current economic climate means that investors are finding themselves in a bit of a bind with the rate of inflation. While July’s figures show that this is slowing significantly from its 26.7% peak on the Consumer Prices Index in January, there is a reticence to adjust budgets in line with this just yet while the market is still to settle. Keeping that higher rate of inflation in mind provides greater cost certainty, particularly with there still being so many questions around the potential impacts of new legislation such as the Building Safety Act. The build programme then needs to work in lockstep with the budgetary approach. The challenge on this front is that the construction industry has been hit especially hard by the above issues within the economy, all of which has created a knock-on effect that has had a major impact on contractors in particular. The latest data from the Insolvency Service shows that 471 construction businesses collapsed in May, and it’s not just the smaller firms that are feeling the pinch. Henry Construction Projects – a business that achieved £400m revenue in 2022 with major jobs across the UK particularly in London – went into administration in June, and they won’t be the last to go to the wall. Combine this with the current labour shortages in the construction sector- again, an issue that doesn’t look like being solved any time soon - and it paints a challenging picture for ongoing and upcoming projects. Adapting Approaches Typically, the most successful property developers are those that can replicate a tried and tested formula. Take a housing developer for example - they will usually have an optimal size for the plot of land they are buying, upon which they will build a consistent number of homes at a broadly similar cost, which they can subsequently sell at a known unit price. This cookie cutter approach tends to serve these developers well, as they will be basing it on the ‘known knowns’ - the format that has worked previously for them. However, if this developer is looking at broadening their approach and taking on a different kind of project, they will have less of an idea of these parameters, and their data won’t be sufficient to make informed decisions that safeguard the project. Property development is very much like a giant obstacle course - you need to assess the challenges in front of you, and have enough knowledge to work out how to navigate them. Without this data, you can’t accurately assess the risk factors. It is in this kind of instance that having a unified set of data from an external consultant really comes into its own. Having access to this will not only help you understand your position, but also give you much fuller insight into contractor capabilities and the level of risk within their supply chain. DATA AS AN ASSET In this kind of climate, data can be your biggest asset, but it needs to be versatile enough to adapt to the changing winds of the industry and detailed enough to help those acting on behalf of investors to make informed, calculated decisions. Platforms such as the Building Cost Information Service from RICS can act as a guide, but the broadness of its parameters and costings mean that getting an accurate estimate can be an inexact science, especially in the current economic climate. Traditionally, the role of the monitoring surveyor would involve the preparation of a written report to Business 52 Finance Monthly.
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