Liverpool Developments

LIVERPOOL DEVELOPMENTS

Viability Report for
Lanyork Road
Development
Prepared for Fieldtown Property Development
392106
3/8/2013

Contents
1. Executive Summary

Page 3

2. Introduction

Page 5

3. Market Research

Page 6

4. Planning Brief

Page 14

5. Development Brief

Page 18

Financial Appraisal

Page 22

6.

7. Market Strategy and Funding

Page 25

8. References

Page 29

Appendix A

Page 31

2

1.

Executive Summary

Fieldtown Property Development is thinking of acquiring a plot of land for development,
they are unsure of what would best suit the area. Liverpool Developments have been commissioned
to produce a viability report which will include research into the site and the surrounding area.
The site is 6,500m2 and is currently leased to seven tenants, potential problems which will
be dealt with in an appropriate manor. The direct use of land around the site is industrial but with
commercial and residential buildings a short walk away the scope of development is fairly large.
Market research was conducted on the area to gain a well needed knowledge of demand;
the research used was external and internal however, only secondary data used. When the economy
shrank 0.3% in the last few months of 2012 there were raised concerns of a second recession.
Liverpool however is doing better than the average city; even with the affects of the recession it was
the fastest growing economy outside London increasing investor confidence in the area. The retail
sector in Liverpool has grown due to recent developments and has become a top 5 shopping
destination. Added with a catchment area of 4.7 million people the sector is very strong. Office
space in city centres will always promote business, a beneficial feature for the city council. Liverpool
was said to be the most active area in-terms of office uptake before the recession hit, it would be
safe to assume these levels may return. Residential properties in the area had one clear choice; with
land expensive on the fringe of the city centre it would not be efficient to build houses. The trend
demonstrates this with multiple two bed and three bed flats in the area.
Planning is an essential legal process which needs to be completed, any developments has to
suit the area visually and environmentally. The site is in an area that is primarily used for industrial
services so it is unlikely that a 40 floor high rise would be accepted. Traffic access to the site is
exceptional through the junction on Leeds Street and Pall Mall lessening possible congestion and
with Leeds Street a main road for access to Strand Street public transport is also exceptional. Past
planning applications for the site ranges from advertising to large developments. Fortunately the
development was accepted however the advertising was rejected. Site constraints which have to be
overcome include:




Current Tenants
Height of surrounding buildings
Meseyrail line at the edge of the site

These constraints have been dealt with in an appropriate manor. Analysing the planning
guidelines, the UDP map shows plans to expand the city centre boundaries. This will eventually
include the Lanyork Road site which is beneficial for the development. Supplementary planning
guidance has also been assessed to aid the design process.
The proposed use for the city has to be appropriate to be accepted by planning and prove
profitable. As the requirements for the site was multi use the proposal will include 2 bed and 3 bed
flats and a supermarket. The layout has kept both uses separate to avoid disturbances for the
residents. The design will be red brick and aluminium cladding but will also include sustainable ideas
such as water recycling and solar heating. As the time and cost are the two main priorities for the
build the best procurement method for the development will be a design and build.
3

The finical viability of the site has to prove itself as profitable before a penny is spent. After a
full valuation the cost to buy the land was set at £1,187,651. Rental income from the proposed
development is estimated at £382,461 amounting to a freehold value of £6,360,981. Build costs
including professional fees and finance is valued at £5,088,152 leaving a residual sum of £1,272,830,
minus the actual cost of the land there is £85,000 left over providing a profit of 1.4%. A small
amount when compared with the amount spent and the associated risk.
To shift property to possible buyers a proper marketing strategy has to be researched and
proposed. The strategy for this development will include local and regional advertising boards,
spreads in newspapers and property magazines. A website should also be produces showing a 32
model and any particulars. Funding for the development will be through mezzanine finance at 30%
internal (£1,882,740), 60% bank finance (£3,765,481) and 10% government funds (£627580).

4

2. Introduction
Fieldtown Property Developments have commissioned us (Liverpool Developments) to
produce a viability report for a possible development around Lanyork Road (Fig 1.). The report is
going to research the site and find the best use or uses for the area. The site is a medium sized plot
of land and is within close proximity to the business district (Fig.1 Red Area) and the newly built
residential towers (Fig.1 Blue Area) of Liverpool.

Fig.1 – Lanyork Rd and surround area, Goole Maps (2013)
Lanyork Road is located just off the junction of Leeds Street and Pall Mall making the site
very accessible without congestion, the junction also offers routes to the City Centre and
surrounding motorways. This will prove beneficial in both construction and handover phases of
development. The plot of land is approximately 6,500m2 and houses seven units, all varying in size.
Two of the units are currently empty but unfortunately five of the units are housing esteemed
businesses. Further research into their lease terms will be required. Currently the site is fully
enclosed and offers access through Lanyork Road, which is a cul-de-sac. One major problem at first
glance is the railway line which leads underground on the west side of the plot; this may lead to
problems with ground stability, planning permission or noise. All of which can be dealt with in an
appropriate manor.
As stated earlier, the site is only a small walk from the commercial district and the recently
developed residential towers along Strand St. With so much mixed use in the area the scope of
development and potential for the plot of land is fairly high. However, moving away from the city
centre the main use of the area is industrial (apart from a community college and car parking).
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Plentiful amounts of warehouses, car showrooms and car garages fill the area. It is safe to say that
there is no need for such developments.

3. Market Research
Market research is a vital process in the development process, it can identity a possible
“niche” in the market. This stage will be imperative with such a large investment and can generally
consist of:


External Research – Economic research looking at trends and forecasts
Internal Research – Consumer research looking at current demands

The research methods however can be split down into further sub sections:


Primary Data – Information found from questionnaires, interviews and observations
Secondary Data – Information from existing research.

This report will contain both external and internal research however the research method
will only be on secondary data.
Since 2008 the U.K Economy has struggled to keep ahead of its deficits and even in the final
3 months of 2012 (4 years after the recession started) the economy shrank 0.3%. This decrease in
growth has as stated by BBC (2013) further fuelled fears of the possibility of re-entering another
recession. Amongst further fears the recovery period for the current recession has also been allot
slower and unstable when compared to past examples (Fig.2)

Fig.2 - How Recessions Compare, BBC (2013)
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Starting from zero (peak of 2007) the percentage change was -6.54% when the recession
fully hit, and even though there is a slight increase, figures are still set at -3.35% 60 months on.
When compared with past recessions, sixty months on and all other examples are far beyond
negative figures. It is safe to say that the U.k economy is far from stable at this present time.
However, not all is doom and gloom when looking at the economy. As Liverpool Vision (2011)
stated Liverpool has the fastest growing economy outside of London. A revised economic forecast
for Liverpool City (Fig.3) shows a decline in GVA (Gross Value Added) during the recession of 2008.
Fortunately that changed to an incline representing growth in 2010, it is also predicted to last well
beyond 2025.

Figure.3 – Economic Forecast for Liverpool, Mersey Partnership (2012)
The investor confidence is currently higher in Liverpool when compared with the
average for United Kingdom, this which is evident in the multiple developments which have either
finished or are currently in construction. The recently accepted development plan as stated by BBC
Liverpool (2012) will bring new investors and new jobs to Liverpool through a 30 year build program
as Liverpool Waters (2011) defined in a document called statement of key development principles.
This development once finished is less than a mile away (Fig 4 & 5) from the plot of land on Lanyork
Road and will eventually increase the value of any development on the site.

7

Fig.4 – Liverpool Waters Parameter Plan,
Liverpool Waters (2011)

Fig.5 – Princes Dock and King Edwards
proposal, Liverpool Waters (2011)
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Liverpool vision who describe themselves as the city’s economic development company
have produced a new framework with key areas which can be regenerated. This document contains
a map (Fig.6) which currently shows Lanyork Rod as outside the city centre boundaries, however it
also shows the planned expansion which does include Lanyork Road as part of the city centre as
developments continue.

Lanyork Rd

Fig.6 – Liverpool City Centre, Liverpool Vision (2012)
With so many developments currently happening in Liverpool and with one major
development on Lanyork Road’s door step, the site will become a prime location increasing the
potential. With the potential for the plot of land so high, the decision for the best use of the land is
very important. With thorough research and a swat analysis the most suited use can be found.

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Retail
Liverpool is currently in the top five retail destinations with the £1bn regeneration scheme
and as a spokesman from LIVERPOOL ONE (2012) stated the catchment populations is 4.7 million
making the retail sector very profitable. Retail sales during the month of December were up 29.4%
from that of last year but this was predicted to be because of icy weather; however the figures still
show a 6% increase from 2009 and a 14.6% increase from 2008. Visiting shoppers are definitely on
the increase as PORTAS (2013) explained. With that said the majority of retail units are located
within the city centre, a short walk from a vast amount of parking (Fig.7).

Fig.7 – Retail in Liverpool, Google Maps (2013)
Realistically, housing a large amount of small retail units would be unsuccessful for the area.
The walk from the city centre would not warrant the investment, however the plot of land provides
an adequate amount of space for a retail park, not to dissimilar from that at edge lane, which as
stated by ITS LIVERPOOL (2012) is currently expecting a £200 million investment for expansion. Their
aim at the end of their development is to donate any revenues produced to charities, helping the
city benefit in other areas.
Moving away from retail shops there is a small amount of residential properties around
Lanyork road (Fig.10) which have no close proximity to a news agent, a fresh food supplier or a
supermarket (Fig. 12). The potential for a supermarket if one was on the site would be extremely
high with the added bonus of the Leeds Street ring road.

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Fig.8 – Supermarkets in Liverpool, Google Maps (2013)
Below is a swat analysis on the sector highlighting key strengths, weaknesses, threats and
strengths.
Strengths
 Top 5 shopping destination.
 Constant retail developments around
Liverpool.
Opportunity
 Liverpool Waters development may shift
the city centre more towards Lanyork Rd
making it ideal for retail units.
 Leeds street ring road makes the plot of
land ideal for supermarkets or retail
parks.

Weaknesses
 Fierce competition from other shops.
 Site location not ideal for “window
shopping”.
Threats
 £200 million investment in Edge Lane
Retail Park and another £600 million
around city centre.

Office
Office space in and around any city will always be a must; it promotes businesses and helps
the economy. It is the same for the city of Liverpool and as THE COMMERICAL DISTRICT (2011)
stated in an office market review, Liverpool was in confirmed to be one of the largest and most
active regions in terms of office space in the U.K. Liverpool has however been hit by the recession, as
with every other city. During 2007 (before the recession hit) the total take up in the central business
district was 462,875sq ft as explained by LIVERPOOL VISION (2007). Looking at more recent figures
there was an increase of 37,000sq ft in take up in 2009 as LIVERPOOL VISION (2009) stated, however
in 2011 the figures decreased to 268,298sq ft as LIVERPOOL VISION (2011) market review showed
but it still proved to be an increase of 29.3% from that of 2010 (Fig. 9).

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Fig.9 – Office up-take in Liverpool, Liverpool Vision (2011)

Looking primarily at the central business district and parts of the city fringe (Fig.10) there is
office space almost everywhere within Liverpool with a broad choice of options (Grade A,B and C).
However like that of retail once you cross Leeds Street the office space vanishes, mostly due to the
nature of the area being so risky. With the Liverpool waters development this may change as they
have incorporated 314,500sq ft of office space.

Fig.10 – Office space in Liverpool, Google Maps (2013)

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Below is a swat analysis on office space.
Strengths
 Most active city in terms of office space
in 2009.
 2011 seen an up take increase of 29.3%

Opportunity
 Liverpool Waters development will help
office space branch out from the central
district.

Weaknesses
 Large decrease in office uptake when
compared to 2009

Threats
 Out of town office’s are able to offer
better prices £/m2

Residential
The residential market over the last couple of years has not been the gold pot that it used to
be. With loan to value percentages slowly increasing back to the norm it has been hard for an
average first time buyer to acquire their dream home as the Telegraph (2012) stated that the
average age for a first time buyer is now 35. This has had an adverse effect on the property market
decreasing property value across England (Fig.11).

Average House Prices Around
Liverpool
£200,000
£150,000
£100,000

Avg Price

£50,000
£0
7 years ago 5 Years ago 3 Years ago

1 Year ago

Fig.11 – Average House Prices Around Liverpool, Zoopla (2012)
With that said the property market is slowly recovering, CITY RESIDENTIAL (2012) showed in
a report that prices are up 0.42% quarterly and 2.21% down over the year. Sales activity has also
been strong between October and December.
The rental market however is in a better state. With the average age for first time buyers 35,
only 1 in 4 adults own their own property. This has had a beneficial impact on the rental market as it
has continually grown and as the BBC (2012) stated it is predicted to grow an extra 4% in 2013.

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With only 3 houses up for sale within 1 mile of Lanyork (Fig.12) the majority of sales are in
flats (fig.13)

Fig.12 – Houses, Right Move (2013)

Fig.13 – Flats, Right Move (2013)

The amount of flats around Liverpool will be partly due to the high cost of purchasing land
but also the potential for more profit. That is a trend that has proved beneficial within the residential
sector.
Below is a swat analysis on residential property in Liverpool.
Strengths
 People want to live in the city centre.
Opportunities

Weaknesses
 Mostly one type of property available.
Threats

4. Planning Brief
Planning briefs are usually prepared to illustrate planning information required for both the
client and the planning officer. The objective of this chapter is to provide this required information
along with site history, any constraints and planning policies.
The briefing process is an unfamiliar process for the average person, however it is more
simple than most would think, 4 key elements that are normally included are:




Who prepared the brief
The consultation process
The stage of development
The status of the brief.

Liverpool Developments have prepared this document in preparation for a potential
development to commence in the near future. Once the application has been sent in for assessment,
the public is able to view the documents and add any comments or doubts of the plan to the council.
However the application is not at this stage and is still in early evaluation. The application to
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Liverpool council will be an outline planning application meaning not all details will be provided at
the time of the application.
As the site is in an industrial area, the surrounding area predominantly warehouses and car
showrooms. However the plot of land is close enough to the business district and Strand Street to
warrant a range of uses. It also means the public transport for the site will be exceptional. Bus and
train routes are both within a five minute walk. Leeds Street also promotes access via personal
transport such as cars or motorbikes without causing congestion. The site currently houses a small
amount of garages and a large warehouse, all of which receives utilities and will prove helpful when
construction begins.
Past planning applications for the site range from advertising boards to large development
schemes. One of which included an 11 storey block and a 6 storey block apartments, a proposal that
was accepted in 2008 (http://bit.ly/YJpdKN). A change of use has also been applied for. A change of
use from industrial to a motor garage, it was accepted with conditions (Appendix 1). Generally
advertising applications for the site are declined (Appendix 2).
Site constraints for the site will be challenging to overcome but a re-course for each problem
that arises must be found. Currently the site is occupied by five tenants, some of which have had
their lease for an extended period while some are newer shorter leases. In order to start the
development, the premises on the site must be vacant. All the leases have to be bought from the
current tenants along with the freehold right of the land, a process which will add to the cost of the
development. During the design stages, research into the surrounding buildings need to be
incorporated into the final design. The height of the buildings, the materials used and the general
layout all need to suit the area in order for the planning application to be accepted. As the majority
of buildings around the site are one or two floors, the final design cannot be a 40 floor high rise.
With the residential high rises a short walk, there will be some leeway in the height, but with every
additional floor the chance of planning being accepted decreases. No more than 5 in the current
market would be acceptable as previous developments had planning permission for 11 floors. With
the site located on a junction between Leeds Street and Pall Mall it would not be acceptable to have
the site entrance on this junction. Too much congestion would build up around the lights and the
planning officer would predict this. The best entrance for the site with minimal affect on congestion
would be on Pall Mall, either a new road or the use of the old road is advisable. The last major
problem that we can predict is the railway line leading under the site. Fortunately it only covers the
western side of the plot. Any designs will have to be shifted to the eastern side in order to sustain
the integrity of the tunnel. Meseyrail will have to be informed of the development and a structural
engineer will be required to survey the grounds. It is likely that Meseyrail will reply with some
conditions such as a fence to stop plant and debris from reaching the railway line. All conditions are
put into place to ensure the safety of its passengers; an example can be seen in appendix 3. The
Meseyrail will also have a right to access the land in order to carry out repairs or to prevent an
accident under section 14 of the Railway Regulations Act 1842. It would also be ideal to do further
research even when completed, Meseyrail produce a Route Utilisation Strategy which may highlight
problems in the unforeseeable future.
The old planning system in the U.K was known to be slow but it also halted possible
developments as COMMUNITIES GOV (2011) stated that the old planning systems is acting as a
15

serious brake on growth and slowing the job market. The new planning system is called the national
planning policy framework and has removed the complexity and confusion of the old system. Some
of the old documents that were used are now replaced with 1 document amounting to less than 60
pages. It has set key economic social and environmental objectives and has the same legal status of
the old system. As of this moment local authorities are responsible for local plans, this local plan
contains the Unitary Development Plan (UDP – Appendix 4). Any decisions for planning will be
referred to the UDP until it is gradually replaced by the core strategy and the sites and polices plan.
The UDP is also accompanied by Supplementary Planning guidance notes (SPG) which include:













House extensions
Sheltered housing
Residential care homes
Childcare facilities
Trees and development
Conversion of buildings into flats and bedsits
Car and cycle parking standards
Shop fronts
New residential developments
Bed and breakfast and hostel accommodation
Mersey tram lines
Planning advice note on refuse storage and recycling facilities
Planning advice note for develops on developing contaminated land

The core strategy is currently in its draft phases, but the document has placed Lanyork Road
in a priority housing and neighbourhood renewal area. The plot of land is also close to a long-term
mixed use development zone and an employment and investment zone, however for the purpose of
this development only the UDP and the SPG notes are of use.
From thorough research into the concurrent UDP, the site has been listed as a primary
industrial area and a business development area. It has also become evident that most industrial
sites are protected from any developments for non industrial/business purposes; they intend to
reserve the resources. This would halt any potential developments on the site, however Lanyork
Road and the surround area are up for development as the waterfront, docks and hinterland have
been addressed as areas for concentration. Other areas for development are the City Centre,
Eastern corridor, Speke and Gillmoss as documented by LIVERPOOL GOV (2002).
Below is section based on SPG’s which may affect this development in particular.
SPG – New Residential Developments
Within the guidelines all new residential developments are expected to have reasonable
levels of privacy. Each planning application is assessed using standards but the council will however
be flexible were appropriate. The standards will include:-

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



Density, not strictly operated but some goals need to be achieve. The character of the
surrounding area cannot be compromised as well as any site features either man made or
natural.
Design and layout, any new residential developments are required to help the urban
environment with emphasis on scale, building lines, roofscapes and architectural features
such as cladding. The layout needs to ensure a good level of security and safety from crime
or vandalism whilst still providing amenity and visual interest. Any designs near a railway or
main road require noise attenuation measures.
The other standards only relate to housing and not flats which is a more likely choice for the

area.
SPG – Sheltered Housing
Use class C3, defined as a self-contained accommodation with an alarm system and a
warden. Once again it is split into categories of guidelines which include; location, size and scale and
amenities. Starting with location the development need to be on flat ground with regards to the
elderly, be free from noise and smells and have a pleasant feeling about the building. Size and scale
incorporates density. Whether high or low the development should represent the characteristics of
the site and surrounding area. Finally waste bin areas and gardens should be provided under the
amenities requirements.
SPG – Car and cycle parking
Most development choices will require a minimum parking allowance, for the use class C3
the minimum required is 1 space per unit for residents and 1 space per 2 units for visitors. 1 stand
per unit is also required for cycle bikes. For a supermarket the minimum parking is 1 staff space per
100m2 and 1 visitor space per 20m2. 1 staff stand per 500m2 and 1 visitor stand per 250m2 is also
required for cycle bikes.
Whilst there is a minimum amount of spaces for staff and visitors a minimum of 6% for
disabled parking must be included at a size of 4.8m x 3m. Other parking bays should be 2.4m x 4.8m.
SPG – Shop Fronts
In the goal of making the city look attractive, certain loosely defined rules must be applied to
any retail designs. These will include keeping any windows recessed behind the face, cash machine
being integral with no advertising, the right choice of material for the area whilst still maximising
their durability, a limit to the amount of displays with the brand name and interior security shutters
which require no planning permission. Exterior security shutters have a lot less leeway and require
planning permission.

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An outline planning application with all matters reserved will be included in chapter 5. Using
the planning portal fee calculator the total fee will £2695(Fig14 and 15).

Fig14. – Planning Calc, Planning portal (2013)

Fig15. – Planning Calc, Planning Portal (2013)

5. Development Brief
The main aim and objective of this development brief is to set out the design principles for
the site, different topic areas such as; appropriate uses, built form, layout plans, sustainability and
build materials will be covered in this chapter. Implementation and contract will also be included as
it is an integral part of development.
Choosing an appropriate use for the site can prove to be profitable, but it can also end in a
loss if the use is not ideal for the area. Residential properties will be the first choice but as shown
earlier in chapter three. Individual houses such as detached or semi-detached houses are not
prominent in the area it would be best to follow the trend and incorporate flats onto the site. The
amount of floors will vary from one to four floors dependant on the amount of car parking the plot
of land can supply, however providing car parking for the units at the minimum requirement will still
deliver an added value to the property. The density of the flats will vary from two beds (94m2) to
three beds (110m2) providing for a range of tenants needs, four bed flats would however be
unviable for the property and the tenant pool. As the requirement of the site is a multiuse
development the second option for the site will be a supermarket. A good anchor tenant for the site
would be Tesco, ideally a Tesco Express which is smaller than the average supermarket. An average
size for such stores are 400m2 but the design can go larger once again dependant on car parking.
Access to the site will be through Lanyork Road however the residential flats will be split into a gated
community whilst the supermarket will be open to the public. Pedestrian access will also be
available but from the side of the supermarket, removing the risk element of traffic accidents.
As the surrounding area is primarily industrial use, the conditions of the surrounding
buildings are not of high quality and due to this the area looks neglected. Buildings of high
architectural features would not suit the area, however there needs to be some quality in the design
to help improve the area. A middle point needs to be reached for the best outcome. From
researching recently developed buildings in the area the new Liverpool Community College on
Vauxhall Road stands out the most. Use of brick and steel cladding is a design which would suit the
site.

18

Fig.16 – Site Plan (2013)

19

The footprint of the site will be arranged in such a way to prevent disturbances to any
residents from the activities of Tesco (Fig.16). To accomplish this Tesco parking will be positioned
north of the site with the building further south. A small amount of space will be provided behind
the building for loading products from delivery vans. The residential plot will be completely
separated from Tesco by a fence and a hedge; this should reduce any disturbances whilst also
providing privacy. With the Residential flats placed in the south eastern corner, it will be surrounded
by parking and communal gardens. With the surrounding buildings being no more than 2 floors, the
residential block will be three floors with the supermarket set out over one floor.
Energy emissions have now become more important for the U.K, after the Rio summit and
Kyoto new target were set for energy emissions. This has had an effect on everyone, reaching
individual councils and developments. Liverpool has managed to save over the past 10 years as
LIVERPOOL GOV (2005) stated that they have reduced annual energy and water costs from £11m p.a.
to just £7m p.a. Additionally any Liverpool City Council procured buildings will look for all major
works to obtain a BREEAM rating of good or very good. Although it is not a requirement for private
investors to achieve this rating it would be advisable to reach close to these ratings. The BREEAM
rating can add to the appeal of the building especially if it achieves an excellent rating. It will not
however add to the value of the property but rather provide a saving (payback period) which will pay
for the cost of itself. The payback period for sustainable innovation or materials will vary dependant
on their use but the most widely used are heating related. Innovative ideas like extra insulation and
solar heating can work together to provide a reduced energy bill. The government will pay people
who use these incentives under the Renewable Heat Incentive (RHI). Other methods can involve
recycling water or reducing water usage. Roof water runoff and grey water can both be collected
and recycled for use in toilet water or garden water, whilst eco washing machines, toilets, taps and
showers will reduce the yearly usage. With such a large amount of flats and even more tenants the
water usage within the building will be extremely high, any innovative money saving methods would
be advised.
The materials that will be used for the residential flats will be a mixture of red brick and steel
cladding (Fig.17). This will provide a contrast along the façade of the building which will complement
the surrounding buildings.

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Figure.17 – Potential Residential Design, Marley Eternit Cladding (2013)
The building which will house the supermarket will also use the same materials to keep the
integrity of the site. Figure 18 shows the potential design but extra windows will be added.

Figure.18 – Potential Supermarket design, National Archives (2013)
With the surrounding buildings built from red brick both buildings will seamlessly fit into the
surroundings whilst the added cladding will add a modern and revamped looked to the site. With
proper landscaping around both the supermarket and residential flats the view from the windows
will be less like that of a rural area and more like a sub-urban area.

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Implementation and Contracts
Procurement is usually referred to the process of acquisition of an asset, however within the
built environment when a new building is required, it is known to be the process of designing,
constructing and commissioning a new building. When developing a procurement strategy there are
multiple choices which must be decided. The first choice will be analysis what is required of the build,
whether it’s built fast, cheap or has high quality the three never usually work together (Fig.19).

Figure.19 – Procurement options, Google (2013)
Different developments will require different things. One development may need a fast
construction phase whilst still maintaining a good level of quality, in this example the cost would
escalate. For the purpose of this development the budget has minimum leeway, the best two
categories would be time and cost. Although the quality would still be average there is no need for a
very high standard at the edge of the industrial area.
Along with the time, cost and quality decision the right procurement route for the project
has to be found. These routes will include:




Traditional
Design and Build
Management Contracting
Construction Management
Each has its own advantages which will benefit different types of builds and requirements.

Traditional procurement involves all the development stages starting when the phase before
it has finished. This produces a time risk element however cost and quality are low risk. Design and
build involves the design and construction phases overlapping somewhat. Unlike traditional it
produces a high quality risk but has low cost and time risks. Management contracting removes the
development phase competition altogether, but this does bring its own risks into the route.
Contracting Management is similar to management contracting but the contractors are in direct
contact with the client. The design and build procurement route is best suited for this development.
It provides a low cost and time risk and as quality is not high on the agenda the disadvantage of the
route is less damaging.
6. Financial Appraisal
Before a development can commence, the financial viability has to be assessed. With such
large investment at stake the development has to worthwhile for both the client and the developer.
22

With the development in its early design stages the cost to buy the land and its current use must be
value. As the site is not vacant and houses multiple tenants each tenant and their lease must be
valued individually to assess their worth.
Unit 1, which is the largest space on the site, is currently on a 10 year lease. At a price of
£43/m2 the site was valued at £655,691 freehold and £106,340 leasehold. With such a large value to
the lease the tenant will not require additional compensation.
Unit 1A/1B is the second largest but is on a rolling short term agreement. This agreement
will not offer any 1954 landlord and tenant act protection, however he will be offered a total £5,000.
With the lease valued at £2,910 the tenant will be offered £2,090 compensation. The Freehold value
is estimated at £128,544.
Unit A1 is the third largest space on the site. The tenant has been holding over on a 10 year
lease at a rent of £6,300. Although the tenant is holding over, the lease will still have landlord and
tenant act protection. With the lease valued at £610 the tenant will be compensated with £4,390.
The Freehold is estimated at £68,382.
Unit 3 is currently locked in a 3 year IR lease at £5,400p.a. but it is due to end in 2014. With a
short term left on the lease it has been estimated at £383. The tenant will be compensated with
£4,616. The freehold has been estimated at £55,337.
Unit 5 is the only lease that is not worth anything; however the tenant will still be
compensated with £5,000 to encourage the tenant to move. The freehold has been valued at
£53,759.
Unit A2 and A4 are both identical and will be valued the same. With no tenants only the
freehold has to be bought which amounts to £55,722.
A breakdown of the costs can be seen in Figure.20. The full valuation will be included in
appendix 5 along with comparable evidence for industrial property in appendix 7a and 7b.

23

Site Valuation

Unit 1
Unit 1A/B
Unit A1
Unit A2
Unit 3
Unit A4
Unit 5

Total Fh & Lh
Freehold
Leasehold
£762,031
£655,691 £106,340
£131,454
£128,544
£2,910
£68,992
£68,382
£610
£57,847
£57,847
£55,722
£55,337
£384
£57,847
£57,847
£53,759
£57,908
-£4,149

Unit 1
Unit 1A/B
Unit A1
Unit A2
Unit A3
Unit A4
Unit 5

Total with extra costs
£762,031
£131,454
£68,991.98
£57,846.75
£55,722
£57,847
£53,759

Total Cost to Buy Land

Additional
0
£2,090
£4,390
£4,616
£9,149

£1,187,650.68

Fig.20 – Site Valuation, Excel (2013)
The total cost to buy the land is estimated at £1,187,651, this will include the freehold and
leasehold costs as well as any compensation.
With the land valued, the build costs and potential development value can now be estimate.
With the annual net income of £382,461 achievable, the net realisation is set at £6,360,981 using an
all-risks yield of 6%. Fig. 21 shows the spread of rental income on the site. Two bedroom flats are
currently over 50% of the income whilst three bedroom flats and supermarkets are remarkable less.
Comparable evidence which has been used to value the residential and commercial property can be
found in appendix 7c, 7d and 7e.

24

Two Bedroom
Three Bedroom
Supermarket

Fig.21 – Rental Spread, Excel (2013)
The total build costs for the development including landscaping and demolition are currently
estimated at £5,088,152 (Fig.22), BCIS examples which have been used to estimate the cost can be
found in appendix 8a,8b and 8c. With the building costs set at £5,088,152 and the net realisation
estimated at £6,360,981 the residual sum can be calculated, currently it is estimated at £1,272,830,
however with the added cost of acquiring the land the new sum is £85,180.

Net Realisation
Total Cost
Residual Sum
Total Cost for Land
Profit
Profit %

£6,360,981.60
£5,088,151.87
£1,272,829.74
£1,187,650
£85,179.74
1.4%

Fig.22 – Residual Totals, Excel (2013)
A full breakdown of the residual valuation will be included appendix 9.
With the development fully appraised it has proven that it can provide a 1.4% profit, this is
estimated at just over £85,000. This however is a low percentage when presented with the risk
involved. Decreasing the contingencies or the quality of the property may increase the profit but
this will still only boost the profit percentage by one or two per-cent. This is also the figure from
selling 100% of the site to possible clients. This will unlikely be the case,

7. Market Strategy and Funding
For any product to shift in ownership the product or service has to seen by a mass market. A
market strategy is the method used to reach the mass market through multiple marketing methods.
25

When analysing which marketing strategy best suits the product it is important to assess how it will
be sold. A production orientated strategy will sell the product through demonstrating its quality
while a product orientated strategy will sell the product by showing its features. The market strategy
may also target a select group of the population; different target markets will warrant different
strategies to improve the effectiveness.
The most ideal marketing strategy for this development would by product orientated. The
supermarket space will be aimed at national chains such as Tesco or Morrison’s. With a “blue chip
tenant” on the site it will likely increase the “site brand” increasing the sale rate of the other
properties. The residential flats will be aimed at new families or professionals who work within the
city. Generally the average marketing time is 8-18 months and can sometimes increase to two years.
To best use this long period it would be advisable to start marketing early on in the development,
with offering the residential flats and supermarket space early it would be possible to offer bespoke
specification of their chosen lot.
While the site has fencing to provide a duty of care to the general public advertising can be
place around the fence in certain strategic positions, the southern corner of the site facing the Leeds
Street junction would be most adequate. Advertising boards can also be placed throughout Liverpool
on a local scale and a regional scale, national advertising is however unnecessary.
With technology constantly evolving, the use of the internet is growing expediently. This is
now an essential resource for marketing, a branded website showing particulars can be produced
incorporating with a 3d model produced on AutoCAD. Listing for the site can also be displayed on
the Co Star Focus website, a professional estate agent which would appeal directly to the targeted
market. Social media can also be a useful for selling a product, Facebook groups and LinkedIn
profiles can be created with ease. Spread virally to the mass market it would be much easier than
any other methods such as standard advertising.
Paper based advertising can also be a useful strategy, strategies which would include glossy
brochures (Fig.23) or articles in newspapers and property magazines would reach a wide range of
the market.
Finally multiple estate agents can be used to reach the local market of Liverpool through
window space.

26

Fig.23 – Example Brochure, Google (2013)
In the short and long term developments will help boost the local economy through added
jobs or increased trading. As a city council, Liverpool will want any and all developments to continue,
to guarantee this multiple sources of funding is available. Sources which will include:





Insurance and Pension funds – Large institutions will have significant investing power and
currently are a major investor within the property industry.
Banks – The most widely used option with small families to large corporations taking out
mortgages every day. An interest rate would normally be applied to the amount borrowed
which can be paid back in instalments.
Internal – Finance from private developers who are willing to risk their own money.
Government – If applicable to the development grants loans and other public sector support
may be available from funding bodies.

27

In this situation funding will come from banks, internal finance and government bodies
(Fig.24). 10% will be from government funds amounting to £627,580, developers finance at
30% set at £1882741 and 60% finance from banks estimated at £3,765,481.

Figure 24 – Mezzanine Finance, Excel (2013)
Finance can also vary in its timescale, short (3 years), medium (3-10y years) and long term
(10+). Each timescale with its own advantages, however as some property will be sold and some
leased, there will be a mixture of short and medium length financing terms. Bank loans should be
paid back by sales as they carry a significant interest rate; government funding can be paid back
either after any sales in the future or from rental income.
The government funding will come from multiple regeneration programs, Liverpool vision
which stated they have £54 million available for development schemes LIVERPOOL VISION (2013).
Regional Growth Fund also quoted as having £350 million to spend between 2011 and 2015
LIVERPOOL CITY REGION (2013). The European Regional Development Fund is also able to offer £2.8
billion ERDF (2013), however this fund is aimed at more disadvantaged areas and so this
development would be unlikely to gain finance from this source.

28

References
BBC LIVERPOOL, 2012. Liverpool Waters Plan Approved. [Online]
Available at: http://www.bbc.co.uk/news/uk-england-merseyside-17270508
[Accessed 26th Feburary 2013].
BBC, 2012. Rents to Rise Faster than House Prices in 2013. [Online]
Available at: http://www.bbc.co.uk/news/business-20726001
[Accessed 1st March 2013].
BBC, 2013. How Recessions Compare. [Online]
Available at: http://www.bbc.co.uk/news/10613201
[Accessed 26th January 2013].
BBC, 2013. Uk GDP: Economy shrank at end of 2012. [Online]
Available at: http://www.bbc.co.uk/news/business-21193525
CITY RESIDENTIAL , 2012. Liverpool Residential Update. [Online]
Available at:
http://www.cityresidential.co.uk/images/cms_uploads/editor//Liverpool%20Resi%20Update%20Q4
%202012.pdf
COMMUNITIES.GOV, 2011. Planning and Building. [Online]
Available at: http://www.communities.gov.uk/documents/planningandbuilding/pdf/1984490.pdf
[Accessed 4th March 2013].
GOOGLE MAPS, 2013. Lanyork Rd, Liverpool: Google.
GOOGLE MAPS, 2013. Retail in Liverpool, Liverpool: Google.
LIVERPOOL CITY COUNCIL, 2002. Unitary Development Plan. [Online]
Available at: http://liverpool.gov.uk/Images/UDP.pdf
LIVERPOOL GOV, 2005. Sustainable Development. [Online]
Available at: http://liverpool.gov.uk/Images/SustainableDevelopmentPlan.pdf
LIVERPOOL VISION, 2007. Liverpool Commerical Office Market 2007. [Online]
Available at: http://www.liverpoolvision.co.uk/Docs/NewsDocs/Market%20Review%202007.pdf
LIVERPOOL VISION, 2011. Liverpool Commercial Office Market Review 2011. [Online]
Available at:
http://www.liverpoolvision.co.uk/Docs/DownloadDocs/298Liverpool%20Commercial%20Office%20
Market%20Review%202011.pdf

29

LIVERPOOL VISION, 2012. Strategic Investment Framework. [Online]
Available at: http://www.liverpoolvision.co.uk/City_Centre/Strategic_Investment_Framework.aspx
LIVERPOOL VISION, 2013. European Union Grant. [Online]
Available at:
http://www.liverpoolvision.co.uk/news/54m_european_union_grant_released_for_merseyside_reg
eneration_projects.aspx
[Accessed March 8th 2013].
LIVERPOOL WATERS, 2011. Statement of Key Development Principles. [Online]
Available at:
http://www.liverpoolwaters.co.uk/pdf/PlanApps/201111/Statement_of_Key_Development_Principl
es.pdf
LIVERPOOLLEP, 2013. Liverpool City Region. [Online]
Available at: http://liverpoollep.org/opportunities/regional_growth_fund.aspx
MARLEY ETERNIT, 2013. Rock Grove 1, London: Marley.
MERSEY PARTNERSHIP, 2012. Economic Review. [Online]
Available at: http://tmp.immediacy.live.mandogroup.com/docs/Economic_Report_2012.pdf
NATIONAL ARCHIVE, 2011. Tesco Design, London: National Archive.
PORTAS, M., 2013. Liverpool Vision. [Online]
Available at: http://www.liverpoolvision.co.uk/news/city_shops_are_ahead_of_the_curve.aspx
REDCAR AND CLEVELAND, 2008. Network rail Response. [Online]
Available at: http://www.redcarcleveland.gov.uk/Maps/R_2008_0928_FF/Network%20Rail%20Response.pdf
TELEGRAPH, 2012. Average First Time Buyer is Now 35. [Online]
Available at: http://www.telegraph.co.uk/news/uknews/9533491/Average-first-time-buyer-is-now35-research-finds.html
THE COMMERCIAL DISTRICT, 2010. Liverpool Office Market Defies Economic Downturn. [Online]
Available at: http://thecommercialdistrict.com/news/shownews.asp?recordid=711
ZOOPLA, 2012. Sold Prices. [Online]
Available at: http://www.zoopla.co.uk/house-prices/
[Accessed March 1st 2013].
30

6.

Yield
£34,931
£375,000 x100
Evidence in Appendix 5a

=

9.3149333

Unit 1
Subject
Size m2
Lease years
Start
End
Clause
£/m2
Rent paid
Unexpired

955
10
2008
2018
B/c 7th
£43
£41,065
5

Comparable
Size m2
Rent
Lease

165
£11,828
5 years

Evidence in Appendix 5b
Rent per m2 =

Rent paid (£)
Space (m2)

Rent per m2 =

£11,828
165

Rent per m2 =

£71.68

Adjustments on rent paid
Subject
955m2
10 years
Break clause

Comparable
165m2
5 years
N/a
Total=

Adjusted rent per m2=
Adjusted FRV=

1%
-1%
4%
4%

£74.55
£71,197.39

45

Subject Valuation
Freehold
Term
Rent Recived
Less Management 3%
Net Income

£41,065
£1,231.95
£39,833

Yp @ 8.5% for 5 years
3.9406
Comparable at 9.3%, this is a term valuation so reduced .8%
Term Value=

£156,966.12

Reversion
Rent Recived
Less Management 3%
Net Income

£71,197
£2,135.92
£69,061

Yp rev to perp in 5 years @ 9%
7.22146
Site is closer to city centre than comparable, a reduction of 3%
Reversion Value =

£498,724.64

Freehold Value=

£655,690.76

Leashold
FRV
Less rent
Profit

£71,197.39
£41,065
£30,132.39

Yp @ 9.5%,3% and 20% for 5 year
3.5291
9.5 to represent a lease when compared to freehold
Leasehold Value=

£106,340.22

Unit 1 Valuation=

£762,030.98

46

Unit 1A/B
Subject
Size m2
Lease years
Start
End
£/m2
Rent paid
Unexpired

170
1
2013
2014
£53
£9,000
0

Comparable
Size m2
Rent
Lease

165
£11,828
5 years

Rent per m2 =

Rent paid (£)
Space (m2)

Rent per m2 =

£11,828
165

Rent per m2 =

£71.68

Subject
170 m2
10 years

Comparable
165m2
5 years
Total=

Adjusted FRV=

1%
-1%
0%

£71.68
£12,186.42

47

Subject Valuation
Freehold
Term
Rent Recived
Less Management 3%
Net Income

£9,000
£270.00
£8,730

Yp @ 8.5% for 1 year
0.9217
Term Value=

£8,046.44

Reversion
Rent Recived
Less Management 3%
Net Income

£12,186
£365.59
£11,821

Yp rev to perp in 1 year @ 9%
10.19368
Reversion Value =

£120,497.77

Freehold Value=

£128,544.21

Leashold
FRV
Less rent
Profit

£12,186.42
£9,000
£3,186.42

Yp @ 9.5%,3% for 1 year
0.9132
Leasehold Value=
Unit 1A/B Valuation=

£2,909.84
£131,454.06

48

Unit A1
Subject
Size m2
Lease years
Start
End
Clause
£/m2
Rent paid
Unexpired

90
10
2002
2012
B/c 7th
£77
£6,300
0

Comparable
Size m2
Rent
Lease

165
£11,828
5 years

Rent per m2 =

Rent paid (£)
Space (m2)

Rent per m2 =

£11,828
165

Rent per m2 =

£71.68

Subject
90m2
10 years
Ir

Comparable
165m2
5 years
FRI
Total=

Adjusted FRV=

1%
-1%
8%
8%

£77.42
£6,967.77

49

Subject Valuation
Freehold
Term
Rent Recived
External Repairs 5%
Insurance 3%
Less Management 3%
Net Income

£6,300
£315.00
£189.00
£189.00
£5,607

Yp @ 8.5% for 1 year
0.9217
Term Value=

£5,167.97

Reversion
Rent Recived
Less Management 3%
External Repairs 5%
Insurance 3%
Net Income

£6,968
£209.03
£348.39
£209.03
£6,201

Yp rev to perp in 1 year @ 9%
10.19368
Reversion Value =

£63,214.20

Freehold Value=

£68,382.17

Leashold
FRV
Less rent
Profit

£6,967.77
£6,300
£667.77

Yp @ 9.5%,3% for 1 year
0.9132
Leasehold Value=
Unit A1 Valuation=

£609.81
£68,991.98

50

Unit A2 & A4
Subject
Size m2
Lease years
Start
End
Clause

72
10
2013
2023
B/c 7th

Comparable
Size m2
Rent
Lease

165
£11,828
5 years

Rent per m2 =

Rent paid (£)
Space (m2)

Rent per m2 =

£11,828
165

Rent per m2 =

£71.68

Subject
72
10 years
Break clause

Comparable
165m2
5 years
N/a
Total=

Adjusted FRV=

1%
-1%
4%
4%

£74.55
£5,367.76

Subject Valuation
Freehold
Term
Rent Recived
Less Management 3%
Net Income

£5,368
£161.03
£5,207

YP in perp @ 9%
11.11
Term Value=

£57,846.75

51

Unit A3
Subject
Size m2
Lease years
Start
End
£/m2
Rent paid
Unexpired

72
3
2011
2014
£75
£5,400
2

Comparable
Size m2
Rent
Lease

165
£11,828
5 years

Rent per m2 =

Rent paid (£)
Space (m2)

Rent per m2 =

£11,828
165

Rent per m2 =

£71.68

Subject
72m2
Ir

Comparable
165m2
FRI
Total=

Adjusted FRV=

1%
8%
9%

£78.14
£5,625.83

52

Subject Valuation
Freehold
Term
Rent Recived
Less Management 3%
External Repairs 5%
Insurance 3%
Net Income

£5,400
£162.00
£270.00
£162.00
£4,806

1.7711
Term Value=

£8,511.91

Reversion
Rent Recived
Less Management 3%
External Repairs 5%
Insurance 3%
Net Income

£5,626
£168.77
£281.29
£168.77
£5,007

9.352
Reversion Value =

£46,825.33

Freehold Value=

£55,337.24

Leashold
FRV
Less rent
Profit

£5,625.83
£5,400
£225.83

Yp @ 9.5%,3% and 20% for 2 years
1.7018
Leasehold Value=
Unit A3 Valuation=

£384.31
£55,721.55

53

Unit 5
Subject
Size m2
Lease years
Start
End
£/m2
Rent paid
Unexpired

72
10
2005
2015
£94
£6,750
3

Comparable
Size m2
Rent
Lease

165
£11,828
5 years

Rent per m2 =

Rent paid (£)
Space (m2)

Rent per m2 =

£11,828
165

Rent per m2 =

£71.68

Subject
72m2
10 years
Ir

Comparable
165m2
5 years
FRI
Total=

Adjusted FRV=

1%
-1%
8%
8%

£77.42
£5,574.21

54

Subject Valuation
Freehold
Term
Rent Recived
Less Management 3%
External Repairs 5%
Insurance 3%
Net Income

£6,750
£202.50
£337.50
£202.50
£6,008

2.554
Term Value=

£15,343.16

Reversion
Rent Recived
Less Management 3%
External Repairs 5%
Insurance 3%
Net Income

£5,574
£167.23
£278.71
£167.23
£4,961

8.57982
Reversion Value =

£42,564.92

Freehold Value=

£57,908.07

Leashold
FRV
Less rent
Profit

£5,574.21
£6,750
-£1,175.79

Yp @ 9.5%,3% and 20% for 5 year
3.5291
Leasehold Value=

-£4,149.47

Unit A5 Valuation=

£53,758.61

55

7a.
http://www.showcase.co.uk/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGY5YmQ1MmM3LWM2Y
jMtNDUxMy04ZTlmLTAxMzdlNzgwZjI2NcLKFv7/lCpw3DyC1JC/ZI/b9IYd
7b.
http://www.showcase.co.uk/#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJGNjY2I5MTQ3LWNmYTAt
NDI4OC1iYjQ1LTAyMmUwMDc3YzVjNaI+XoGzHuu6OXtXURt2xlfRGvW0
7c.
http://www.rightmove.co.uk/property-to-rent/property-40837100.html
7d.
7e.

56

9.
Development Appraisal
Lanyork Road
Fieldtown Developments
Prepared by Liverpool Developments
Date 6th March
Valuation
2 Bedroom Flats p.a
3 Bedroom Flats p.a
Supermarket space
Conversion to GIA m2 @10%

28 @ £735pcm
12 @ £800pcm

918m2 @ £35/m2

£246,960.00
£115,200.00
1020
£32,130.00

Total rent p.a.
Less 3% Management

£394,290.00
£11,828.70

Net Income

£382,461.30

Yp in perp @ 6%

16.6667

Gross Realisation

£6,374,367.75

Less legal/agent fees @ 2.5%
Less Surveyor fees @ 1%

£9,561.53
£3,824.61

Net Realisation

£6,360,981.60

Construction Costs
Flats @ 3930m2

£716/m2 (Appendix 6A, 6B)

Supermarket @ 1020m2

£560/m2 (Appendix 6C)

Total Build Cost

£2,813,880.00
£571,200.00
£3,385,080.00

Additonal Construction Costs
Prelims @ 10%
Site Investigation/Site prep
Site Survey
Demolition
1503m2 @ £30/m2
Planning Fees
Contingencies @ 5%
Total Additonal Construction Costs

£338,508.00
£45,000.00
£500.00
£45,090.00
£2,695
£169,254
£601,047

68

Professional Fees
Architect @ 4%
Quantity Survery @ 3%
Structural Engineer @ 2%
Building Surveryor @ 2%
Consultant/PM @ 2%

£135,403.20
£101,552.40
£67,701.60
£67,701.60
£67,701.60

Total Professional Fees

£440,060.40

Finance for half build period (1+0.14)^0.5-1 =0.067
Finance for professional fees (1+0.14)^1 =0.14
Finance for 2 months void (1+0.14)^0.166=0.0221

£267,070.51
£61,608.46
£97,818.74

Finance

Total Finance Cost

£426,497.71

Letting and Advertising
Letting @ 10% FRV

£39,429.00

Advertisng @ 10% net realisation

£636,098.16

Total Letting and Advertising Cost
Net Realisation
Total Cost
Residual Sum
Total Cost for Land
Profit
Profit %

£675,527.16
£6,360,981.60
£5,088,151.87
£1,272,829.74
£1,187,650
£85,179.74
1.4%

69

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