Urban brownfield development values have taken a steep plunge over the past year, as real estate expert Nick Millican informs. That’s because many developers stopped short of purchasing sites and made smaller offers for land. The goal is to boost markets.
Number crunchers say that U.K. development sunk by 18% over a period of 12 months into June of 2023. These figures are derived from Knight Frank, an independent real estate consultancy firm. A leading London real estate figure and investment expert, Nick Millican, said interest rates are behind the trend.
They have put downward pressure on both the value of residential and commercial projects. The bottom line, he said, is that developers just are not willing to pay more than they want to for new sites. Real estate expert Nick Millican said developers have confronted a “double hit” in the debt markets as well.
Borrowing has become expensive thanks to upward trending rates. Additionally, banks are holding their money close when it comes to development schemes. Then banks want to lend at a smaller loan-to-cost ratio. Nick Millican explains that that means the borrower needs to pony up more cash to close a deal.
Consider also that the LTC that bankers feel they can tolerate in terms of development plans has shrunk from 65% to 55% over the past year. The expert said that debt funds are more willing to make loans for development. However, they have dropped the LTC they favor from 70% to 60%. Nick Millican has been a successful prominent operator in the London and U.K. real estate sector for more than two decades.