Developers struggling with rising costs

UK developers are increasingly concerned about rising costs with regards to labour and materials, as most say they’re rethinking their strategies, research from Shawbrook shows.

In the past 12 months a change in building materials (40%) was the most popular change, while 39% have also built or are planning to build different types of properties.

Rising costs are especially pertinent for developers with residential housing developments (44%), compared to those with build-to-let (41%), industrial (41%), commercial (39%), semi commercial (38%), student residences (37%) and residences for later life living (30%).

Terry Woodley, managing director of development finance at Shawbrook, said: “Property developers are displaying resilience as they adapt to new directions in construction.

“Only 4% of developers are not planning to make any strategic adjustments, highlighting just how crucial the need for adaptability is going to be over the next 12 months. What will be most interesting, however, is the routes developers choose to go down in order to make their plans profitable.

“For instance, they are incorporating a mix of residential, commercial, and recreational areas into single projects. This strategy diversifies income sources and reduces risks tied to any one sector. The popularity of build-to-rent, retirement living, and houses with multiple occupants (HMOs) is also on the rise.

“A key factor for developers is finding a funding partner that can stay committed throughout the entire process, offering expertise and flexibility from planning to execution.”

Despite facing significant hurdles, more than a third (34%) have been able to expand their business in the past 12 months.