The J3 team had a fantastic experience at UKREiiF 2023, where they connected with property professionals across the sector and engaged in some very insightful discussions. While there was a notable consensus of optimism about the future, J3 Director Johnny Leadsom outlined some of the common threads of concerns that were discussed.
UKREiiF 2023: Key concerns
- Building Safety Act and its second staircase consultation:
The building safety act achieved its goal – A shake-up of building regulations that would significantly impact how buildings are designed, built, and maintained.
The decision in February 2023 wherein the Mayor of London mandated a second staircase in all new buildings above 30m with immediate effect caused not only a great deal of confusion, but industry experts are predicting have raised concerns about the potential repercussions of implementing a compulsory second staircase. Their predictions indicate that such a requirement could result in a significant loss of residential floor space, estimated at up to 6% in London alone. This reduction would equate to approximately 1.5 rooms per floor or around 5,400 new apartments. Unfortunately, this decrease in available housing contradicts the Mayor of London’s ambitious goal of constructing over 100,000 new homes this year.
Undoubtedly, there will be instances where incorporating a second staircase is the appropriate choice. However, we must remember that whether we opt for one or two staircases, all fire safety measures must coexist harmoniously. We must refrain from treating a second staircase as a universal solution that inadvertently diverts attention from other essential but less apparent safety measures.
- Planning delays:
Making an unsurprising appearance in many conversations was the unavoidable topic of planning permission and the raft of barriers that come with it. While the Government’s commitment to digitise the planning system is a positive step forward, it is only a small step towards enhancing a developer’s capacity to contribute to housebuilding.
- Contractor insolvency:
Contractor insolvencies are now perceived as the main threat to successful project delivery. Discussions were held regarding strategies for mitigating these risks, the importance of ownership-controlled programs, and procuring latent defects insurance, with the developer being the named policyholder. Performance bonds are also increasingly being used as a mechanism to protect the financial interest of developers in light of alarming insolvency statistics.
Opportunities in the Construction Environment
- Part complete & near complete developments:
We noted an increased interest and level of conversation from developers seeking funding and retrospective warranties for part-complete and near-completed development projects. On the latter, where you have a scheme part-way through construction, we explained that such enquiries are not the most attractive risks for insurers, with question marks surrounding the previous work carried out and who will be responsible for the two-year defects period going forward. However, developers with demonstrable experience and a strong professional team are often able to satisfy the due diligence requirements by prospective insurance partners – Noting the importance of having an experienced advisor in your corner, co-ordinating proceedings!
- Modern methods of construction:
While there is undoubtedly a growing acceptance of Modern Methods of Construction (MMC), the insurance industry maintains a cautious stance toward MMC. The team at J3 were pleased to expand on how and where they guide and advise on insurance policies for developments in this category.
About J3 Advisory
In a positive but challenging marketplace, how a developer models and subsequently funds their developments alongside their risk mitigation strategy will directly affect their profitability and the growth of their business.
J3’s finance and insurance divisions work in tandem to ensure the most effective debt structures are in place, in conjunction with an insurance programme that delivers peace of mind and comprehensive cover to experienced development professionals.