London Building Schemes Stall Due to Construction Costs

A number of residential building projects throughout London have stalled because of rising construction costs, with numerous developers looking to renegotiate with planners due to their schemes no longer being viable.

A labour shortage has pushed construction costs in London upwards, with estimates from developers and contractors suggesting a rise of up to 10% in the last year.

One consultancy firm, Arcadis, said that they are now the second highest in the world behind New York.

A private developer with £3.6 billion worth of projects under construction, Galliard Homes, said that its Capital Towers development in East London is no longer viable in its current incarnation due to the high build cost inflation from 2014 to 2015, with certain works packages rising by a significant amount above the average increase rate.

The developer has applied for a reduction in the payments it has to make to the local authority in terms of affordable home construction. This cut in the mandatory payment will aim to restore the company’s profit margin.

Another developer building 71 apartments, Loromah Estates, secured concessions from the London borough of Lewisham at the end of 2015 on its construction of affordable homes, on the basis that the projects were no longer viable due to ‘abnormally high construction costs.’ In May this year, a 34 unit scheme in Woolwich also secured similar concessions, also citing high construction costs.

Essential Living, another developer that builds homes for rent, scrapped its primary contractors on a London Docklands project earlier this year as part of a wider company effort to control finances.

However, the scheme is still without a start date, even though it was due to begin in 2014.

Chief Executive of Cast (a planning consultancy), Mark Farmer, said that the issue is widespread throughout the industry and pointed out some schemes that may no longer go ahead due to these issues.


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BDC 305 Jun 2023