liverpool developments

LIVERPOOL DEVELOPMENTS

Viability Report for Lanyork Road Development

Prepared for Fieldtown Property Development

392106

3/8/2013

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Contents

1. Executive Summary Page 3

2. Introduction Page 5

3. Market Research Page 6

4. Planning Brief Page 14

5. Development Brief Page 18

6. Financial Appraisal 2

7. Market Strategy and Funding Page 25

8. References Page 29

Appendix A Page 31

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1. Executive Summary

Fieldtown Property Development is thinking of acquiring a plot of land for development,

they are unsure of what would best suit the area. Liverpool Developments have been commissioned

to produce a viability report which will include research into the site and the surrounding area.

The site is 6,500m2 and is currently leased to seven tenants, potential problems which will

be dealt with in an appropriate manor. The direct use of land around the site is industrial but with

commercial and residential buildings a short walk away the scope of development is fairly large.

Market research was conducted on the area to gain a well needed knowledge of demand;

the research used was external and internal however, only secondary data used. When the economy

shrank 0.3% in the last few months of 2012 there were raised concerns of a second recession.

Liverpool however is doing better than the average city; even with the affects of the recession it was

the fastest growing economy outside London increasing investor confidence in the area. The retail

sector in Liverpool has grown due to recent developments and has become a top 5 shopping

destination. Added with a catchment area of 4.7 million people the sector is very strong. Office

space in city centres will always promote business, a beneficial feature for the city council. Liverpool

was said to be the most active area in-terms of office uptake before the recession hit, it would be

safe to assume these levels may return. Residential properties in the area had one clear choice; with

land expensive on the fringe of the city centre it would not be efficient to build houses. The trend

demonstrates this with multiple two bed and three bed flats in the area.

Planning is an essential legal process which needs to be completed, any developments has to

suit the area visually and environmentally. The site is in an area that is primarily used for industrial

services so it is unlikely that a 40 floor high rise would be accepted. Traffic access to the site is

exceptional through the junction on Leeds Street and Pall Mall lessening possible congestion and

with Leeds Street a main road for access to Strand Street public transport is also exceptional. Past

planning applications for the site ranges from advertising to large developments. Fortunately the

development was accepted however the advertising was rejected. Site constraints which have to be

overcome include:

Current Tenants

Height of surrounding buildings

Meseyrail line at the edge of the site

These constraints have been dealt with in an appropriate manor. Analysing the planning

guidelines, the UDP map shows plans to expand the city centre boundaries. This will eventually

include the Lanyork Road site which is beneficial for the development. Supplementary planning

guidance has also been assessed to aid the design process.

The proposed use for the city has to be appropriate to be accepted by planning and prove

profitable. As the requirements for the site was multi use the proposal will include 2 bed and 3 bed

flats and a supermarket. The layout has kept both uses separate to avoid disturbances for the

residents. The design will be red brick and aluminium cladding but will also include sustainable ideas

such as water recycling and solar heating. As the time and cost are the two main priorities for the

build the best procurement method for the development will be a design and build.

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The finical viability of the site has to prove itself as profitable before a penny is spent. After a

full valuation the cost to buy the land was set at £1,187,651. Rental income from the proposed

development is estimated at £382,461 amounting to a freehold value of £6,360,981. Build costs

including professional fees and finance is valued at £5,088,152 leaving a residual sum of £1,272,830,

minus the actual cost of the land there is £85,000 left over providing a profit of 1.4%. A small

amount when compared with the amount spent and the associated risk.

To shift property to possible buyers a proper marketing strategy has to be researched and

proposed. The strategy for this development will include local and regional advertising boards,

spreads in newspapers and property magazines. A website should also be produces showing a 32

model and any particulars. Funding for the development will be through mezzanine finance at 30%

internal (£1,882,740), 60% bank finance (£3,765,481) and 10% government funds (£627580).

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2. Introduction

Fieldtown Property Developments have commissioned us (Liverpool Developments) to

produce a viability report for a possible development around Lanyork Road (Fig 1.). The report is

going to research the site and find the best use or uses for the area. The site is a medium sized plot

of land and is within close proximity to the business district (Fig.1 Red Area) and the newly built

residential towers (Fig.1 Blue Area) of Liverpool.

Fig.1 – Lanyork Rd and surround area, Goole Maps (2013)

Lanyork Road is located just off the junction of Leeds Street and Pall Mall making the site

very accessible without congestion, the junction also offers routes to the City Centre and

surrounding motorways. This will prove beneficial in both construction and handover phases of

development. The plot of land is approximately 6,500m2 and houses seven units, all varying in size.

Two of the units are currently empty but unfortunately five of the units are housing esteemed

businesses. Further research into their lease terms will be required. Currently the site is fully

enclosed and offers access through Lanyork Road, which is a cul-de-sac. One major problem at first

glance is the railway line which leads underground on the west side of the plot; this may lead to

problems with ground stability, planning permission or noise. All of which can be dealt with in an

appropriate manor.

As stated earlier, the site is only a small walk from the commercial district and the recently

developed residential towers along Strand St. With so much mixed use in the area the scope of

development and potential for the plot of land is fairly high. However, moving away from the city

centre the main use of the area is industrial (apart from a community college and car parking).

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Plentiful amounts of warehouses, car showrooms and car garages fill the area. It is safe to say that

there is no need for such developments.

3. Market Research

Market research is a vital process in the development process, it can identity a possible

“niche” in the market. This stage will be imperative with such a large investment and can generally

consist of:-

External Research – Economic research looking at trends and forecasts

Internal Research – Consumer research looking at current demands

The research methods however can be split down into further sub sections:-

Primary Data – Information found from questionnaires, interviews and observations

Secondary Data – Information from existing research.

This report will contain both external and internal research however the research method

will only be on secondary data.

Since 2008 the U.K Economy has struggled to keep ahead of its deficits and even in the final

3 months of 2012 (4 years after the recession started) the economy shrank 0.3%. This decrease in

growth has as stated by BBC (2013) further fuelled fears of the possibility of re-entering another

recession. Amongst further fears the recovery period for the current recession has also been allot

slower and unstable when compared to past examples (Fig.2)

Fig.2 - How Recessions Compare, BBC (2013)

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Starting from zero (peak of 2007) the percentage change was -6.54% when the recession

fully hit, and even though there is a slight increase, figures are still set at -3.35% 60 months on.

When compared with past recessions, sixty months on and all other examples are far beyond

negative figures. It is safe to say that the U.k economy is far from stable at this present time.

However, not all is doom and gloom when looking at the economy. As Liverpool Vision (2011)

stated Liverpool has the fastest growing economy outside of London. A revised economic forecast

for Liverpool City (Fig.3) shows a decline in GVA (Gross Value Added) during the recession of 2008.

Fortunately that changed to an incline representing growth in 2010, it is also predicted to last well

beyond 2025.

Figure.3 – Economic Forecast for Liverpool, Mersey Partnership (2012)

The investor confidence is currently higher in Liverpool when compared with the

average for United Kingdom, this which is evident in the multiple developments which have either

finished or are currently in construction. The recently accepted development plan as stated by BBC

Liverpool (2012) will bring new investors and new jobs to Liverpool through a 30 year build program

as Liverpool Waters (2011) defined in a document called statement of key development principles.

This development once finished is less than a mile away (Fig 4 & 5) from the plot of land on Lanyork

Road and will eventually increase the value of any development on the site.

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Fig.4 – Liverpool Waters Parameter Plan,

Liverpool Waters (2011)

Fig.5 – Princes Dock and King Edwards

proposal, Liverpool Waters (2011)

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Liverpool vision who describe themselves as the city’s economic development company

have produced a new framework with key areas which can be regenerated. This document contains

a map (Fig.6) which currently shows Lanyork Rod as outside the city centre boundaries, however it

also shows the planned expansion which does include Lanyork Road as part of the city centre as

developments continue.

Lanyork Rd

Fig.6 – Liverpool City Centre, Liverpool Vision (2012)

With so many developments currently happening in Liverpool and with one major

development on Lanyork Road’s door step, the site will become a prime location increasing the

potential. With the potential for the plot of land so high, the decision for the best use of the land is

very important. With thorough research and a swat analysis the most suited use can be found.

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Retail

Liverpool is currently in the top five retail destinations with the £1bn regeneration scheme

and as a spokesman from LIVERPOOL ONE (2012) stated the catchment populations is 4.7 million

making the retail sector very profitable. Retail sales during the month of December were up 29.4%

from that of last year but this was predicted to be because of icy weather; however the figures still

show a 6% increase from 2009 and a 14.6% increase from 2008. Visiting shoppers are definitely on

the increase as PORTAS (2013) explained. With that said the majority of retail units are located

within the city centre, a short walk from a vast amount of parking (Fig.7).

Fig.7 – Retail in Liverpool, Google Maps (2013)

Realistically, housing a large amount of small retail units would be unsuccessful for the area.

The walk from the city centre would not warrant the investment, however the plot of land provides

an adequate amount of space for a retail park, not to dissimilar from that at edge lane, which as

stated by ITS LIVERPOOL (2012) is currently expecting a £200 million investment for expansion. Their

aim at the end of their development is to donate any revenues produced to charities, helping the

city benefit in other areas.

Moving away from retail shops there is a small amount of residential properties around

Lanyork road (Fig.10) which have no close proximity to a news agent, a fresh food supplier or a

supermarket (Fig. 12). The potential for a supermarket if one was on the site would be extremely

high with the added bonus of the Leeds Street ring road.

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Fig.8 – Supermarkets in Liverpool, Google Maps (2013)

Below is a swat analysis on the sector highlighting key strengths, weaknesses, threats and

strengths.

Strengths Weaknesses

Top 5 shopping destination.

Constant retail developments around Liverpool.

Fierce competition from other shops.

Site location not ideal for “window shopping”.

Opportunity Threats

Liverpool Waters development may shift the city centre more towards Lanyork Rd making it ideal for retail units.

Leeds street ring road makes the plot of land ideal for supermarkets or retail parks.

£200 million investment in Edge Lane Retail Park and another £600 million around city centre.

Office

Office space in and around any city will always be a must; it promotes businesses and helps

the economy. It is the same for the city of Liverpool and as THE COMMERICAL DISTRICT (2011)

stated in an office market review, Liverpool was in confirmed to be one of the largest and most

active regions in terms of office space in the U.K. Liverpool has however been hit by the recession, as

with every other city. During 2007 (before the recession hit) the total take up in the central business

district was 462,875sq ft as explained by LIVERPOOL VISION (2007). Looking at more recent figures

there was an increase of 37,000sq ft in take up in 2009 as LIVERPOOL VISION (2009) stated, however

in 2011 the figures decreased to 268,298sq ft as LIVERPOOL VISION (2011) market review showed

but it still proved to be an increase of 29.3% from that of 2010 (Fig. 9).

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Fig.9 – Office up-take in Liverpool, Liverpool Vision (2011)

Looking primarily at the central business district and parts of the city fringe (Fig.10) there is

office space almost everywhere within Liverpool with a broad choice of options (Grade A,B and C).

However like that of retail once you cross Leeds Street the office space vanishes, mostly due to the

nature of the area being so risky. With the Liverpool waters development this may change as they

have incorporated 314,500sq ft of office space.

Fig.10 – Office space in Liverpool, Google Maps (2013)

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Below is a swat analysis on office space.


Most active city in terms of office space in 2009.

2011 seen an up take increase of 29.3%

Large decrease in office uptake when compared to 2009

Opportunity Threats

Liverpool Waters development will help office space branch out from the central district.

Out of town office’s are able to offer better prices £/m2

Residential

The residential market over the last couple of years has not been the gold pot that it used to

be. With loan to value percentages slowly increasing back to the norm it has been hard for an

average first time buyer to acquire their dream home as the Telegraph (2012) stated that the

average age for a first time buyer is now 35. This has had an adverse effect on the property market

decreasing property value across England (Fig.11).

Fig.11 – Average House Prices Around Liverpool, Zoopla (2012)

With that said the property market is slowly recovering, CITY RESIDENTIAL (2012) showed in

a report that prices are up 0.42% quarterly and 2.21% down over the year. Sales activity has also

been strong between October and December.

The rental market however is in a better state. With the average age for first time buyers 35,

only 1 in 4 adults own their own property. This has had a beneficial impact on the rental market as it

has continually grown and as the BBC (2012) stated it is predicted to grow an extra 4% in 2013.

£0

£50,000

£100,000

£150,000

£200,000

7 years ago 5 Years ago 3 Years ago 1 Year ago

Average House Prices Around Liverpool

Avg Price

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With only 3 houses up for sale within 1 mile of Lanyork (Fig.12) the majority of sales are in

flats (fig.13)

Fig.12 – Houses, Right Move (2013) Fig.13 – Flats, Right Move (2013)

The amount of flats around Liverpool will be partly due to the high cost of purchasing land

but also the potential for more profit. That is a trend that has proved beneficial within the residential

sector.

Below is a swat analysis on residential property in Liverpool.


People want to live in the city centre. Mostly one type of property available.

Opportunities Threats

4. Planning Brief

Planning briefs are usually prepared to illustrate planning information required for both the

client and the planning officer. The objective of this chapter is to provide this required information

along with site history, any constraints and planning policies.

The briefing process is an unfamiliar process for the average person, however it is more

simple than most would think, 4 key elements that are normally included are:-

Who prepared the brief

The consultation process

The stage of development

The status of the brief.

Liverpool Developments have prepared this document in preparation for a potential

development to commence in the near future. Once the application has been sent in for assessment,

the public is able to view the documents and add any comments or doubts of the plan to the council.

However the application is not at this stage and is still in early evaluation. The application to

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Liverpool council will be an outline planning application meaning not all details will be provided at

the time of the application.

As the site is in an industrial area, the surrounding area predominantly warehouses and car

showrooms. However the plot of land is close enough to the business district and Strand Street to

warrant a range of uses. It also means the public transport for the site will be exceptional. Bus and

train routes are both within a five minute walk. Leeds Street also promotes access via personal

transport such as cars or motorbikes without causing congestion. The site currently houses a small

amount of garages and a large warehouse, all of which receives utilities and will prove helpful when

construction begins.

Past planning applications for the site range from advertising boards to large development

schemes. One of which included an 11 storey block and a 6 storey block apartments, a proposal that

was accepted in 2008 (http://bit.ly/YJpdKN). A change of use has also been applied for. A change of

use from industrial to a motor garage, it was accepted with conditions (Appendix 1). Generally

advertising applications for the site are declined (Appendix 2).

Site constraints for the site will be challenging to overcome but a re-course for each problem

that arises must be found. Currently the site is occupied by five tenants, some of which have had

their lease for an extended period while some are newer shorter leases. In order to start the

development, the premises on the site must be vacant. All the leases have to be bought from the

current tenants along with the freehold right of the land, a process which will add to the cost of the

development. During the design stages, research into the surrounding buildings need to be

incorporated into the final design. The height of the buildings, the materials used and the general

layout all need to suit the area in order for the planning application to be accepted. As the majority

of buildings around the site are one or two floors, the final design cannot be a 40 floor high rise.

With the residential high rises a short walk, there will be some leeway in the height, but with every

additional floor the chance of planning being accepted decreases. No more than 5 in the current

market would be acceptable as previous developments had planning permission for 11 floors. With

the site located on a junction between Leeds Street and Pall Mall it would not be acceptable to have

the site entrance on this junction. Too much congestion would build up around the lights and the

planning officer would predict this. The best entrance for the site with minimal affect on congestion

would be on Pall Mall, either a new road or the use of the old road is advisable. The last major

problem that we can predict is the railway line leading under the site. Fortunately it only covers the

western side of the plot. Any designs will have to be shifted to the eastern side in order to sustain

the integrity of the tunnel. Meseyrail will have to be informed of the development and a structural

engineer will be required to survey the grounds. It is likely that Meseyrail will reply with some

conditions such as a fence to stop plant and debris from reaching the railway line. All conditions are

put into place to ensure the safety of its passengers; an example can be seen in appendix 3. The

Meseyrail will also have a right to access the land in order to carry out repairs or to prevent an

accident under section 14 of the Railway Regulations Act 1842. It would also be ideal to do further

research even when completed, Meseyrail produce a Route Utilisation Strategy which may highlight

problems in the unforeseeable future.

The old planning system in the U.K was known to be slow but it also halted possible

developments as COMMUNITIES GOV (2011) stated that the old planning systems is acting as a

http://bit.ly/YJpdKN

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serious brake on growth and slowing the job market. The new planning system is called the national

planning policy framework and has removed the complexity and confusion of the old system. Some

of the old documents that were used are now replaced with 1 document amounting to less than 60

pages. It has set key economic social and environmental objectives and has the same legal status of

the old system. As of this moment local authorities are responsible for local plans, this local plan

contains the Unitary Development Plan (UDP – Appendix 4). Any decisions for planning will be

referred to the UDP until it is gradually replaced by the core strategy and the sites and polices plan.

The UDP is also accompanied by Supplementary Planning guidance notes (SPG) which include:-

House extensions

Sheltered housing

Residential care homes

Childcare facilities

Trees and development

Conversion of buildings into flats and bedsits

Car and cycle parking standards

Shop fronts

New residential developments

Bed and breakfast and hostel accommodation

Mersey tram lines

Planning advice note on refuse storage and recycling facilities

Planning advice note for develops on developing contaminated land

The core strategy is currently in its draft phases, but the document has placed Lanyork Road

in a priority housing and neighbourhood renewal area. The plot of land is also close to a long-term

mixed use development zone and an employment and investment zone, however for the purpose of

this development only the UDP and the SPG notes are of use.

From thorough research into the concurrent UDP, the site has been listed as a primary

industrial area and a business development area. It has also become evident that most industrial

sites are protected from any developments for non industrial/business purposes; they intend to

reserve the resources. This would halt any potential developments on the site, however Lanyork

Road and the surround area are up for development as the waterfront, docks and hinterland have

been addressed as areas for concentration. Other areas for development are the City Centre,

Eastern corridor, Speke and Gillmoss as documented by LIVERPOOL GOV (2002).

Below is section based on SPG’s which may affect this development in particular.

SPG – New Residential Developments

Within the guidelines all new residential developments are expected to have reasonable

levels of privacy. Each planning application is assessed using standards but the council will however

be flexible were appropriate. The standards will include:-

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Density, not strictly operated but some goals need to be achieve. The character of the

surrounding area cannot be compromised as well as any site features either man made or

natural.

Design and layout, any new residential developments are required to help the urban

environment with emphasis on scale, building lines, roofscapes and architectural features

such as cladding. The layout needs to ensure a good level of security and safety from crime

or vandalism whilst still providing amenity and visual interest. Any designs near a railway or

main road require noise attenuation measures.

The other standards only relate to housing and not flats which is a more likely choice for the

area.

SPG – Sheltered Housing

Use class C3, defined as a self-contained accommodation with an alarm system and a

warden. Once again it is split into categories of guidelines which include; location, size and scale and

amenities. Starting with location the development need to be on flat ground with regards to the

elderly, be free from noise and smells and have a pleasant feeling about the building. Size and scale

incorporates density. Whether high or low the development should represent the characteristics of

the site and surrounding area. Finally waste bin areas and gardens should be provided under the

amenities requirements.

SPG – Car and cycle parking

Most development choices will require a minimum parking allowance, for the use class C3

the minimum required is 1 space per unit for residents and 1 space per 2 units for visitors. 1 stand

per unit is also required for cycle bikes. For a supermarket the minimum parking is 1 staff space per

100m2 and 1 visitor space per 20m2. 1 staff stand per 500m2 and 1 visitor stand per 250m2 is also

required for cycle bikes.

Whilst there is a minimum amount of spaces for staff and visitors a minimum of 6% for

disabled parking must be included at a size of 4.8m x 3m. Other parking bays should be 2.4m x 4.8m.

SPG – Shop Fronts

In the goal of making the city look attractive, certain loosely defined rules must be applied to

any retail designs. These will include keeping any windows recessed behind the face, cash machine

being integral with no advertising, the right choice of material for the area whilst still maximising

their durability, a limit to the amount of displays with the brand name and interior security shutters

which require no planning permission. Exterior security shutters have a lot less leeway and require

planning permission.

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An outline planning application with all matters reserved will be included in chapter 5. Using

the planning portal fee calculator the total fee will £2695(Fig14 and 15).

Fig14. – Planning Calc, Planning portal (2013) Fig15. – Planning Calc, Planning Portal (2013)

5. Development Brief

The main aim and objective of this development brief is to set out the design principles for

the site, different topic areas such as; appropriate uses, built form, layout plans, sustainability and

build materials will be covered in this chapter. Implementation and contract will also be included as

it is an integral part of development.

Choosing an appropriate use for the site can prove to be profitable, but it can also end in a

loss if the use is not ideal for the area. Residential properties will be the first choice but as shown

earlier in chapter three. Individual houses such as detached or semi-detached houses are not

prominent in the area it would be best to follow the trend and incorporate flats onto the site. The

amount of floors will vary from one to four floors dependant on the amount of car parking the plot

of land can supply, however providing car parking for the units at the minimum requirement will still

deliver an added value to the property. The density of the flats will vary from two beds (94m2) to

three beds (110m2) providing for a range of tenants needs, four bed flats would however be

unviable for the property and the tenant pool. As the requirement of the site is a multiuse

development the second option for the site will be a supermarket. A good anchor tenant for the site

would be Tesco, ideally a Tesco Express which is smaller than the average supermarket. An average

size for such stores are 400m2 but the design can go larger once again dependant on car parking.

Access to the site will be through Lanyork Road however the residential flats will be split into a gated

community whilst the supermarket will be open to the public. Pedestrian access will also be

available but from the side of the supermarket, removing the risk element of traffic accidents.

As the surrounding area is primarily industrial use, the conditions of the surrounding

buildings are not of high quality and due to this the area looks neglected. Buildings of high

architectural features would not suit the area, however there needs to be some quality in the design

to help improve the area. A middle point needs to be reached for the best outcome. From

researching recently developed buildings in the area the new Liverpool Community College on

Vauxhall Road stands out the most. Use of brick and steel cladding is a design which would suit the

site.

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Fig.16 – Site Plan (2013)

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The footprint of the site will be arranged in such a way to prevent disturbances to any

residents from the activities of Tesco (Fig.16). To accomplish this Tesco parking will be positioned

north of the site with the building further south. A small amount of space will be provided behind

the building for loading products from delivery vans. The residential plot will be completely

separated from Tesco by a fence and a hedge; this should reduce any disturbances whilst also

providing privacy. With the Residential flats placed in the south eastern corner, it will be surrounded

by parking and communal gardens. With the surrounding buildings being no more than 2 floors, the

residential block will be three floors with the supermarket set out over one floor.

Energy emissions have now become more important for the U.K, after the Rio summit and

Kyoto new target were set for energy emissions. This has had an effect on everyone, reaching

individual councils and developments. Liverpool has managed to save over the past 10 years as

LIVERPOOL GOV (2005) stated that they have reduced annual energy and water costs from £11m p.a.

to just £7m p.a. Additionally any Liverpool City Council procured buildings will look for all major

works to obtain a BREEAM rating of good or very good. Although it is not a requirement for private

investors to achieve this rating it would be advisable to reach close to these ratings. The BREEAM

rating can add to the appeal of the building especially if it achieves an excellent rating. It will not

however add to the value of the property but rather provide a saving (payback period) which will pay

for the cost of itself. The payback period for sustainable innovation or materials will vary dependant

on their use but the most widely used are heating related. Innovative ideas like extra insulation and

solar heating can work together to provide a reduced energy bill. The government will pay people

who use these incentives under the Renewable Heat Incentive (RHI). Other methods can involve

recycling water or reducing water usage. Roof water runoff and grey water can both be collected

and recycled for use in toilet water or garden water, whilst eco washing machines, toilets, taps and

showers will reduce the yearly usage. With such a large amount of flats and even more tenants the

water usage within the building will be extremely high, any innovative money saving methods would

be advised.

The materials that will be used for the residential flats will be a mixture of red brick and steel

cladding (Fig.17). This will provide a contrast along the façade of the building which will complement

the surrounding buildings.

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Figure.17 – Potential Residential Design, Marley Eternit Cladding (2013)

The building which will house the supermarket will also use the same materials to keep the

integrity of the site. Figure 18 shows the potential design but extra windows will be added.

Figure.18 – Potential Supermarket design, National Archives (2013)

With the surrounding buildings built from red brick both buildings will seamlessly fit into the

surroundings whilst the added cladding will add a modern and revamped looked to the site. With

proper landscaping around both the supermarket and residential flats the view from the windows

will be less like that of a rural area and more like a sub-urban area.

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Implementation and Contracts

Procurement is usually referred to the process of acquisition of an asset, however within the

built environment when a new building is required, it is known to be the process of designing,

constructing and commissioning a new building. When developing a procurement strategy there are

multiple choices which must be decided. The first choice will be analysis what is required of the build,

whether it’s built fast, cheap or has high quality the three never usually work together (Fig.19).

Figure.19 – Procurement options, Google (2013)

Different developments will require different things. One development may need a fast

construction phase whilst still maintaining a good level of quality, in this example the cost would

escalate. For the purpose of this development the budget has minimum leeway, the best two

categories would be time and cost. Although the quality would still be average there is no need for a

very high standard at the edge of the industrial area.

Along with the time, cost and quality decision the right procurement route for the project

has to be found. These routes will include:-

Traditional

Design and Build

Management Contracting

Construction Management

Each has its own advantages which will benefit different types of builds and requirements.

Traditional procurement involves all the development stages starting when the phase before

it has finished. This produces a time risk element however cost and quality are low risk. Design and

build involves the design and construction phases overlapping somewhat. Unlike traditional it

produces a high quality risk but has low cost and time risks. Management contracting removes the

development phase competition altogether, but this does bring its own risks into the route.

Contracting Management is similar to management contracting but the contractors are in direct

contact with the client. The design and build procurement route is best suited for this development.

It provides a low cost and time risk and as quality is not high on the agenda the disadvantage of the

route is less damaging.

6. Financial Appraisal

Before a development can commence, the financial viability has to be assessed. With such

large investment at stake the development has to worthwhile for both the client and the developer.

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With the development in its early design stages the cost to buy the land and its current use must be

value. As the site is not vacant and houses multiple tenants each tenant and their lease must be

valued individually to assess their worth.

Unit 1, which is the largest space on the site, is currently on a 10 year lease. At a price of

£43/m2 the site was valued at £655,691 freehold and £106,340 leasehold. With such a large value to

the lease the tenant will not require additional compensation.

Unit 1A/1B is the second largest but is on a rolling short term agreement. This agreement

will not offer any 1954 landlord and tenant act protection, however he will be offered a total £5,000.

With the lease valued at £2,910 the tenant will be offered £2,090 compensation. The Freehold value

is estimated at £128,544.

Unit A1 is the third largest space on the site. The tenant has been holding over on a 10 year

lease at a rent of £6,300. Although the tenant is holding over, the lease will still have landlord and

tenant act protection. With the lease valued at £610 the tenant will be compensated with £4,390.

The Freehold is estimated at £68,382.

Unit 3 is currently locked in a 3 year IR lease at £5,400p.a. but it is due to end in 2014. With a

short term left on the lease it has been estimated at £383. The tenant will be compensated with

£4,616. The freehold has been estimated at £55,337.

Unit 5 is the only lease that is not worth anything; however the tenant will still be

compensated with £5,000 to encourage the tenant to move. The freehold has been valued at

£53,759.

Unit A2 and A4 are both identical and will be valued the same. With no tenants only the

freehold has to be bought which amounts to £55,722.

A breakdown of the costs can be seen in Figure.20. The full valuation will be included in

appendix 5 along with comparable evidence for industrial property in appendix 7a and 7b.

24

Fig.20 – Site Valuation, Excel (2013)

The total cost to buy the land is estimated at £1,187,651, this will include the freehold and

leasehold costs as well as any compensation.

With the land valued, the build costs and potential development value can now be estimate.

With the annual net income of £382,461 achievable, the net realisation is set at £6,360,981 using an

all-risks yield of 6%. Fig. 21 shows the spread of rental income on the site. Two bedroom flats are

currently over 50% of the income whilst three bedroom flats and supermarkets are remarkable less.

Comparable evidence which has been used to value the residential and commercial property can be

found in appendix 7c, 7d and 7e.

Site Valuation

Total Fh & Lh Freehold Leasehold Additional

Unit 1 £762,031 £655,691 £106,340 0

Unit 1A/B £131,454 £128,544 £2,910 £2,090

Unit A1 £68,992 £68,382 £610 £4,390

Unit A2 £57,847 £57,847

Unit 3 £55,722 £55,337 £384 £4,616

Unit A4 £57,847 £57,847

Unit 5 £53,759 £57,908 -£4,149 £9,149

Total with extra costs

Unit 1 £762,031

Unit 1A/B £131,454

Unit A1 £68,991.98

Unit A2 £57,846.75

Unit A3 £55,722

Unit A4 £57,847

Unit 5 £53,759

Total Cost to Buy Land £1,187,650.68

25

Net Realisation £6,360,981.60

Total Cost £5,088,151.87

Residual Sum £1,272,829.74

Total Cost for Land £1,187,650

Profit £85,179.74

Profit % 1.4%

Fig.21 – Rental Spread, Excel (2013)

The total build costs for the development including landscaping and demolition are currently

estimated at £5,088,152 (Fig.22), BCIS examples which have been used to estimate the cost can be

found in appendix 8a,8b and 8c. With the building costs set at £5,088,152 and the net realisation

estimated at £6,360,981 the residual sum can be calculated, currently it is estimated at £1,272,830,

however with the added cost of acquiring the land the new sum is £85,180.

Fig.22 – Residual Totals, Excel (2013)

A full breakdown of the residual valuation will be included appendix 9.

With the development fully appraised it has proven that it can provide a 1.4% profit, this is

estimated at just over £85,000. This however is a low percentage when presented with the risk

involved. Decreasing the contingencies or the quality of the property may increase the profit but

this will still only boost the profit percentage by one or two per-cent. This is also the figure from

selling 100% of the site to possible clients. This will unlikely be the case,

7. Market Strategy and Funding

For any product to shift in ownership the product or service has to seen by a mass market. A

market strategy is the method used to reach the mass market through multiple marketing methods.

Two Bedroom

Three Bedroom

Supermarket

26

When analysing which marketing strategy best suits the product it is important to assess how it will

be sold. A production orientated strategy will sell the product through demonstrating its quality

while a product orientated strategy will sell the product by showing its features. The market strategy

may also target a select group of the population; different target markets will warrant different

strategies to improve the effectiveness.

The most ideal marketing strategy for this development would by product orientated. The

supermarket space will be aimed at national chains such as Tesco or Morrison’s. With a “blue chip

tenant” on the site it will likely increase the “site brand” increasing the sale rate of the other

properties. The residential flats will be aimed at new families or professionals who work within the

city. Generally the average marketing time is 8-18 months and can sometimes increase to two years.

To best use this long period it would be advisable to start marketing early on in the development,

with offering the residential flats and supermarket space early it would be possible to offer bespoke

specification of their chosen lot.

While the site has fencing to provide a duty of care to the general public advertising can be

place around the fence in certain strategic positions, the southern corner of the site facing the Leeds

Street junction would be most adequate. Advertising boards can also be placed throughout Liverpool

on a local scale and a regional scale, national advertising is however unnecessary.

With technology constantly evolving, the use of the internet is growing expediently. This is

now an essential resource for marketing, a branded website showing particulars can be produced

incorporating with a 3d model produced on AutoCAD. Listing for the site can also be displayed on

the Co Star Focus website, a professional estate agent which would appeal directly to the targeted

market. Social media can also be a useful for selling a product, Facebook groups and LinkedIn

profiles can be created with ease. Spread virally to the mass market it would be much easier than

any other methods such as standard advertising.

Paper based advertising can also be a useful strategy, strategies which would include glossy

brochures (Fig.23) or articles in newspapers and property magazines would reach a wide range of

the market.

Finally multiple estate agents can be used to reach the local market of Liverpool through

window space.

27

Fig.23 – Example Brochure, Google (2013)

In the short and long term developments will help boost the local economy through added

jobs or increased trading. As a city council, Liverpool will want any and all developments to continue,

to guarantee this multiple sources of funding is available. Sources which will include:-

Insurance and Pension funds – Large institutions will have significant investing power and

currently are a major investor within the property industry.

Banks – The most widely used option with small families to large corporations taking out

mortgages every day. An interest rate would normally be applied to the amount borrowed

which can be paid back in instalments.

Internal – Finance from private developers who are willing to risk their own money.

Government – If applicable to the development grants loans and other public sector support

may be available from funding bodies.

28

In this situation funding will come from banks, internal finance and government bodies

(Fig.24). 10% will be from government funds amounting to £627,580, developers finance at

30% set at £1882741 and 60% finance from banks estimated at £3,765,481.

Figure 24 – Mezzanine Finance, Excel (2013)

Finance can also vary in its timescale, short (3 years), medium (3-10y years) and long term

(10+). Each timescale with its own advantages, however as some property will be sold and some

leased, there will be a mixture of short and medium length financing terms. Bank loans should be

paid back by sales as they carry a significant interest rate; government funding can be paid back

either after any sales in the future or from rental income.

The government funding will come from multiple regeneration programs, Liverpool vision

which stated they have £54 million available for development schemes LIVERPOOL VISION (2013).

Regional Growth Fund also quoted as having £350 million to spend between 2011 and 2015

LIVERPOOL CITY REGION (2013). The European Regional Development Fund is also able to offer £2.8

billion ERDF (2013), however this fund is aimed at more disadvantaged areas and so this

development would be unlikely to gain finance from this source.

29

References

BBC LIVERPOOL, 2012. Liverpool Waters Plan Approved. [Online]

Available at: http://www.bbc.co.uk/news/uk-england-merseyside-17270508

[Accessed 26th Feburary 2013].

BBC, 2012. Rents to Rise Faster than House Prices in 2013. [Online]

Available at: http://www.bbc.co.uk/news/business-20726001

[Accessed 1st March 2013].

BBC, 2013. How Recessions Compare. [Online]

Available at: http://www.bbc.co.uk/news/10613201

[Accessed 26th January 2013].

BBC, 2013. Uk GDP: Economy shrank at end of 2012. [Online]

Available at: http://www.bbc.co.uk/news/business-21193525


CITY RESIDENTIAL , 2012. Liverpool Residential Update. [Online]

Available at:

http://www.cityresidential.co.uk/images/cms_uploads/editor//Liverpool%20Resi%20Update%20Q4

%202012.pdf


COMMUNITIES.GOV, 2011. Planning and Building. [Online]

Available at: http://www.communities.gov.uk/documents/planningandbuilding/pdf/1984490.pdf

[Accessed 4th March 2013].

GOOGLE MAPS, 2013. Lanyork Rd, Liverpool: Google.

GOOGLE MAPS, 2013. Retail in Liverpool, Liverpool: Google.

LIVERPOOL CITY COUNCIL, 2002. Unitary Development Plan. [Online]

Available at: http://liverpool.gov.uk/Images/UDP.pdf


LIVERPOOL GOV, 2005. Sustainable Development. [Online]

Available at: http://liverpool.gov.uk/Images/SustainableDevelopmentPlan.pdf


LIVERPOOL VISION, 2007. Liverpool Commerical Office Market 2007. [Online]

Available at: http://www.liverpoolvision.co.uk/Docs/NewsDocs/Market%20Review%202007.pdf


LIVERPOOL VISION, 2011. Liverpool Commercial Office Market Review 2011. [Online]

Available at:

http://www.liverpoolvision.co.uk/Docs/DownloadDocs/298Liverpool%20Commercial%20Office%20

Market%20Review%202011.pdf


30

LIVERPOOL VISION, 2012. Strategic Investment Framework. [Online]

Available at: http://www.liverpoolvision.co.uk/City_Centre/Strategic_Investment_Framework.aspx


LIVERPOOL VISION, 2013. European Union Grant. [Online]

Available at:

http://www.liverpoolvision.co.uk/news/54m_european_union_grant_released_for_merseyside_reg

eneration_projects.aspx

[Accessed March 8th 2013].

LIVERPOOL WATERS, 2011. Statement of Key Development Principles. [Online]

Available at:

http://www.liverpoolwaters.co.uk/pdf/PlanApps/201111/Statement_of_Key_Development_Principl

es.pdf


LIVERPOOLLEP, 2013. Liverpool City Region. [Online]

Available at: http://liverpoollep.org/opportunities/regional_growth_fund.aspx


MARLEY ETERNIT, 2013. Rock Grove 1, London: Marley.

MERSEY PARTNERSHIP, 2012. Economic Review. [Online]

Available at: http://tmp.immediacy.live.mandogroup.com/docs/Economic_Report_2012.pdf


NATIONAL ARCHIVE, 2011. Tesco Design, London: National Archive.

PORTAS, M., 2013. Liverpool Vision. [Online]

Available at: http://www.liverpoolvision.co.uk/news/city_shops_are_ahead_of_the_curve.aspx


REDCAR AND CLEVELAND, 2008. Network rail Response. [Online]

Available at: http://www.redcar-

cleveland.gov.uk/Maps/R_2008_0928_FF/Network%20Rail%20Response.pdf


TELEGRAPH, 2012. Average First Time Buyer is Now 35. [Online]

Available at: http://www.telegraph.co.uk/news/uknews/9533491/Average-first-time-buyer-is-now-

35-research-finds.html


THE COMMERCIAL DISTRICT, 2010. Liverpool Office Market Defies Economic Downturn. [Online]

Available at: http://thecommercialdistrict.com/news/shownews.asp?recordid=711


ZOOPLA, 2012. Sold Prices. [Online]

Available at: http://www.zoopla.co.uk/house-prices/

[Accessed March 1st 2013].

31

Appendix

1.

33

2.

34

3.

36

4.

37

5.

45

Yield

£34,931

£375,000 x100 = 9.3149333

Evidence in Appendix 5a

Unit 1

Subject

Size m2 955

Lease years 10

Start 2008

End 2018

Clause B/c 7th

£/m2 £43

Rent paid £41,065

Unexpired 5

Comparable

Size m2 165

Rent £11,828

Lease 5 years

Evidence in Appendix 5b

Rent per m2 = Rent paid (£)

Space (m2)

Rent per m2 = £11,828

165

Rent per m2 = £71.68

Adjustments on rent paid

Subject Comparable

955m2 165m2 1%

10 years 5 years -1%

Break clause N/a 4%

Total= 4%

Adjusted rent per m2= £74.55

Adjusted FRV= £71,197.39

6.

46

Subject Valuation

Freehold

Term

Rent Recived £41,065

Less Management 3% £1,231.95

Net Income £39,833

Yp @ 8.5% for 5 years 3.9406

Comparable at 9.3%, this is a term valuation so reduced .8%

Term Value= £156,966.12

Reversion


Less Management 3% £2,135.92

Net Income £69,061

Yp rev to perp in 5 years @ 9% 7.22146

Site is closer to city centre than comparable, a reduction of 3%

Reversion Value = £498,724.64

Freehold Value= £655,690.76

Leashold

FRV £71,197.39

Less rent £41,065

Profit £30,132.39

Yp @ 9.5%,3% and 20% for 5 year

3.5291

9.5 to represent a lease when compared to freehold

Leasehold Value= £106,340.22

Unit 1 Valuation= £762,030.98

47

Unit 1A/B

Subject

Size m2 170

Lease years 1

Start 2013

End 2014

£/m2 £53

Rent paid £9,000

Unexpired 0

Comparable

Size m2 165

Rent £11,828

Lease 5 years



Space (m2)

Rent per m2 = £11,828

165



Subject Comparable

170 m2 165m2 1%


Total= 0%



48

Subject Valuation

Freehold

Term


Less Management 3% £270.00

Net Income £8,730

Yp @ 8.5% for 1 year 0.9217


Term Value= £8,046.44

Reversion



Net Income £11,821

Yp rev to perp in 1 year @ 9% 10.19368




Leashold

FRV £12,186.42

Less rent £9,000

Profit £3,186.42

Yp @ 9.5%,3% for 1 year

0.9132


Leasehold Value= £2,909.84

Unit 1A/B Valuation= £131,454.06

49

Unit A1

Subject

Size m2 90

Lease years 10

Start 2002

End 2012

Clause B/c 7th

£/m2 £77

Rent paid £6,300

Unexpired 0

Comparable

Size m2 165

Rent £11,828

Lease 5 years



Space (m2)

Rent per m2 = £11,828

165



Subject Comparable

90m2 165m2 1%


Ir FRI 8%

Total= 8%



50

Subject Valuation

Freehold

Term


External Repairs 5% £315.00

Insurance 3% £189.00


Net Income £5,607

Yp @ 8.5% for 1 year 0.9217



Reversion





Net Income £6,201

Yp rev to perp in 1 year @ 9% 10.19368




Leashold

FRV £6,967.77

Less rent £6,300

Profit £667.77

Yp @ 9.5%,3% for 1 year

0.9132


Leasehold Value= £609.81

Unit A1 Valuation= £68,991.98

51

Unit A2 & A4

Subject

Size m2 72

Lease years 10

Start 2013

End 2023

Clause B/c 7th

Comparable

Size m2 165

Rent £11,828

Lease 5 years



Space (m2)

Rent per m2 = £11,828

165



Subject Comparable

72 165m2 1%


Break clause N/a 4%

Total= 4%



Subject Valuation

Freehold

Term



Net Income £5,207

YP in perp @ 9% 11.11



52

Unit A3

Subject

Size m2 72

Lease years 3

Start 2011

End 2014

£/m2 £75

Rent paid £5,400

Unexpired 2

Comparable

Size m2 165

Rent £11,828

Lease 5 years



Space (m2)

Rent per m2 = £11,828

165



Subject Comparable

72m2 165m2 1%

Ir FRI 8%

Total= 9%



53

Subject Valuation

Freehold

Term





Net Income £4,806

Yp @ 8.5% for 2 years 1.7711



Reversion





Net Income £5,007





Leashold

FRV £5,625.83

Less rent £5,400

Profit £225.83

Yp @ 9.5%,3% and 20% for 2 years

1.7018


Leasehold Value= £384.31


54

Unit 5

Subject

Size m2 72

Lease years 10

Start 2005

End 2015

£/m2 £94

Rent paid £6,750

Unexpired 3

Comparable

Size m2 165

Rent £11,828

Lease 5 years



Space (m2)

Rent per m2 = £11,828

165



Subject Comparable

72m2 165m2 1%


Ir FRI 8%

Total= 8%



55

Subject Valuation

Freehold

Term





Net Income £6,008

Yp @ 8.5% for 3 years 2.554



Reversion





Net Income £4,961





Leashold

FRV £5,574.21

Less rent £6,750

Profit -£1,175.79

Yp @ 9.5%,3% and 20% for 5 year

3.5291


Leasehold Value= -£4,149.47


56

7a.

http://www.showcase.co.uk/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGY5YmQ1MmM3LWM2Y

jMtNDUxMy04ZTlmLTAxMzdlNzgwZjI2NcLKFv7/lCpw3DyC1JC/ZI/b9IYd

7b.

http://www.showcase.co.uk/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGNjY2I5MTQ3LWNmYTAt

NDI4OC1iYjQ1LTAyMmUwMDc3YzVjNaI+XoGzHuu6OXtXURt2xlfRGvW0

7c.

http://www.rightmove.co.uk/property-to-rent/property-40837100.html

7d.


7e.


http://www.showcase.co.uk/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGNjY2I5MTQ3LWNmYTAtNDI4OC1iYjQ1LTAyMmUwMDc3YzVjNaI+XoGzHuu6OXtXURt2xlfRGvW0

http://www.showcase.co.uk/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGNjY2I5MTQ3LWNmYTAtNDI4OC1iYjQ1LTAyMmUwMDc3YzVjNaI+XoGzHuu6OXtXURt2xlfRGvW0




57

8a.

60

8b.

64

8c.

68

9.

Development Appraisal

Lanyork Road

Fieldtown Developments

Prepared by Liverpool Developments

Date 6th March

Valuation

2 Bedroom Flats p.a 28 @ £735pcm £246,960.00

3 Bedroom Flats p.a 12 @ £800pcm £115,200.00

Supermarket space 1020

Conversion to GIA m2 @10% 918m2 @ £35/m2 £32,130.00

Total rent p.a. £394,290.00

Less 3% Management £11,828.70

Net Income £382,461.30

Yp in perp @ 6% 16.6667

Gross Realisation £6,374,367.75

Less legal/agent fees @ 2.5% £9,561.53

Less Surveyor fees @ 1% £3,824.61


Construction Costs

Flats @ 3930m2 £716/m2 (Appendix 6A, 6B) £2,813,880.00

Supermarket @ 1020m2 £560/m2 (Appendix 6C) £571,200.00

Total Build Cost £3,385,080.00

Additonal Construction Costs

Prelims @ 10% £338,508.00

Site Investigation/Site prep £45,000.00

Site Survey £500.00

Demolition 1503m2 @ £30/m2 £45,090.00

Planning Fees £2,695

Contingencies @ 5% £169,254

Total Additonal Construction Costs £601,047

69

Professional Fees

Architect @ 4% £135,403.20

Quantity Survery @ 3% £101,552.40

Structural Engineer @ 2% £67,701.60

Building Surveryor @ 2% £67,701.60

Consultant/PM @ 2% £67,701.60

Total Professional Fees £440,060.40

Finance

Finance for half build period (1+0.14)^0.5-1 =0.067 £267,070.51

Finance for professional fees (1+0.14)^1 =0.14 £61,608.46

Finance for 2 months void (1+0.14)^0.166=0.0221 £97,818.74

Total Finance Cost £426,497.71

Letting and Advertising

Letting @ 10% FRV £39,429.00

Advertisng @ 10% net realisation £636,098.16

Total Letting and Advertising Cost £675,527.16


Total Cost £5,088,151.87

Residual Sum £1,272,829.74

Total Cost for Land £1,187,650

Profit £85,179.74

Profit % 1.4%

liverpool developments

Real Estate

tenant act

fastest growing

central business

past planning

city centre

4total 4adjusted

key development

unitary development