M65 Corridor. Although viability is only marginal and there is not a significant surplus to sustain higher policy requirements, CIL or S106 contributions in this area.
5.31 Tables 5.18-5.21 suggest that the affordable housing policy in the emerging Local Plan policy could be increased slightly in the West Craven Towns and Rural Area (i.e. 5% provision in West Craven Towns and 25% in the Rural Area) and development is likely to be viable. Increasing the affordable housing target would render development more marginal and a careful balance needs to be struck between affordable housing and other planning contributions (i.e. design standards or infrastructure works).
100 UNIT SCHEME
5.32 The following tables set out the viability results for the 100 dwelling typology (schemes 17-20 – M65 Corridor, M65 Corridor North, West Craven Towns and Rural Area).
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Values
(566,073) 80% 90% 100% 110% 120% 90% (1,687,089) (740,458) 206,173 1,152,803 2,099,434 95% (2,073,212) (1,126,581) (179,950) 766,680 1,713,311 100% (2,459,335) (1,512,704) (566,073) 380,557 1,327,188 105% (2,845,458) (1,898,827) (952,196) (5,566) 941,065
Construction Costs 110% (3,231,581) (2,284,950) (1,338,319) (391,689) 554,942
Table 5.22 – Scheme 17. 100 Units M65 Corridor
Values
188,214 80% 90% 100% 110% 120% 90% (1,083,659) (61,599) 960,460 1,982,520 3,004,579 95% (1,469,782) (447,722) 574,337 1,596,397 2,618,456 100% (1,855,905) (833,845) 188,214 1,210,274 2,232,333 105% (2,242,028) (1,219,968) (197,909) 824,151 1,846,210
Construction Costs 110% (2,628,151) (1,606,091) (584,032) 438,028 1,460,087
Table 5.23 – Scheme 18. 100 Units M65 Corridor North
Values
451,064 80% 90% 100% 110% 120% 90% (949,038) 137,136 1,223,310 2,309,484 3,395,658 95% (1,335,161) (248,987) 837,187 1,923,361 3,009,535 100% (1,721,284) (635,110) 451,064 1,537,238 2,623,412 105% (2,107,407) (1,021,233) 64,941 1,151,115 2,237,289
Construction Costs 110% (2,493,530) (1,407,356) (321,182) 764,992 1,851,166
Table 5.24 – Scheme 19. 100 Units West Craven Towns
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Values
401,669 80% 90% 100% 110% 120% 90% (1,321,720) (73,903) 1,173,915 2,421,733 3,669,551 95% (1,707,843) (460,026) 787,792 2,035,610 3,283,428
ction Costs ctionCosts 100% (2,093,966) (846,149) 401,669 1,649,487 2,897,305 105% (2,480,089) (1,232,272) 15,546 1,263,364 2,511,182
Constru 110% (2,866,212) (1,618,395) (370,577) 877,241 2,125,059
Table 5.25 – Scheme 20. 100 Units Rural Area with 20% Affordable Housing
5.33 As can be seen from table 5.22 residential development of the 100 units scheme is unviable in the M65 Corridor (i.e. there is a deficit of £566,073 below the threshold land value). Sensitivity analysis indicates that a 10% rise in property values in the M65 Corridor will be necessary for development to become viable (assuming construction costs remain static).
5.34 Alternatively, land owners would have to reduce their aspirations for land or site value for development to be viable. A considerable reduction of land prices would be necessary in the M65 Corridor. Without significant downward adjustments to land value aspirations or significant property value increases there is no margin for planning contributions in the M65 Corridor.
5.35 Tables 5.23-5.25 illustrate that the viability for the 100 unit scheme in the M65 Corridor North, West Craven Towns and the Rural Area is better than the M65 Corridor, with development steadily growing in viability (i.e. there is a modest surplus of £188,214 above the threshold land value in the M65 Corridor North, £451,064 in the West Craven Towns and £401,669 in the Rural Area). Importantly, the appraisal for the Rural Area includes affordable housing provision in line with the Councils emerging Local Plan policy target of 20%. Sensitivity analysis illustrates that an increase in construction costs or reduction in property values would marginalise development viability or renders it unviable in the M65 Corridor North, West Craven Towns and the Rural Area.
5.36 In the stronger market areas of the West Craven Towns and the Rural Area, development viability appears equally strong and there is a modest margin for CIL or S106 contributions. The level of viability in these areas is sufficient to potentially sustain an increase of up to 5% of the affordable housing target. Tables 5.26 and 5.27
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illustrate the impact of increasing the affordable housing target in West Craven Towns and the Rural Area to 5% and 25% respectively.
5.37 Tables 5.22 and 5.23 support the Council’s emerging Local Plan policy not to require affordable housing on residential development schemes of this size in the M65 Corridor. They suggest that this scale of residential development (i.e. a 50 dwelling scheme) would, on the basis of current market evidence, be unable to sustain significant policy requirements (i.e. higher design standards), CIL or S106 contributions. However, Table 5.17 illustrates that development is viable in the northern part of M65 Corridor. Viability is only marginal and there is not a significant surplus to sustain higher policy requirements, CIL or S106 contributions in this area.
Values
266,414 80% 90% 100% 110% 120% 90% (1,096,758) (29,049) 1,038,660 2,106,369 3,174,078 95% (1,482,881) (415,172) 652,537 1,720,246 2,787,955 100% (1,869,004) (801,295) 266,414 1,334,123 2,401,832 105% (2,255,127) (1,187,418) (119,709) 948,000 2,015,709
Construction Costs 110% (2,641,250) (1,573,541) (505,832) 561,877 1,629,586
Table 5.24 – Scheme 19. 100 Units West Craven Towns with 5% Affordable Housing
Values
174,063 80% 90% 100% 110% 120% 90% (1,503,805) (278,748) 946,309 2,171,366 3,396,423 95% (1,889,928) (664,871) 560,186 1,785,243 3,010,300 100% (2,276,051) (1,050,994) 174,063 1,399,120 2,624,177 105% (2,662,174) (1,437,117) (212,060) 1,012,997 2,238,054
Construction Costs 110% (3,048,297) (1,823,240) (598,183) 626,874 1,851,931
Table 5.25 – Scheme 20. 100 Units Rural Area with 25% Affordable Housing
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5.38 Tables 5.24-5.25 suggest that affordable housing policy in the emerging Local Plan policy could be increased slightly in the West Craven Towns and Rural Area (i.e. 5% provision in West Craven Towns and 25% in the Rural Area) and development is likely to be viable. Increasing the affordable housing target would render development more marginal and a careful balance needs to be struck between affordable housing and other planning contributions (i.e. design standards or infrastructure works).
CARE HOME
5.39 The following table sets out the viability results for the 40 bedroom care home typology (scheme 16).
Values
214,409 80% 90% 100% 110% 120% 90% (185,366) 89,402 364,171 638,939 913,707 95% (260,247) 14,521 289,290 564,058 838,826 100% (335,128) (60,359) 214,409 489,177 763,946 105% (410,008) (135,240) 139,528 414,297 689,065
Construction Costs 110% (484,889) (210,121) 64,648 339,416 614,184
Table 5.26 – Scheme 21. 40 Bedroom Care Home
5.40 Table 5.16 suggests that the 40 bedroom care home scheme is viable (i.e. there is a surplus of £214,409 above the threshold land value). Sensitivity analysis illustrates that the development can accommodate modest increases to build cost (i.e. 5% and 10%) and remain viable. However, a reduction in property value (i.e. 10%) will result in development being unviable.
5.41 Table 5.16 suggests that the care home scheme is potentially able to accommodate modest additional policy requirements (i.e. higher design standards), CIL or S106 contributions.
5.42 The margin available from care home development for additional policy requirements, CIL or S106 contributions equates to about £21/sq.m. This figure is calculated by dividing the surplus available for CIL or S106 contributions by the development floorspace (i.e £214,409/10,000 sq.m). This sum is not available exclusively for CIL and when reasonable policy requirements and site specific S106 costs are discounted the maximum sum available for CIL is unlikely to exceed £10/sq.m.
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COMMERCIAL DEVELOPMENT 5.43 The commercial development scenarios include a mix of different types and sizes of commercial development in the Borough. Where the property market research has identified different price levels for a given commercial use (i.e. offices) appraisals have been prepared for each different market area. The development scenarios have been designed to reflect the character and size of typical local development schemes. These scenarios include:
A 140 sq.m office (tested in Nelson and Barnoldswick / Colne)
A 465 sq.m office (tested in Nelson and Barnoldswick / Colne)
A 140 sq.m industrial unit
A 465 sq.m industrial unit
A 929 sq.m industrial unit
A small 232 sq.m retail parade (i.e. a typical local centre)
A small 929 sq.m foodstore (i.e. a typical discount foodstore format such as Aldi or Lidl)
A large 4,645 sq.m foodstore (i.e. a typical supermarket format such as Asda, Morrisons, Sainsburys or Tesco)
A 1,858 sq.m retail warehouse scheme
A 600 sq.m town centre retail development (tested in Nelson and Barnoldswick / Colne ).
OFFICE DEVELOPMENT (USE CLASS B1)
5.44 The following tables set out the viability results for the office development typologies (schemes 22-25 – 140 sq.m and 465 sq.m office schemes in Nelson and Barnoldswick / Colne).
Values
Values
(97,046) 80% 90% 100% 110% 120% 90% (102,834) (90,042) (77,250) (64,459) (51,667) 95% (112,732) (99,940) (87,148) (74,356) (61,565) 100% (122,629) (109,838) (97,046) (84,254) (71,463) 105% (132,527) (119,735) (106,944) (94,152) (81,360)
Construction Costs 110% (142,425) (129,633) (116,842) (104,050) (91,258)
Table 5.27 – Scheme 22. 140 sq.m Nelson Office Scheme
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Values
(129,625) 80% 90% 100% 110% 120% 90% (128,783) (119,306) (109,829) (100,352) (90,875) 95% (138,681) (129,204) (119,727) (110,250) (100,772) 100% (148,579) (139,102) (129,625) (120,147) (110,670) 105% (158,477) (149,000) (139,522) (130,045) (120,568)
Construction Costs 110% (168,375) (158,897) (149,420) (139,943) (130,466)
Table 5.28 – Scheme 23. 140 sq.m Barnoldswick / Colne Office Scheme
Values
(279,692) 80% 90% 100% 110% 120% 90% (299,107) (256,595) (214,084) (171,572) (129,061) 95% (331,911) (289,400) (246,888) (204,376) (161,865) 100% (364,715) (322,204) (279,692) (237,180) (194,669) 105% (397,519) (355,008) (312,496) (269,985) (227,473)
Construction Costs 110% (430,324) (387,812) (345,300) (302,789) (260,277)
Table 5.29 – Scheme 24. 465 sq.m Nelson Office Scheme
Values
(436,668) 80% 90% 100% 110% 120% 90% (424,312) (397,686) (371,060) (344,434) (317,809) 95% (457,116) (430,490) (403,864) (377,239) (350,613) 100% (489,920) (463,294) (436,668) (410,043) (383,417) 105% (522,724) (496,098) (469,473) (442,847) (416,221)
Construction Costs 110% (555,528) (528,902) (502,277) (475,651) (449,025)
Table 5.30 – Scheme 25. 465 sq.m Barnoldswick / Colne Office Scheme
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5.45 As can be seen from Tables 5.27-5.30 office development in Nelson and Barnoldswick / Colne (the largest commercial centres in Pendle) is unviable. The deficit in each instance is greater than the relative land value threshold and suggests that viability issues stem from office values as opposed to build or land costs. Without significant improvements to office values, developer led office development is unlikely to occur in Pendle.
INDUSTRIAL AND DISTRIBUTION DEVELOPMENT (USE CLASS B2 AND B8)
5.46 The following tables set out the viability results for the industrial and distribution development typologies (schemes 26-29 – 140 sq.m B2, 465 sq.m B2 and 929 sq.m B8).
Values
(49,661) 80% 90% 100% 110% 120% 90% (56,202) (48,132) (40,063) (31,994) (23,925) 95% (61,000) (52,931) (44,862) (36,793) (28,724) 100% (65,799) (57,730) (49,661) (41,592) (33,523) 105% (70,598) (62,529) (54,460) (46,390) (38,321)
Construction Costs 110% (75,397) (67,327) (59,258) (51,189) (43,120)
Table 5.31 – Scheme 26. 140 sq.m Industrial Unit (Use Class B2)
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Values
(222,073) 80% 90% 100% 110% 120% 90% (230,402) (210,290) (190,177) (170,065) (149,952) 95% (246,350) (226,238) (206,125) (186,013) (165,900) 100% (262,298) (242,186) (222,073) (201,961) (181,848) 105% (278,246) (258,134) (238,021) (217,909) (197,796)
Construction Costs 110% (294,194) (274,082) (253,969) (233,857) (213,744)
Table 5.32 – Scheme 27. 465 sq.m Industrial Unit (Use Class B2)
Values
(460,227) 80% 90% 100% 110% 120% 90% (463,760) (434,909) (406,058) (377,208) (348,357) 95% (490,844) (461,994) (433,143) (404,292) (375,442) 100% (517,929) (489,078) (460,227) (431,377) (402,526) 105% (545,013) (516,163) (487,312) (458,461) (429,611)
Construction Costs 110% (572,098) (543,247) (514,396) (485,546) (456,695)
Table 5.33 – Scheme 28. 929 sq.m Distribution Unit (Use Class B8)
5.47 As can be seen from Tables 5.30-5.33 industrial and distribution development in Pendle is unviable. The deficit in each instance is greater than the relative land value threshold and suggests that viability issues stem from industrial and distribution property values as opposed to build or land costs. Without significant improvements to industrial and distribution property values, developer led development is unlikely to occur in Pendle.
RETAIL DEVELOPMENT
5.48 The following tables set out the viability results for the retail development typologies (schemes 29-34 – small retail parade, small foodstore, large foodstore, retail warehouse, Nelson town centre retail development and Barnoldswick / Colne town centre retail development).
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Values
(32,900) 80% 90% 100% 110% 120% 90% (61,552) (35,179) (8,807) 17,566 43,939 95% (73,599) (47,226) (20,853) 5,520 31,892 100% (85,645) (59,272) (32,900) (6,527) 19,846 105% (97,692) (71,319) (44,946) (18,573) 7,799
Construction Costs 110% (109,738) (83,365) (56,993) (30,620) (4,247)
Table 5.34 – Scheme 29. Small Retail Parade
Values
(800,471) 80% 90% 100% 110% 120% 90% (962,686) (809,884) (657,082) (504,280) (351,479) 95% (1,034,380) (881,578) (728,776) (575,975) (423,173) 100% (1,106,074) (953,272) (800,471) (647,669) (494,867) 105% (1,177,768) (1,024,967) (872,165) (719,363) (566,562)
Construction Costs 110% (1,249,463) (1,096,661) (943,859) (791,058) (638,256)
Table 5.35 – Scheme 30. Small (929 sq.m) Foodstore
Values
726,092 80% 90% 100% 110% 120% 90% (1,436,091) 9,476 1,455,042 2,900,608 4,346,174
95% (1,800,565) (354,999) 1,090,567 2,536,133 3,981,699 ion Costs Costs ion 100% (2,165,040) (719,474) 726,092 2,171,658 3,617,225 105% (2,529,515) (1,083,949) 361,618 1,807,184 3,252,750
Construct 110% (2,893,989) (1,448,423) (2,857) 1,442,709 2,888,275
Table 5.36 – Scheme 31. Large (4,645 sq.m) Foodstore
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Values
519,963 80% 90% 100% 110% 120% 90% 55,820 326,925 598,030 869,134 1,140,239 95% 16,787 287,891 558,996 830,101 1,101,206 100% (22,247) 248,858 519,963 791,067 1,062,172 105% (61,281) 209,824 480,929 752,034 1,023,139
Construction Costs 110% (100,314) 170,791 441,895 713,000 984,105
Table 5.37 – Scheme 32. Retail Warehouse
Values
(85,407) 80% 90% 100% 110% 120% 90% (169,014) (96,058) (23,102) 49,853 122,809 95% (200,166) (127,210) (54,255) 18,701 91,657 100% (231,318) (158,363) (85,407) (12,451) 60,505 105% (262,471) (189,515) (116,559) (43,603) 29,352
Construction Costs 110% (293,623) (220,667) (147,711) (74,756) (1,800)
Table 5.38 – Scheme 33. Nelson Town Centre Retail Development
Values
(203,784) 80% 90% 100% 110% 120% 90% (263,073) (202,276) (141,480) (80,683) (19,887) 95% (294,225) (233,428) (172,632) (111,835) (51,039) 100% (325,377) (264,580) (203,784) (142,988) (82,191) 105% (356,529) (295,733) (234,936) (174,140) (113,343)
Construction Costs 110% (387,681) (326,885) (266,088) (205,292) (144,496)
Table 5.39 – Scheme 34. Colne Town Centre Retail Development
5.49 As can be seen from Tables 5.34-5.35 and 5.38-5.39 the majority of retail development schemes in Pendle are unviable (including a small retail parade, small foodstore and town centre retail development in Nelson and Barnoldswick / Colne). The deficit in each instance is greater than the relative land value threshold and suggests that viability issues stem from retail property values as opposed to build or land costs. Without significant improvements to retail property values for small retail and foodstore units, developer led development is unlikely to occur in Pendle.
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5.50 Tables 5.25 and 5.26 suggest that large foodstore and retail warehouse developments in Pendle are viable, generating a surplus above the threshold land value. Large foodstore and retail warehouse development schemes each provide a reasonable margin for additional policy requirements (i.e. higher design standards), CIL or S106 contributions.
5.51 The margin available from large foodstore development for additional policy requirements, CIL or S106 contributions equates to about £156/sq.m. This figure is calculated by dividing the surplus available for CIL or S106 contributions by the development floorspace (i.e £726,092 / 4,645 sq.m). This sum is not available exclusively for CIL and when reasonable policy requirements and site specific S106 costs are discounted the maximum sum available for CIL is unlikely to exceed £50/sq.m.
5.52 The margin available from retail warehouse development for additional policy requirements, CIL or S106 contributions equates to about £347/sq. m. Again, this figure is calculated by dividing the surplus available for CIL or S106 contributions by the development floorspace (i.e £519,963 / 1,500 sq. m). Again, this sum is not available exclusively for CIL and when reasonable policy requirement and site specific S106 are discounted the maximum sum available for CIL is unlikely to exceed £250/sq. m.
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6 CONCLUSIONS & RECOMMENDATIONS
6.1 This study has sought to assess the viability of development in Pendle. This report sets out the methodology, market context, assumptions and results of the plan viability assessment. It is intended to assist the Council with the assessment of the viability of the emerging Pendle Local Plan.
6.2 The NPPF, CIL Guidance and the Harman Local Plan Viability Guidance requires stakeholder engagement, particularly with members of the development industry. Throughout the preparation of this study we have sought to engage the development industry to inform the market analysis and test assumptions. Extensive efforts have been made to engage with members of the development industry and particularly those that have been and are active in Pendle. Feedback during this process has been disappointing, but where feedback has been given, it has been considered and reflected in our assumptions.
6.3 In this report we have tested 34 notional development typology scenarios, including a range of residential and non-residential developments. Where development typologies are perceived to attract different values in different market areas, these have been included in the modelling.
6.4 This section of the report provides conclusions and recommendations on Borough wide development viability. Accounting for overall development viability, conclusions and recommendations are given to:
the viability of emerging Local Plan policies;
the economic viability of meeting affordable housing requirements; and
the scope for a CIL charge to be applied to development and the potential impact on development delivery.
LOCAL PLAN VIABILITY 6.5 The key purpose of this report is to assess and inform the deliverability of the emerging Local Plan. This must be carried out in the context of the emerging policies set out in the Local Plan for Pendle: Core Strategy Publication Report 2012 and the future Pendle Local Plan Part 2: Site Allocations and Development
COLLIERS INTERNATIONAL UK 94 of 104 Pendle Borough Council /
Policies. It must also reflect the existing and historic challenges that are faced in Pendle relating to a weak property market with low prices compared to regional and national averages.
6.6 As has been clearly demonstrated in this report, the property market in Pendle is typified by weak demand, meaning low values. This is not a recent trend. Even in the very strong property market of 2002 – 2007, the borough did not attract much employment led investment, although there has been considerable retail investment in Colne since 2009.
6.7 The tight settlement boundaries around the rural villages and West Craven towns meant that there was limited activity in the more desirable areas. Earby was an exception to this and the settlement has seen a significant amount of housing development over the last decade.
6.8 Similarly, there was little commercial activity and any space that did come forward required gap funding to make it deliverable.
6.9 It is clear that most non-residential development across Pendle and residential development in the parts of the M65 Corridor (excluding the north of this area) is not viable in the current market. This is not surprising bearing in mind the current state of the market, and this is reflected on the ground with the lack of actual development coming forward.
6.10 The lack of development viability is not solely a factor of a high level of development costs or excessive land value thresholds and the Council has not formulated a set of policies that are expensive for the developer to implement. It is more the case that weak development viability stems from low property values associated with limited demand in Pendle.
6.11 When considering the deliverability of the emerging Pendle Local Plan it is also useful to consider paragraph 154 of the NPPF.
154. Local Plans should be aspirational but realistic. They should address the spatial implications of economic, social and environmental change. Local Plans should set out the opportunities for development and clear policies on what will or will not be permitted and where. Only policies that provide a clear indication of how a decision maker should react to a development proposal should be included in the plan.
6.12 The plan is aspirational but realistic. Not all development typologies, particularly housing development in the M65 Corridor (excluding the northern part of this corridor) and the employment sites are viable
COLLIERS INTERNATIONAL UK 95 of 104 Pendle Borough Council /
now, but the Council has sensible ambitions to bring land forward. It is taking practical steps to create the right environment to facilitate development. Policies encourage the provision of well-designed places to live and work, meeting the needs of residents, businesses and their employees. Policies require that development proposals should seek to deliver the highest possible standards of design in terms of built form and sustainability.
6.13 The emerging Pendle Local Plan strikes an appropriate balance between encouraging new residential and economic development without imposing such a level of burden on developers to prevent them, and landowners, making a competitive return.
6.14 In terms of detailed development policies that will be included in the future Pendle Local Plan Part 2: Site Allocations and Development Policies, the Council should not impose policies over and above the reasonable minimum design and sustainability requirements on housing and economic development.
AFFORDABLE HOUSING REQUIREMENTS 6.15 Emerging policy in the Pendle Local Plan requires that affordable housing will be provided where it is viable and at a level that does not burden development with unrealistic targets. The notional residential development scenarios tested in this report support the following affordable housing thresholds identified in the Pendle Local Plan Part 1: Core Strategy Publication Report 2012, based upon existing market prices and development costs.
Table LIV3a – Affordable Housing Targets
Area M65 Corridor West Craven Rural Pendle Towns
Site Size 15 15 0-4 5-9 10+ Threshold
Base 0% 0% N/A 15% 20% Affordable Housing Target
6.16 The SHMA Update 2013 recommends an affordable housing target of 40% across the borough to meet the majority of affordable housing needs. However, it is evident from the Council’s past affordable housing viability study and our own further analysis of affordable housing viability that this target will be difficult to achieve
COLLIERS INTERNATIONAL UK 96 of 104 Pendle Borough Council /
based on existing market conditions and construction costs. Based upon our viability assessment we recommend the following maximum affordable housing targets based on current market conditions and construction costs:
Area M65 Corridor West Craven Rural Pendle Towns
Site Size 15 15 0-4 5-9 10+ Threshold
Base 0% 5% N/A 20% 20% Affordable Housing Target
6.17 The viability testing confirms that in market areas where affordable housing is required, the tenure mix of 30% social rented, 20% affordable rented and 50% intermediate housing recommended in the SHMA Update 2013 is viable, subject to the affordable housing targets discussed above.
6.18 Policy choices on the delivery of affordable housing will need to balance affordability against the deliverability of social rented, affordable rented and intermediate tenures (intermediate being generally cheaper to deliver per unit than social rented and affordable rent offering a new choice and opportunity for delivery).
COMMUNITY INFRASTRUCTURE LEVY 6.18 The notional residential development scenarios tested in this report do not provide a margin above the land value threshold to support the introduction of CIL. . The commercial scenarios indicate that offices and industrial development do not generate sufficient margin. Care homes, large foodstore and retail warehouse development are the only property types capable of supporting CIL. The margins available from these types of development (when policy requirements and site specific S106 costs are discounted is unlikely to exceed £10/sq.m for care homes, £50/sq.m for large foodstores and £250/sq.m for retail warehouses.
6.19 It is for the Council to determine the merits of introducing a community infrastructure levy, but given the costs of introducing and administering it and the very limited types of development on which CIL could be levied, the benefits are likely to be very negligible or nil
COLLIERS INTERNATIONAL UK 97 of 104 Pendle Borough Council /
in current economic conditions. We would not therefore recommend CIL is introduced at this time. Rather, the Council should monitor market conditions and when market values and development activity shows signs of improvement, review this position at that time.
NEXT STEPS 6.20 The recommendations in this study are ‘a consultant’s view’ and do not reflect the particular priorities and emphasis that Pendle Council may put on different parts of its development plan.
6.21 We stress that the information in this report is an important element of the assessment of deliverability - but is only one part of the evidence; the wider context needs to be considered.
COLLIERS INTERNATIONAL UK 98 of 104 Pendle Borough Council
APPENDICES
COLLIERS INTERNATIONAL UK 99 of 104 Pendle Borough Council
1 POLICY COST IMPLICATIONS
COLLIERS INTERNATIONAL UK 100 of 104 Pendle Borough Council Policy Policy Direct Cost Comments / Cost Assumptions Reference Implication SD1 Presumption in Favour of Sustainable No Development will be required to fulfill the principles of Development sustainability. This may indirectly affect viability as environmental or social consideration may add additional costs to development. However, the principles of sustainability are now well established in planning and within our viability appraisals we have had regard to the BCIS cost indices for Pendle which will take this requirement into consideration. SDP 1 Spatial Development Principles No Development is favoured in the larger settlements, reducing in size and scope the smaller/more rural the settlement.
The viability of development depends on various macro- economic factors including population and economic growth. At a local level viability is affected by a range of factors for example landowner expectations and occupier demand.
The supply of land and allocation of sites for development as determined by the planning system is fixed in the short-term and therefore has only an indirect impact on price/viability.
In the long-term as more land is released for development this will influence viability but in the context of other demand pressures.
Limited development in small villages will reduce the supply of new homes and therefore help to maintain the high property prices in certain locations.
There is a need to respect the rural nature of the locality, sensitive design and configuration may thus augment the costs of development.
Development is favoured on previously developed sites and then other land with a defined settlement boundary, which is potentially more costly than development of greenfield sites. However, the priority for redevelopment of brownfield sites and land within defined settlements are now well established in planning and within our viability appraisals we have had regard to the BCIS cost indices for Pendle which will take this requirement into consideration SDP 2 Housing Distribution No The viability of development depends on various macro- economic factors including population and growth in the economy. At a local level viability is affected by a range of factors for example landowner expectations, occupier demand, or funding. The supply of land as determined by the planning system acts as an indirect factor upon the influences on development viability. It shapes which sites or localities are available for development thus impacting the market through limiting the availability of sites in the short term.
We have had regard to different property values in each of the market areas, which will take housing distribution into account. SDP3 Employment Distribution No In the short-term the supply of employment land is fixed. The viability of development economics is impacted by other factors such as demand for commercial premises (itself determined by growth in the wider economy) and site specific costs e.g. local utilities capacity etc. The price of land is established by residual appraisal within this context.
The allocated land may not be the most suitable/viable or subject to abnormal costs impacting on development viability. Skewing the land supply through retaining/allocating land for employment sites will affect land economics, thus viability through the distortion of supply and demand.
In the longer term the supply of (additional) land for business will, all other things being equal, depress the value of employment land and make development more viable. However, the time period for such allocation means that this additional land is absorbed into the market with only an indirect impact on viability.
We have had regard to business premises values in the borough, which will take employment distribution into account. SDP4 Retail Distribution No Major new retail development should be concentrated in the three main town centres. This distorts the market through restricting the supply of land through reduced potential for securing planning in out of town locations. This restriction creates a shortage of supply of good town centre sites which drives up town centre land values. It also creates a premium for edge of centre with planning permission. This market dynamic is factored into the prevailing property market. SDP 5 Infrastructure Requirements Yes Contributing to infrastructure via CIL and planning obligations is a direct cost to developers.
Our economic viability appraisals calculate the maximum CIL and / or planning contribution for various development typologies for a given ‘threshold’ land value, developers profit and affordable housing. ENV 1 Protecting and Enhancing Our Natural and No Protection of the natural and historic environments is a long Historic Environments established role of planning policy and the costs associated with natural and historic environment protection are factored into the property development market. ENV 2 Achieving Quality in Design and Yes Considerations for the high quality design will augment Conservation development costs and thus directly impact viability, such as: • Quality design; • Environmental Improvements; • Enhancing the local area; Within our viability appraisals we have had regard to the BCIS cost indices for Pendle which takes into consideration the requirement for high quality design (this has always been the case so the costs are embedded in the indices). ENV3 Renewable and Low Carbon Energy Yes The requirements for new developments to secure at least 10% Generation of their energy from renewable or low carbon sources (unless unfeasible or unviable) will directly impact costs.
The requirements for feasibility studies on renewable and low carbon energy generation will also impact on costs directly. Such considerations thus directly influence development.
The costs associated with the requirement for renewable and low carbon energy generation are also potentially subsumed by CSH and BREEAM costs. ENV 4 Promoting Sustainable Travel No The location of development vis-à-vis public and private transport links has a spatial impact on the value (viability) of sites. Sites with good communication links will tend to be more attractive resulting in higher gross development values and higher residual land values. Site in poorer locations or requiring significant investment in infrastructure (new roads etc.) will be least attractive resulting in lower gross development values and lower residual land values. This market context is indirectly factored into appraisals via the land value and gross development value assumptions. ENV 5 Pollution and Unstable Land No Protection of the environment is a long established role of planning policy and the costs associated with environmental protection are factored into the property development market.
The abnormal costs associated with a specific site (e.g. contamination) are factored into the purchase price of land by diligent developers and therefore are accommodated within the development economics. ENV 6 Waste Management No Protection of the environment, including waste management, is a long established role of planning policy and the costs associated with environmental protection are factored into the property development market. ENV 7 Water Management No Protection of the environment, including water management, is a long established role of planning policy and the costs associated with environmental protection are factored into the property development market. LIV 1 Housing Provision and Delivery No The viability of development depends on various macro- economic factors including population and growth in the economy. At a local level viability is affected by a range of factors for example landowner expectations, occupier demand, or funding. The supply of land as determined by the planning system acts as an indirect factor within this hierarchy of influences. It shapes which sites or localities are available for development thus impacting the market through limiting the availability of sites in the short term.
We have had regard to different property values in each of the market areas, which will take housing distribution into account. LIV 2 Housing Needs No Developers will be required to show how they meet the housing needs, relating to the types and sizes of dwellings linked to policies LIV3 and LIV4. Diligent developers are best placed to determine and provide housing that meets the demands and aspirations of people in the borough and housing needs are therefore factored into the property development markets. LIV 3 Affordable Housing Yes Affordable housing contributions will directly impact the gross development value of a scheme and therefore viability.
We have had regard to the affordable housing target and tenure mix recommended in the SHMA Update 2013. LIV 4 Designing Better Places to Live Yes Considerations for the high quality design will augment development costs and thus directly impact viability, such as: • Quality design; • Environmental Improvements; • Enhancing the local area; Within our viability appraisals we have had regard to the BCIS cost indices for Pendle which takes into consideration the requirement for high quality design (this has always been the case so the costs are embedded in the indices).
Replacement provision onsite of, or contribution towards the improvement of green infrastructure and open space will also directly impact on costs. This has been factored in through our development density assumptions. WRK 1 Strengthening the Local Economy No Proposals to support development in the local economy will have a spatial impact on the supply (and via price, demand) for sites and premises. Provided site supply keeps check with demand, strengthening the local economy will not have a direct and immediate impact on development viability. WRK 2 Employment Land Supply No In the short-term the supply of employment land is fixed. The viability of development economics is impacted by other factors such as demand for commercial premises (itself determined by growth in the wider economy) and site specific costs e.g. local utilities capacity etc. The price of land is established by residual appraisal within this context.
The allocated land may not be the most suitable/viable or subject to abnormal costs impacting on development viability. Skewing the land supply through retaining/allocating land for employment sites will affect land economics, thus viability through the distortion of supply and demand.
In the longer term the supply of (additional) land for business will, all other things being equal, depress the value of employment land and make development more viable. However, the time period for such allocation means that this additional land is absorbed into the market with only an indirect impact on viability.
We have had regard to business premises values in the borough, which will take employment distribution into account. WRK 3 Retailing and Town Centres No Major new retail development should be concentrated in the three main town centres. This distorts the market through restricting the supply of land through reduced potential for securing planning in out of town locations. This restriction creates a shortage of supply of good town centre sites which drives up town centre land values. It also creates a premium for edge of centre with planning permission. This market dynamic is factored into the prevailing property market. WRK 4 Tourism, Leisure and Culture No Policies to promote tourism, leisure and culture will impact on the location of development. Different tourism, leisure and cultural developments will be attracted or directed to different locations. The property market has factored this into the existing market context and policy will not have a direct impact on viability. WRK 5 Designing Better Places to Work Yes Considerations for the high quality design will augment development costs and thus directly impact viability, such as: • Quality design; • Environmental Improvements; • Enhancing the local area; Within our viability appraisals we have had regard to the BCIS cost indices for Pendle which takes into consideration the requirement for high quality design (this has always been the case so the costs are embedded in the indices). SUP 1 Community Facilities Yes Contributing to infrastructure via CIL and planning obligations is a direct cost to developers.
Our economic viability appraisals calculate the maximum CIL and / or planning contribution for various development typologies for a given ‘threshold’ land value, developers profit and affordable housing. SUP 2 Health and Well-being No The Councils work with partners to deliver key development which will improve the health and wellbeing of People will not have a direct impact on development viability. SUP 3 Education and Training No The Councils work with partners to deliver key development that will improve the education and training opportunities in Pendle will not have a direct impact on development viability. SUP 4 Designing Better Public Places Yes Considerations for the high quality design will augment development costs and thus directly impact viability, such as: • Quality design; • Environmental Improvements; • Enhancing the local area; Within our viability appraisals we have had regard to the BCIS cost indices for Pendle which takes into consideration the requirement for high quality design (this has always been the case so the costs are embedded in the indices).
2 RESIDENTIAL DEVELOPMENT APPRAISALS
COLLIERS INTERNATIONAL UK 101 of 104 Pendle Borough Council 130909 Pendle District Wide Viability Study Resi Appraisals V3 - Version Notes
Date Version Notes
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 1. 1 Unit M65 Corridor
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 180,000
DEVELOPMENT COSTS
Site Acquisition -
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 2. 1 Unit M65 Corridor North
ASSUMPTIONS
VALUES £
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GROSS DEVELOPMENT VALUE 220,000
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© 130909 Pendle District Wide Viability Study Resi Appraisals V3 3. 1 Unit West Craven Towns
ASSUMPTIONS
VALUES £
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GROSS DEVELOPMENT VALUE 250,000
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© 130909 Pendle District Wide Viability Study Resi Appraisals V3 4. 1 Unit Rural
ASSUMPTIONS
VALUES £
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GROSS DEVELOPMENT VALUE 340,000
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© 130909 Pendle District Wide Viability Study Resi Appraisals V3 5. 5 Unit M65 Corridor
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 660,000
DEVELOPMENT COSTS
Site Acquisition -
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© 130909 Pendle District Wide Viability Study Resi Appraisals V3 6. 5 Unit M65 Corridor North
ASSUMPTIONS
VALUES £
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GROSS DEVELOPMENT VALUE 720,000
DEVELOPMENT COSTS
Site Acquisition -
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Professional Fees
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Finance Costs -
Developers Profit
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 7. 5 Unit West Craven Town
ASSUMPTIONS
VALUES £
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GROSS DEVELOPMENT VALUE 770,000
DEVELOPMENT COSTS
Site Acquisition -
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Professional Fees
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 8. 5 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 894,720
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
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Developers Profit
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 9. 15 Unit M65 Corridor
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 2,000,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
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Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 10. 15 Unit M65 Corridor North
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 2,190,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 11. 15 Unit West Craven Towns
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 2,350,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 11a. 15 Unit West Craven Towns
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 2,270,100
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 12. 15 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 2,780,570
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 12a. 15 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 2,631,140
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 13. 50 Unit M65 Corridor
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 6,245,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 14. 50 Unit M65 Corridor North
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 6,725,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 15. 50 Unit West Craven Towns
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 7,135,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 15a. 50 Unit West Craven Towns
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 7,013,705
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 16. 50 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 8,178,300
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
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Professional Fees
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 16a. 50 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 8,029,125
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
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CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 17. 100 Unit M65 Corridor
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 12,550,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 18. 100 Unit M65 Corridor North
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 13,550,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 19. 100 Unit West Craven Towns
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 14,400,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 19a. 100 Unit West Craven Towns
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 14,155,200
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 20. 100 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 16,543,000
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 20a. 100 Unit Rural
ASSUMPTIONS
VALUES £
less
GROSS DEVELOPMENT VALUE 16,241,250
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© 130909 Pendle District Wide Viability Study Resi Appraisals V3 21. Care Home 40 Beds
ASSUMPTIONS
VALUES
less
less
GROSS DEVELOPMENT VALUE 2,836,611
DEVELOPMENT COSTS
Site Acquisition -
Initial Payments -
Construction Costs -
Professional Fees
Disposal Costs -
Finance Costs -
Developers Profit
TOTAL COSTS
CIL £
SENSITIVITY ANALYSIS
NOTES
© Value Assumptions Residential Development
M65 Corridor Land Value Threshold
M65 Corridor (north)
West Craven Towns
Rural
Land Value Threshold
3 COMMERCIAL DEVELOPMENT APPRAISALS
COLLIERS INTERNATIONAL UK 102 of 104 Pendle Borough Council 131206 Pendle District Wide Development Viability Study Commercial Appraisals Final.xlsx - Version Notes
Date Version Notes
130625 v1 DRAFT for circulation
130829 v2 Amended development scenario numbering
131122 Final Correction to Gross floor area for Scheme 22.
Page 1/1 Printed: 06/12/2013 13:53 G:\DEVELOPMENT CONSULTING\AJD\2013\Pendle\Report\Final\Final\131206 Pendle District Wide Development Viability Study Commercial Appraisals Final.xlsx © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 22. B1 Offices 140sqm - Nelson
ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 1,506 1,750 86.1% area 2 area 3 total floor area 1,506 1,750 86.1%
Site density 7,500 sqm per hectare
VALUES
area 1 1,506 @ 10.00 psf 15,060 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 15,060
Yield @ 10.5% capitalised rent 143,429 less Rent Free / Void allowance 3 months rent (3,765) Purchasers costs @ 5.76% (7,606) 132,057
GROSS DEVELOPMENT VALUE 132,057
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.02 ha 0.05 acres Site Purchase Price (6,695) SDLT 6,695 @ 1% (67) Acquisition Agent fees 6,695 @ 1% (67) Acquisition Legal fees 6,695 @ 0.5% (33)
Initial Payments - Planning Application Professional Fees and reports (5,000) Statutory Planning Fees (770) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.05 acres @ 100,000 per acre (5,356) Build Costs 1,750 sqft @ 71.00 psf (124,250) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 124,250 @ 10% (12,425) Contingency 136,675 @ 5% (6,834)
Professional Fees 148,865 @ 10% (14,887)
Disposal Costs - Letting Agents Costs 15,060 ERV @ 15.00% (2,259) Letting Legal Costs 15,060 ERV @ 5.00% (753) Investment Sale Agents Costs 132,057 GDV @ 1.00% (1,321) Investment Sale Legal Costs 132,057 GDV @ 0.50% (660) Marketing and Promotion 132,057 GDV @ 1.00% (1,321)
Finance Costs - Finance Fees 182,698 @ 1.00% (1,827) Interest allowance (build and land) (1) 12 months @ 7.00% (6,394)
Developers Profit 190,919 @ 20.00% (38,184)
TOTAL COSTS (229,103)
CIL Surplus/(Deficit) for CIL (2) (97,046) CIL Rate £ psm (GIA) (Max) (596.93)
SENSITIVITY ANALYSIS
Values (97,046) 80% 90% 100% 110% 120% Construction Costs 90% (102,834) (90,042) (77,250) (64,459) (51,667) 95% (112,732) (99,940) (87,148) (74,356) (61,565) 100% (122,629) (109,838) (97,046) (84,254) (71,463) 105% (132,527) (119,735) (106,944) (94,152) (81,360) 110% (142,425) (129,633) (116,842) (104,050) (91,258)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:51 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 23. B1 Offices 140sqm - B - C
ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 1,506 1,750 86.1% area 2 area 3 total floor area 1,506 1,750 86.1%
Site density 7,500 sqm per hectare
VALUES
area 1 1,506 @ 8.50 psf 12,801 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 12,801
Yield @ 12.0% capitalised rent 106,675 less Rent Free / Void allowance 3 months rent (3,200) Purchasers costs @ 5.76% (5,636) 97,839
GROSS DEVELOPMENT VALUE 97,839
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.02 ha 0.05 acres Site Purchase Price (6,695) SDLT 6,695 @ 1% (67) Acquisition Agent fees 6,695 @ 1% (67) Acquisition Legal fees 6,695 @ 0.5% (33)
Initial Payments - Planning Application Professional Fees and reports (5,000) Statutory Planning Fees (770) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.05 acres @ 100,000 per acre (5,356) Build Costs 1,750 sqft @ 71.00 psf (124,250) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 124,250 @ 10% (12,425) Contingency 136,675 @ 5% (6,834)
Professional Fees 148,865 @ 10% (14,887)
Disposal Costs - Letting Agents Costs 12,801 ERV @ 15.00% (1,920) Letting Legal Costs 12,801 ERV @ 5.00% (640) Investment Sale Agents Costs 97,839 GDV @ 1.00% (978) Investment Sale Legal Costs 97,839 GDV @ 0.50% (489) Marketing and Promotion 97,839 GDV @ 1.00% (978)
Finance Costs - Finance Fees 181,391 @ 1.00% (1,814) Interest allowance (build and land) (1) 12 months @ 7.00% (6,349)
Developers Profit 189,553 @ 20.00% (37,911)
TOTAL COSTS (227,464)
CIL Surplus/(Deficit) for CIL (2) (129,625) CIL Rate £ psm (GIA) (Max) (797.32)
SENSITIVITY ANALYSIS
Values (129,625) 80% 90% 100% 110% 120% Construction Costs 90% (128,783) (119,306) (109,829) (100,352) (90,875) 95% (138,681) (129,204) (119,727) (110,250) (100,772) 100% (148,579) (139,102) (129,625) (120,147) (110,670) 105% (158,477) (149,000) (139,522) (130,045) (120,568) 110% (168,375) (158,897) (149,420) (139,943) (130,466)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:51 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 24. B1 Offices 465sqm - Nelson
ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 5,005 5,800 86.3% area 2 area 3 total floor area 5,005 5,800 86.3%
Site density 19,630 sqm per hectare
VALUES
area 1 5,005 @ 10.00 psf 50,050 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 50,050
Yield @ 10.5% capitalised rent 476,667 less Rent Free / Void allowance 3 months rent (12,513) Purchasers costs @ 5.76% (25,279) 438,875
GROSS DEVELOPMENT VALUE 438,875
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.03 ha 0.07 acres Site Purchase Price (8,478) SDLT 8,478 @ 1% (85) Acquisition Agent fees 8,478 @ 1% (85) Acquisition Legal fees 8,478 @ 0.5% (42)
Initial Payments - Planning Application Professional Fees and reports (10,000) Statutory Planning Fees (2,695) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.07 acres @ 100,000 per acre (6,783) Build Costs 5,800 sqft @ 71.00 psf (411,800) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 411,800 @ 10% (41,180) Contingency 452,980 @ 5% (22,649)
Professional Fees 482,412 @ 10% (48,241)
Disposal Costs - Letting Agents Costs 50,050 ERV @ 15.00% (7,508) Letting Legal Costs 50,050 ERV @ 5.00% (2,503) Investment Sale Agents Costs 438,875 GDV @ 1.00% (4,389) Investment Sale Legal Costs 438,875 GDV @ 0.50% (2,194) Marketing and Promotion 438,875 GDV @ 1.00% (4,389)
Finance Costs - Finance Fees 573,020 @ 1.00% (5,730) Interest allowance (build and land) (1) 12 months @ 7.00% (20,056)
Developers Profit 598,806 @ 20.00% (119,761)
TOTAL COSTS (718,567)
CIL Surplus/(Deficit) for CIL (2) (279,692) CIL Rate £ psm (GIA) (Max) (519.08)
SENSITIVITY ANALYSIS
Values (279,692) 80% 90% 100% 110% 120% Construction Costs 90% (299,107) (256,595) (214,084) (171,572) (129,061) 95% (331,911) (289,400) (246,888) (204,376) (161,865) 100% (364,715) (322,204) (279,692) (237,180) (194,669) 105% (397,519) (355,008) (312,496) (269,985) (227,473) 110% (430,324) (387,812) (345,300) (302,789) (260,277)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
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ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 5,005 5,800 86.3% area 2 area 3 total floor area 5,005 5,800 86.3%
Site density 19,630 sqm per hectare
VALUES
area 1 5,005 @ 8.50 psf 42,543 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 42,543
Yield @ 12.0% capitalised rent 354,521 less Rent Free / Void allowance 18 months rent (63,814) Purchasers costs @ 5.76% (15,833) 274,874
GROSS DEVELOPMENT VALUE 274,874
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.03 ha 0.07 acres Site Purchase Price (8,478) SDLT 8,478 @ 1% (85) Acquisition Agent fees 8,478 @ 1% (85) Acquisition Legal fees 8,478 @ 0.5% (42)
Initial Payments - Planning Application Professional Fees and reports (10,000) Statutory Planning Fees (2,695) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.07 acres @ 100,000 per acre (6,783) Build Costs 5,800 sqft @ 71.00 psf (411,800) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 411,800 @ 10% (41,180) Contingency 452,980 @ 5% (22,649)
Professional Fees 482,412 @ 10% (48,241)
Disposal Costs - Letting Agents Costs 42,543 ERV @ 15.00% (6,381) Letting Legal Costs 42,543 ERV @ 5.00% (2,127) Investment Sale Agents Costs 274,874 GDV @ 1.00% (2,749) Investment Sale Legal Costs 274,874 GDV @ 0.50% (1,374) Marketing and Promotion 274,874 GDV @ 1.00% (2,749)
Finance Costs - Finance Fees 567,418 @ 1.00% (5,674) Interest allowance (build and land) (1) 12 months @ 7.00% (19,860)
Developers Profit 592,952 @ 20.00% (118,590)
TOTAL COSTS (711,543)
CIL Surplus/(Deficit) for CIL (2) (436,668) CIL Rate £ psm (GIA) (Max) (810.41)
SENSITIVITY ANALYSIS
Values (436,668) 80% 90% 100% 110% 120% Construction Costs 90% (424,312) (397,686) (371,060) (344,434) (317,809) 95% (457,116) (430,490) (403,864) (377,239) (350,613) 100% (489,920) (463,294) (436,668) (410,043) (383,417) 105% (522,724) (496,098) (469,473) (442,847) (416,221) 110% (555,528) (528,902) (502,277) (475,651) (449,025)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:51 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 26. B2 Industrial 140sqm
ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 1,506 1,506 100.0% area 2 area 3 total floor area 1,506 1,506 100.0%
Site density 4,150 sqm per hectare
VALUES
area 1 1,506 @ 6.00 psf 9,036 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 9,036
Yield @ 10.0% capitalised rent 90,360 less Rent Free / Void allowance 3 months rent (2,259) Purchasers costs @ 5.76% (4,798) 83,303
GROSS DEVELOPMENT VALUE 83,303
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.03 ha 0.08 acres Site Purchase Price (10,413) SDLT 10,413 @ 1% (104) Acquisition Agent fees 10,413 @ 1% (104) Acquisition Legal fees 10,413 @ 0.5% (52)
Initial Payments - Planning Application Professional Fees and reports (5,000) Statutory Planning Fees (770) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.08 acres @ 100,000 per acre (8,330) Build Costs 1,506 sqft @ 40.00 psf (60,240) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 60,240 @ 10% (6,024) Contingency 66,264 @ 5% (3,313)
Professional Fees 77,908 @ 10% (7,791)
Disposal Costs - Letting Agents Costs 9,036 ERV @ 15.00% (1,355) Letting Legal Costs 9,036 ERV @ 5.00% (452) Investment Sale Agents Costs 83,303 GDV @ 1.00% (833) Investment Sale Legal Costs 83,303 GDV @ 0.50% (417) Marketing and Promotion 83,303 GDV @ 1.00% (833)
Finance Costs - Finance Fees 106,032 @ 1.00% (1,060) Interest allowance (build and land) (1) 12 months @ 7.00% (3,711)
Developers Profit 110,803 @ 20.00% (22,161)
TOTAL COSTS (132,964)
CIL Surplus/(Deficit) for CIL (2) (49,661) CIL Rate £ psm (GIA) (Max) (354.95)
SENSITIVITY ANALYSIS
Values (49,661) 80% 90% 100% 110% 120% Construction Costs 90% (56,202) (48,132) (40,063) (31,994) (23,925) 95% (61,000) (52,931) (44,862) (36,793) (28,724) 100% (65,799) (57,730) (49,661) (41,592) (33,523) 105% (70,598) (62,529) (54,460) (46,390) (38,321) 110% (75,397) (67,327) (59,258) (51,189) (43,120)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:53 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 27. B2 Industrial 465sqm
ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 5,005 5,005 100.0% area 2 area 3 total floor area 5,005 5,005 100.0%
Site density 4,150 sqm per hectare
VALUES
area 1 5,005 @ 4.50 psf 22,523 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 22,523
Yield @ 10.0% capitalised rent 225,225 less Rent Free / Void allowance 3 months rent (5,631) Purchasers costs @ 5.76% (11,960) 207,635
GROSS DEVELOPMENT VALUE 207,635
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.11 ha 0.28 acres Site Purchase Price (34,606) SDLT 34,606 @ 1% (346) Acquisition Agent fees 34,606 @ 1% (346) Acquisition Legal fees 34,606 @ 0.5% (173)
Initial Payments - Planning Application Professional Fees and reports (10,000) Statutory Planning Fees (2,695) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.28 acres @ 100,000 per acre (27,685) Build Costs 5,005 sqft @ 40.00 psf (200,200) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 200,200 @ 10% (20,020) Contingency 220,220 @ 5% (11,011)
Professional Fees 258,916 @ 10% (25,892)
Disposal Costs - Letting Agents Costs 22,523 ERV @ 15.00% (3,378) Letting Legal Costs 22,523 ERV @ 5.00% (1,126) Investment Sale Agents Costs 207,635 GDV @ 1.00% (2,076) Investment Sale Legal Costs 207,635 GDV @ 0.50% (1,038) Marketing and Promotion 207,635 GDV @ 1.00% (2,076)
Finance Costs - Finance Fees 342,670 @ 1.00% (3,427) Interest allowance (build and land) (1) 12 months @ 7.00% (11,993)
Developers Profit 358,090 @ 20.00% (71,618)
TOTAL COSTS (429,708)
CIL Surplus/(Deficit) for CIL (2) (222,073) CIL Rate £ psm (GIA) (Max) (477.61)
SENSITIVITY ANALYSIS
Values (222,073) 80% 90% 100% 110% 120% Construction Costs 90% (230,402) (210,290) (190,177) (170,065) (149,952) 95% (246,350) (226,238) (206,125) (186,013) (165,900) 100% (262,298) (242,186) (222,073) (201,961) (181,848) 105% (278,246) (258,134) (238,021) (217,909) (197,796) 110% (294,194) (274,082) (253,969) (233,857) (213,744)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:47 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final26 28. B8 Warehouse 929sqm
ASSUMPTIONS
Land Acquisition Value 125,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 10,000 10,000 100.0% area 2 area 3 total floor area 10,000 10,000 100.0%
Site density 4,150 sqm per hectare
VALUES
area 1 10,000 @ 3.50 psf 35,000 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 35,000
Yield @ 10.0% capitalised rent 350,000 less Rent Free / Void allowance 12 months rent (35,000) Purchasers costs @ 5.76% (17,156) 297,844
GROSS DEVELOPMENT VALUE 297,844
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.22 ha 0.55 acres Site Purchase Price (69,144) SDLT 69,144 @ 3% (2,074) Acquisition Agent fees 69,144 @ 1% (691) Acquisition Legal fees 69,144 @ 0.5% (346)
Initial Payments - Planning Application Professional Fees and reports (20,000) Statutory Planning Fees (5,005) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.55 acres @ 100,000 per acre (55,315) Build Costs 10,000 sqft @ 34.00 psf (340,000) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 340,000 @ 10% (34,000) Contingency 374,000 @ 5% (18,700)
Professional Fees 448,015 @ 10% (44,801)
Disposal Costs - Letting Agents Costs 35,000 ERV @ 15.00% (5,250) Letting Legal Costs 35,000 ERV @ 5.00% (1,750) Investment Sale Agents Costs 297,844 GDV @ 1.00% (2,978) Investment Sale Legal Costs 297,844 GDV @ 0.50% (1,489) Marketing and Promotion 297,844 GDV @ 1.00% (2,978)
Finance Costs - Finance Fees 604,523 @ 1.00% (6,045) Interest allowance (build and land) (1) 12 months @ 7.00% (21,158)
Developers Profit 631,726 @ 20.00% (126,345)
TOTAL COSTS (758,072)
CIL Surplus/(Deficit) for CIL (2) (460,227) CIL Rate £ psm (GIA) (Max) (495.40)
SENSITIVITY ANALYSIS
Values (460,227) 80% 90% 100% 110% 120% Construction Costs 90% (463,760) (434,909) (406,058) (377,208) (348,357) 95% (490,844) (461,994) (433,143) (404,292) (375,442) 100% (517,929) (489,078) (460,227) (431,377) (402,526) 105% (545,013) (516,163) (487,312) (458,461) (429,611) 110% (572,098) (543,247) (514,396) (485,546) (456,695)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:52 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final26 © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 29. Small Retail Parade
ASSUMPTIONS
Land Acquisition Value 250,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 1,500 1,500 100.0% area 2 500 500 100.0% area 3 500 500 100.0% total floor area 2,500 2,500 100.0%
Site density 13,500 sqm per hectare
VALUES
area 1 1,500 @ 10.00 psf 15,000 area 2 500 @ 10.00 psf 5,000 area 3 500 @ 10.00 psf 5,000 less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 25,000
Yield @ 8.5% capitalised rent 294,118 less Rent Free / Void allowance 3 months rent (6,250) Purchasers costs @ 5.76% (15,678) 272,190
GROSS DEVELOPMENT VALUE 272,190
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.02 ha 0.04 acres Site Purchase Price (23,000) SDLT 23,000 @ 1% (230) Acquisition Agent fees 23,000 @ 1% (230) Acquisition Legal fees 23,000 @ 0.5% (115)
Initial Payments - Planning Application Professional Fees and reports (10,000) Statutory Planning Fees (1,540) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.04 acres @ 100,000 per acre (4,251) Build Costs 1,500 sqft @ 61.00 psf (91,500) Build Costs 500 sqft @ 61.00 psf (30,500) Build Costs 500 sqft @ 61.00 psf (30,500) External works inc. utilities reinforcement (allowance) 152,500 @ 10% (15,250) Contingency 167,750 @ 5% (8,388)
Professional Fees 180,389 @ 10% (18,039)
Disposal Costs - Letting Agents Costs 25,000 ERV @ 15.00% (3,750) Letting Legal Costs 25,000 ERV @ 5.00% (1,250) Investment Sale Agents Costs 272,190 GDV @ 1.00% (2,722) Investment Sale Legal Costs 272,190 GDV @ 0.50% (1,361) Marketing and Promotion 272,190 GDV @ 1.00% (2,722)
Finance Costs - Finance Fees 245,347 @ 1.00% (2,453) Interest allowance (build and land) (1) 9 months @ 7.00% (6,440)
Developers Profit 254,241 @ 20.00% (50,848)
TOTAL COSTS (305,089)
CIL Surplus/(Deficit) for CIL (2) (32,900) CIL Rate £ psm (GIA) (Max) (141.66)
SENSITIVITY ANALYSIS
Values (32,900) 80% 90% 100% 110% 120% Construction Costs 90% (61,552) (35,179) (8,807) 17,566 43,939 95% (73,599) (47,226) (20,853) 5,520 31,892 100% (85,645) (59,272) (32,900) (6,527) 19,846 105% (97,692) (71,319) (44,946) (18,573) 7,799 110% (109,738) (83,365) (56,993) (30,620) (4,247)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:53 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 30. Food Store 929sqm
ASSUMPTIONS
Land Acquisition Value 650,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 10,000 10,000 100.0% area 2 area 3 total floor area 10,000 10,000 100.0%
Site density 2,800 sqm per hectare
VALUES
area 1 10,000 @ 13.00 psf 130,000 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 130,000
Yield @ 7.50% capitalised rent 1,733,333 less Rent Free / Void allowance 6 months rent (65,000) Purchasers costs @ 5.76% (90,862) 1,577,471
GROSS DEVELOPMENT VALUE 1,577,471
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.33 ha 0.82 acres Site Purchase Price (532,901) SDLT 532,901 @ 4% (21,316) Acquisition Agent fees 532,901 @ 1% (5,329) Acquisition Legal fees 532,901 @ 0.5% (2,665)
Initial Payments - Planning Application Professional Fees and reports (30,000) Statutory Planning Fees (5,005) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.82 acres @ 100,000 per acre (81,985) Build Costs 10,000 sqft @ 90.00 psf (900,000) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 900,000 @ 10% (90,000) Contingency 990,000 @ 5% (49,500)
Professional Fees 1,121,485 @ 10% (112,148)
Disposal Costs - Letting Agents Costs 130,000 ERV @ 15.00% (19,500) Letting Legal Costs 130,000 ERV @ 5.00% (6,500) Investment Sale Agents Costs 1,577,471 GDV @ 1.00% (15,775) Investment Sale Legal Costs 1,577,471 GDV @ 0.50% (7,887) Marketing and Promotion 1,577,471 GDV @ 1.00% (15,775)
Finance Costs - Finance Fees 1,896,285 @ 1.00% (18,963) Interest allowance (build and land) (1) 12 months @ 7.00% (66,370)
Developers Profit 1,981,618 @ 20.00% (396,324)
TOTAL COSTS (2,377,942)
CIL Surplus/(Deficit) for CIL (2) (800,471) CIL Rate £ psm (GIA) (Max) (861.64)
SENSITIVITY ANALYSIS
Values (800,471) 80% 90% 100% 110% 120% Construction Costs 90% (962,686) (809,884) (657,082) (504,280) (351,479) 95% (1,034,380) (881,578) (728,776) (575,975) (423,173) 100% (1,106,074) (953,272) (800,471) (647,669) (494,867) 105% (1,177,768) (1,024,967) (872,165) (719,363) (566,562) 110% (1,249,463) (1,096,661) (943,859) (791,058) (638,256)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:53 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 31. Food Store 4645sqm
ASSUMPTIONS
Land Acquisition Value 1,000,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 50,000 50,000 100.0% area 2 area 3 total floor area 50,000 50,000 100.0%
Site density 2,800 sqm per hectare
VALUES
area 1 50,000 @ 17.50 psf 875,000 area 2 @ psf - area 3 @ psf - less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 875,000
Yield @ 5.25% capitalised rent 16,666,667 less Rent Free / Void allowance 12 months rent (875,000) Purchasers costs @ 5.76% (860,061) 14,931,606
GROSS DEVELOPMENT VALUE 14,931,606
DEVELOPMENT COSTS
Site Acquisition - Site Area 1.66 ha 4.10 acres Site Purchase Price (4,099,236) SDLT 4,099,236 @ 4% (163,969) Acquisition Agent fees 4,099,236 @ 1% (40,992) Acquisition Legal fees 4,099,236 @ 0.5% (20,496)
Initial Payments - Planning Application Professional Fees and reports (80,000) Statutory Planning Fees (20,429) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 4.10 acres @ 100,000 per acre (409,924) Build Costs 50,000 sqft @ 90.00 psf (4,500,000) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 4,500,000 @ 10% (450,000) Contingency 4,950,000 @ 5% (247,500)
Professional Fees 5,607,424 @ 10% (560,742)
Disposal Costs - Letting Agents Costs 875,000 ERV @ 15.00% (131,250) Letting Legal Costs 875,000 ERV @ 5.00% (43,750) Investment Sale Agents Costs 14,931,606 GDV @ 1.00% (149,316) Investment Sale Legal Costs 14,931,606 GDV @ 0.50% (74,658) Marketing and Promotion 14,931,606 GDV @ 1.00% (149,316)
Finance Costs - Finance Fees 11,141,580 @ 1.00% (111,416) Interest allowance (build and land) (1) 18 months @ 7.00% (584,933)
Developers Profit 11,837,928 @ 20.00% (2,367,586)
TOTAL COSTS (14,205,514)
CIL Surplus/(Deficit) for CIL (2) 726,092 CIL Rate £ psm (GIA) (Max) 156.32
SENSITIVITY ANALYSIS
Values 726,092 80% 90% 100% 110% 120% Construction Costs 90% (1,436,091) 9,476 1,455,042 2,900,608 4,346,174 95% (1,800,565) (354,999) 1,090,567 2,536,133 3,981,699 100% (2,165,040) (719,474) 726,092 2,171,658 3,617,225 105% (2,529,515) (1,083,949) 361,618 1,807,184 3,252,750 110% (2,893,989) (1,448,423) (2,857) 1,442,709 2,888,275
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:53 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 32. Retail Warehouse 1500sqm
ASSUMPTIONS
Land Acquisition Value 500,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 10,000 10,000 100.0% area 2 5,000 5,000 100.0% area 3 5,000 5,000 100.0% total floor area 20,000 20,000 100.0%
Site density 2,800 sqm per hectare
VALUES
area 1 10,000 @ 12.00 psf 120,000 area 2 5,000 @ 12.00 psf 60,000 area 3 5,000 @ 12.00 psf 60,000 less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 240,000
Yield @ 7.5% capitalised rent 3,200,000 less Rent Free / Void allowance 12 months rent (240,000) Purchasers costs @ 5.76% (161,210) 2,798,790
GROSS DEVELOPMENT VALUE 2,798,790
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.66 ha 1.64 acres Site Purchase Price (819,847) SDLT 819,847 @ 3% (24,595) Acquisition Agent fees 819,847 @ 1% (8,198) Acquisition Legal fees 819,847 @ 0.5% (4,099)
Initial Payments - Planning Application Professional Fees and reports (30,000) Statutory Planning Fees (9,625) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 1.64 acres @ 100,000 per acre (163,969) Build Costs 10,000 sqft @ 49.00 psf (490,000) Build Costs sqft @ psf - Build Costs sqft @ psf - External works inc. utilities reinforcement (allowance) 490,000 @ 10% (49,000) Contingency 539,000 @ 5% (26,950)
Professional Fees 729,919 @ 10% (72,992)
Disposal Costs - Letting Agents Costs 240,000 ERV @ 15.00% (36,000) Letting Legal Costs 240,000 ERV @ 5.00% (12,000) Investment Sale Agents Costs 2,798,790 GDV @ 1.00% (27,988) Investment Sale Legal Costs 2,798,790 GDV @ 0.50% (13,994) Marketing and Promotion 2,798,790 GDV @ 1.00% (27,988)
Finance Costs - Finance Fees 1,817,247 @ 1.00% (18,172) Interest allowance (build and land) (1) 12 months @ 7.00% (63,604)
Developers Profit 1,899,023 @ 20.00% (379,805)
TOTAL COSTS (2,278,827)
CIL Surplus/(Deficit) for CIL (2) 519,963 CIL Rate £ psm (GIA) (Max) 559.70
SENSITIVITY ANALYSIS
Values 519,963 80% 90% 100% 110% 120% Construction Costs 90% 55,820 326,925 598,030 869,134 1,140,239 95% 16,787 287,891 558,996 830,101 1,101,206 100% (22,247) 248,858 519,963 791,067 1,062,172 105% (61,281) 209,824 480,929 752,034 1,023,139 110% (100,314) 170,791 441,895 713,000 984,105
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:54 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 33. Town Centre - Nelson
ASSUMPTIONS
Land Acquisition Value 650,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 4,305 4,305 100.0% area 2 1,080 1,080 100.0% area 3 1,080 1,080 100.0% total floor area 6,465 6,465 100.0%
Site density 13,500 sqm per hectare
VALUES
area 1 4,305 @ 12.00 psf 51,660 area 2 1,080 @ 12.00 psf 12,960 area 3 1,080 @ 12.00 psf 12,960 less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 77,580
Yield @ 8.5% capitalised rent 912,706 less Rent Free / Void allowance 18 months rent (116,370) Purchasers costs @ 5.76% (43,371) 752,965
GROSS DEVELOPMENT VALUE 752,965
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.04 ha 0.11 acres Site Purchase Price (106,000) SDLT 106,000 @ 1% (1,060) Acquisition Agent fees 106,000 @ 1% (1,060) Acquisition Legal fees 106,000 @ 0.5% (530)
Initial Payments - Planning Application Professional Fees and reports (15,000) Statutory Planning Fees (3,080) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.11 acres @ 100,000 per acre (10,993) Build Costs 4,305 sqft @ 61.00 psf (262,605) Build Costs 1,080 sqft @ 61.00 psf (65,880) Build Costs 1,080 sqft @ 61.00 psf (65,880) External works inc. utilities reinforcement (allowance) 394,365 @ 10% (39,437) Contingency 433,802 @ 5% (21,690)
Professional Fees 466,485 @ 10% (46,648)
Disposal Costs - Letting Agents Costs 77,580 ERV @ 15.00% (11,637) Letting Legal Costs 77,580 ERV @ 5.00% (3,879) Investment Sale Agents Costs 752,965 GDV @ 1.00% (7,530) Investment Sale Legal Costs 752,965 GDV @ 0.50% (3,765) Marketing and Promotion 752,965 GDV @ 1.00% (7,530)
Finance Costs - Finance Fees 674,203 @ 1.00% (6,742) Interest allowance (build and land) (1) 9 months @ 7.00% (17,698)
Developers Profit 698,643 @ 20.00% (139,729)
TOTAL COSTS (838,372)
CIL Surplus/(Deficit) for CIL (2) (85,407) CIL Rate £ psm (GIA) (Max) (142.20)
SENSITIVITY ANALYSIS
Values (85,407) 80% 90% 100% 110% 120% Construction Costs 90% (169,014) (96,058) (23,102) 49,853 122,809 95% (200,166) (127,210) (54,255) 18,701 91,657 100% (231,318) (158,363) (85,407) (12,451) 60,505 105% (262,471) (189,515) (116,559) (43,603) 29,352 110% (293,623) (220,667) (147,711) (74,756) (1,800)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:54 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final 34. Town Centre - B - C
ASSUMPTIONS
Land Acquisition Value 650,000 per acre Developers Profit 20.0% on costs
NIA (sqft) GIA (sqft) Net to Gross % area 1 4,305 4,305 100.0% area 2 1,080 1,080 100.0% area 3 1,080 1,080 100.0% total floor area 6,465 6,465 100.0%
Site density 13,500 sqm per hectare
VALUES
area 1 4,305 @ 10.00 psf 43,050 area 2 1,080 @ 10.00 psf 10,800 area 3 1,080 @ 10.00 psf 10,800 less management and maintenance - @ 0.0% - - Estimated Gross Rental Value per annum 64,650
Yield @ 8.5% capitalised rent 760,588 less Rent Free / Void allowance 18 months rent (96,975) Purchasers costs @ 5.76% (36,142) 627,471
GROSS DEVELOPMENT VALUE 627,471
DEVELOPMENT COSTS
Site Acquisition - Site Area 0.04 ha 0.11 acres Site Purchase Price (106,000) SDLT 106,000 @ 1% (1,060) Acquisition Agent fees 106,000 @ 1% (1,060) Acquisition Legal fees 106,000 @ 0.5% (530)
Initial Payments - Planning Application Professional Fees and reports (15,000) Statutory Planning Fees (3,080) (site specific) Section 106/278 Costs -
Construction Costs - Demolition and Site Clearance (allowance) 0.11 acres @ 100,000 per acre (10,993) Build Costs 4,305 sqft @ 61.00 psf (262,605) Build Costs 1,080 sqft @ 61.00 psf (65,880) Build Costs 1,080 sqft @ 61.00 psf (65,880) External works inc. utilities reinforcement (allowance) 394,365 @ 10% (39,437) Contingency 433,802 @ 5% (21,690)
Professional Fees 466,485 @ 10% (46,648)
Disposal Costs - Letting Agents Costs 64,650 ERV @ 15.00% (9,698) Letting Legal Costs 64,650 ERV @ 5.00% (3,233) Investment Sale Agents Costs 627,471 GDV @ 1.00% (6,275) Investment Sale Legal Costs 627,471 GDV @ 0.50% (3,137) Marketing and Promotion 627,471 GDV @ 1.00% (6,275)
Finance Costs - Finance Fees 668,480 @ 1.00% (6,685) Interest allowance (build and land) (1) 9 months @ 7.00% (17,548)
Developers Profit 692,712 @ 20.00% (138,542)
TOTAL COSTS (831,255)
CIL Surplus/(Deficit) for CIL (2) (203,784) CIL Rate £ psm (GIA) (Max) (339.30)
SENSITIVITY ANALYSIS
Values (203,784) 80% 90% 100% 110% 120% Construction Costs 90% (263,073) (202,276) (141,480) (80,683) (19,887) 95% (294,225) (233,428) (172,632) (111,835) (51,039) 100% (325,377) (264,580) (203,784) (142,988) (82,191) 105% (356,529) (295,733) (234,936) (174,140) (113,343) 110% (387,681) (326,885) (266,088) (205,292) (144,496)
NOTES (1) interest is based on 1/2 development costs over the period as an approximation for the S-curve (2) a surplus means that there is the potential to levy a CIL, subject to the overall infrastructure 'gap' and the appropriate balance (2) a deficit means that development is not viable and there is no development surplus to levy CIL
Page 1/1 Printed: 09/12/2013 12:54 131122 Pendle District Wide Development Viability Study Commercial Appraisals Final © Copyright Aspinall Verdi Limited
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