by Steve James

When you’re appraising a development site, and particularly a brownfield site, you really do need to anticipate all aspects.

Sometimes we are asked to appraise an opportunity that looks like a really great deal at face value. But all too often, it’s what you don’t see – rather than what you do see – that can add significant cost to a project. And this is especially the case when looking at brownfield sites.

Take a project I’ve been working on recently to establish the land value. It’s a brownfield site in a city location. It’s part of a designated development regeneration area, so it looks attractive, and certainly there would be plenty of demand for the finished site, which already has outline planning permission.

The site was formerly a maltings. It slopes down to a medieval river, and sits next to the ruins of the ancient city wall. Long derelict, the site is now tenanted by a number of businesses and has been used for a wide range of trades, since the brewery ceased operating.

It’s a charming setting. But alarm bells should be ringing for anyone assessing this site, as it is a potential minefield to cost, and the unknowns could blow apart any profit, as careful scrutiny of the outline planning paperwork reveals.

If we walk back in time, through the layers of history, we uncover some interesting facts:

Over the past 50 years, the site has variously been used as a car breakers yard and a garage. It’s great place to get replacement tyres, but it also means that there is a very high probability that the ground is contaminated. How contaminated and how deep? We don’t know. And we’ll need an extensive intrusive ground survey with numerous deep boreholes to find out.

Turning our focus to the brewery, why did it cease trading there? Because the malthouse was directly hit by a bomb during the Second World War. The roof is gone. The walls are still standing and now house a reclamation yard within. Potentially they also house unexploded bombs. As the site was bombed, the ground is likely to be unstable, with much rubble and other landfill. How deep? We don’t know. So before the site can be developed, we’ll have to survey for unexploded ordnance (UXOs) and to examine the makeup of the ground. This, coupled with the findings from the contamination assessment, means that we could potentially have to shift a huge amount of poor ground, and replace with good soil. The cost for this could range anywhere between ┬ú250,000 and ┬ú1.5 million.

The site slopes down to the river. And because it slopes, it will increase building costs. Also, as the water table is very shallow in that part of the city, it means that the foundations for the building work next to the river are likely to have to be piled or rafted. This again increases building costs.

Walking back further in time, given the site’s proximity to the ancient city wall – which dates from the 12th century – we find that it’s an area known for commercial activity during that time, and is of of high archaeological interest. A thorough archaeological survey will be required before construction can start. In some cases, archaeological conditioning for a site will allow the contractor just to report anything significant to the local archaeology team. In this case, trenches will be required to assess the ground before any construction work can start. How long will that take? We don’t know. It depends on what is found. It could add a huge delay to the project, and potentially push the cost of any development borrowing sky-high, setting aside the cost of the archaeology survey itself.

Coming back to the present, the river setting is home to many species of protected wildlife. Bats, birds and trees will need to be managed during any build programme, including working round nesting seasons. This will need to be professionally monitored, and if we get the timings for the build programme wrong, we could be looking at months of delay.

Answers to each of the above questions aren’t optional. Evidence that they have all been properly evaluated is a requirement for full planning permission to be granted, so there’s no option to ‘take a punt’ on the site and hope for the best. And without those answers, it is impossible to put together an accurate price for the land and structure a deal with any confidence. Depending on the findings to the each of the surveys, the land could even currently have a negative value. So even without the planning conditions, that approach would be a massive and ill-advised risk.

That’s why we always use our nine pillars of appraisal to assess any site, from establishing demand for a finished development, to understanding the local planning environment and history, right through to thinking about whether we would develop to sell, or hold, or even sell on the site with an appropriate planning gain.

So, whatever opportunity you are looking to develop, know your area, do your due diligence, and avoid the hidden bombshells!

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