Developers are braced for widespread disruption that could last far beyond the nationwide lockdown, as a result of site closures during the coronavirus crisis.
In recent days some of the UK’s largest developers and contractors announced that they are closing construction sites across the country.
But as the country eventually leaves lockdown and sites reopen, David O’Brien, equity analyst at Goodbody, says the real estate industry will by no means bounce straight back.
“Imagining we’re going to go straight back to work and we’ll get back to be normal will be optimistic,” he said. “If, in 2022, we look back and we’re at 2019 levels, I think that would be a reasonable outcome for everybody.”
David Topham, chief executive of regeneration specialist CTP, said the health of the property sector in a post-coronavirus market is “a massive worry”.
The developer is in the process of procuring contractors for its £200m Pall Mall office scheme in Liverpool, which it is building in a joint venture with Kier Property.
Topham said the jv had planned to start work late this year or early next, but that the disruption caused by the coronavirus has thrown this into doubt.
“What is that [market] situation going to be?” he said. “We genuinely don’t know. We’ll talk to the contractors now and we’ll try to carry on as normal in terms of opening discussions, but when it comes to fixing a price for construction, at what point can we do that? I don’t know. We don’t know where their supply lines will be when we get back to the new normal.”
Topham said developers will need to consider pricing and deliverability of future schemes as a result of coronavirus disruption. “Cost is everything, at the end of the day. Finding margin in developments is actually quite thin, and construction is the biggest component, so a small shift in construction cost is the difference between viability and a project not working.”
Capital & Centric co-founder Tim Heatley said that there will be short-term cost implications as a result of widespread site closures. His company is keeping construction sites open but monitoring this daily, and Heatley said he is preparing for a full shut down of sites as lockdown measures ramp up.
Heatley expects that the company will still be spending about £650,000 a month on security and insurance even after site closures.
In central London, many developers eyeing 2020 speculative completion dates will fail to hit this target, according to Colliers International’s director of research and forecasting, Guy Grantham.
He estimates that of 2m sq ft of office space set to complete this year in the capital, as much as 1.5m sq ft, could now be delayed.
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