The key to any successful regeneration project is a genuinely strategic approach to the infrastructure.
Regardless of its importance, infrastructure is often overlooked. It does not usually form part of the client’s core business, and so tends to receive less attention. With it being unlikely to be the lead consultant’s specialism, it often becomes a secondary consideration with a development.
Cash flow is the big issue with infrastructure work, as the need for large, upfront investment before value is released can put a strain on the viability of a development.
In addition to this, infrastructure tends to be high risk because hidden costs emerge.
Its scope usually extends beyond the boundaries of the site, for example, requiring new road junctions.
There is also the problem of dealing with third parties, such as statutory authorities, that do not face commercial pressure. Infrastructure tends to feature in planning gain negotiations, via Section 106 and so on.
Smoothing the ground
However, it is possible to use infrastructure to create opportunities, speed up delivery, and add value by numerous practical solutions:
Well designed enabling works can shorten the programme. You can structure work to give a better cash flow.
It might be worth looking to specialist companies to create long-term revenue streams, using, for example, the infraco model. These specialist companies invest in the infrastructure
element of the scheme as a funder or contractor and sell the interest back later. Their input allows the developer to manage cash flow by smoothing the effect of deficit over the development programme and often beyond.
You can increase margins by enhancing value from innovative remediation strategies. Technology has advanced significantly in the past few years, providing cost-effective solutions to situations that previously would have rendered a development unviable.
An understanding of the statutory authorities and the way they work helps provide a good platform for negotiation.
Infrastructure is instrumental in creating the environment, the ‘sense of place’. Good infrastructure design can significantly contribute to the increase in value.
Use infrastructure to ‘green’ the development by recycling waste and using renewables. Having sustainable credentials makes the development more attractive, increasing its viability.
Make the most of opportunities for tax breaks and grants.
A recent project where we are tackling viability through innovative infrastructure is a brownfield site in Essex with 1,200 homes.
The site constraints are by no means easy. It is on a riverfront with poor transport links, with the land mostly below the flood plain and next to a major industrial facility. Residential values in the area were very low.
Getting the infrastructure right is a fundamental part of overcoming the negative issues associated with the site.
Subsequent work to create an environment with an appealing character depends on getting the correct infrastructure.
With the costs of the work likely to be in the region of £40 million, the effect on cash flow, and therefore viability, is likely to be significant.
The approach aims to programme the works in a way that releases value as early as possible.
One of the fundamental requirements in ensuring control of the costs is the need to carry out robust and intrusive investigation.
Although this comes at a cost, the knowledge obtained is an invaluable basis for coming up with the right plan for the site.
Various strategies were undertaken at the development stage aimed at maximising the potential of the site. These included:
Transport Finding a way of getting good access to and around the site is a major consideration.
Remediation Detailed investigation of the ground conditions has helped determine the layout of the scheme.
Flood risk This calls for reconfiguration of the site topography and reinforcement of a sea-wall.
Drainage Infiltration-type sustainable drainage systems and a new interceptor sewer will be put in.
Water The design includes sustainable initiatives.
Gas There is a low-pressure supply network without enough capacity.
Understanding what is possible, the likely costs and the potential return are all being carefully considered for the site.
The unlocking of certain areas of the site considered against the cost versus value equation have all been instrumental in creating the design brief for the project.
In essence, infrastructure should provide the backbone of a project’s risk management and should create the opportunity to enhance value. It has often been seen as regeneration’s ugly cousin, but now is the time to take it seriously.
Richard A Jones is head of residential and regeneration at EC Harris