Confidence in commercial real estate hit by Building Safety Act delays
Regulatory delays under the Building Safety Act have negatively impacted the vast majority of institutional real estate investors, according to new data.
Originally implemented to tackle safety concerns in light of the devastating Grenfell fire, the Building Safety Act (BSR) has now created significant planning delays and “undermined market confidence”, according to Investec Real Estate’s bi-annual Future Living survey.
The Building Safety Act created the Building Safety Regulator (BSR), which oversees and approves building work for “higher-risk” buildings in England.
Despite a target of twelve weeks per application, approvals have been taking up to a year, causing a negative knock-on effect for businesses further down the supply chain.
Earlier this year, members of the Construction Plant Hire Association (CPA) reported 150 stalled high-rise schemes across the UK, although some estimates put that figure at over 200, with chief Steven Mulholland arguing that the industry is “on a downward spiral”.
Unite, which builds high-rise student accommodation, has also warned that the Building Safety Act has added “around six months” to development programmes, “putting pressure on returns and further slowing new supply”.
Investors ‘feeling more cautious’
According to Investec, 92 per cent of institutional investors said that the Building Safety Act has negatively impacted their real estate strategies and operations, while three quarters believe political uncertainty has undermined the UK’s competitiveness as a commercial real estate destination.
Against a backdrop of declining new home delivery, almost half of investors have shifted focus away from new development, pivoting instead towards refurbishing or repositioning existing assets.
Jonathan Long, head of corporate real estate lending at Investec, described red tape as a “headache” for investors.
“With pre-Budget uncertainty compounding the challenging fiscal backdrop… it’s no surprise that investors are feeling more cautious,” he added.
However, Investec found that 88 per cent of investors did not consider the Building Safety Act a major obstacle to the long-term growth of non-owner-occupied residential real estate in the UK.
There’s a strong case for the BSR’s issues to be simply teething problems, with a government select committee into the regulator earlier this year showing improvement.
New reforms have introduced a Fast Track Process to “enhance the review” of newbuild applications, and “pave the way” for the creation of a single construction regulator, as recommended by the Grenfell Tower Inquiry.
Pundits have said the changes “directly address” the delays in the process, which had previously frustrated developers and slowed progress on housing delivery.
“It’s encouraging to see safety and speed being treated as complementary, not conflicting, priorities,” Neal Moy, managing director at Paragon Bank, told the committee.