"The fact that a strong proportion of developers are planning to expand their businesses should provide cause for optimism, and the adaptability already displayed will be key to diversifying income streams and ensuring strategies are robust for the year ahead"
- Terry Woodley - Shawbrook
Property developers have faced continued uncertainty stemming from rising costs, high interest rates, and a challenging economic environment in recent times. However, despite these tough conditions, 99% have managed to change tact and diversify their strategy.
According to a new analysis from Shawbrook, 49% of developers are turning towards using different materials to reduce costs, and the same number are exploring new areas and regions to build in. 48% are also planning to build new property types in order to diversify their developments, and 38% are planning to invest in new technology.
When asked why they are changing their strategies, 31% of developers are doing so to meet current demand in the market. 29% are making changes to expand their business, and the same number are altering their strategies to improve profit margins.
Thinking about key challenges over the next 12 months, developers cited rising costs as their biggest concern (26%); followed closely by rising mortgage rates (25%) and rising material costs.
Why are developers changing their strategies? Of those who have changed their strategies, the following have:
To meet demand within the market - 31 %
To expand the business - 29%
To improve profit margins - 29%
To become more sustainable - 28%
To improve EPC ratings - 28%
To make the most of government incentives - 28%
To reduce overheads - 28%
To diversify portfolios - 27%
To improve efficiency - 26%
To meet government regulations - 24%
Key concerns/challenges over the past 12 months:
Rising costs of labour - 26%
Rising mortgage rates - 25%
Difficulty accessing funding/investment - 25%
Falling house prices - 25%
Rising cost of materials - 25%
New regulations - 25%
Cost of living impact on buyers - 24%
Obtaining planning permission - 23%
ESG/sustainability commitments - 23%
Lack of government support for UK housebuilding - 22%
Difficulty accessing labour/talent - 22%
Lack of government support for first-time buyers - 18%
Terry Woodley, MD of Development Finance at Shawbrook, commented: “Developers have faced an array of challenges and continued market turbulence over the past year. However, our research shows that developers have remained agile and resilient, and have implemented changes to navigate their businesses through recent uncertainty.
“The fact that a strong proportion of developers are planning to expand their businesses should provide cause for optimism, and the adaptability already displayed will be key to diversifying income streams and ensuring strategies are robust for the year ahead.
“Given that developers listed access to funding as a concern, now could be an opportune time to partner with a specialist lender who can offer expertise, support and flexibility throughout a development process.”
