A brownfield development site (sometimes known as brown belt land) is land which has previously been in use, but is now derelict, vacant, or potentially even contaminated. From disused petrol stations to old factories, the UK is littered with brownfield land plots which are ripe for development—providing you navigate the potential problems, and successfully secure the right brownfield development finance.
The appeal of brownfield development
Local residents are typically happy for developers to carry out property development with brownfield sites, because they are often unsightly. Greenbelt land, in comparison, is much more contentious, as this sort of development contributes to urban sprawl and loss of countryside.
There is also a lack of infrastructure in place in greenbelt locations. In contrast, a great many brownfield sites are in urban city areas. This is a huge advantage for developers building homes, because relevant infrastructure is typically already in place.
There is a lot of support and finance available for brownfield development. The housing crisis in the UK means there is an increased demand for housing development, with the government pledging to support small and medium-sized enterprises (SME) developers.
SME developers can be a good match for brownfield sites; there are not many large brownfield sites left in London. However, there are small pockets of land dotted around the city which are not of interest to larger developers. But for SME developers looking to develop between one and ten units, these sites can offer a valuable opportunity.
The pitfalls of brownfield development
These sites are often visibly unattractive, requiring rather more imagination on behalf of the developer. The development itself can also be more expensive, as the sites will need to be cleared first. But as land becomes increasingly scarce, savvy developers are becoming increasingly creative.
Contamination is also a serious risk. By definition, brownfield sites have been used before, which means they’ll need careful investigating. If land has been used for something straightforward—perhaps a garage—it’s unlikely to pose a problem. However, there are a number of potential brownfield sites which have a likelihood of contamination, and lenders may be wary of lending against a development on these sites. This includes sites such as factories, petrol stations, landfills and military bases.
Before buying a site, you’ll need to liaise with local authorities to determine if your site is contaminated. Developers will undertake soil surveys to eliminate risk. If contamination is found, this won’t’ necessarily be the end of your scheme—but planning permission will contain conditions outlining the necessary steps to reduce the risk. Understandably, some developers feel hesitant about sharing this information with potential lenders—but honesty really is the best policy. If your site is contaminated, any remediation cost will be factored into your development finance facility.
Of course, sometimes contamination is found during the development process. This is very unlikely with modern technology, but if it were to happen—for example, because the surveys had been negligent—then there will be an insurance claim. This is generally a lengthy process so typically the lender (if the borrower cant) will cover these costs until insurers pay out.
Lenders will typically want the client to build in a 10% contingency into their build costs to cover unexpected costs. However, as brokers, we will always work to ensure all checks have been carried out properly to ensure our clients aren’t in this position.
Brownfield development finance
Brownfield development funding has become widely available in recent years, as the government seeks to find ways to stimulate the levels of house building required in the UK. Planning permission is therefore often relatively easy to secure, as councils strive to optimise space in urban areas. Once you have planning permission, the next step is approaching an experienced development finance broker who can liaise with lenders on your behalf. Whether you need money to purchase the site or to fund the development, we can help.
A good development finance broker can also assist you should issues arise during the development of a brownfield land site, because we can help with cash flow issues.