Glasgow City Council is planning to bring into force a range of
measures aimed at protecting the city's once-booming commercial
property development sector from falling victim to the credit
crunch, The Herald has learned.
In Glasgow's version of a national government-style economic
stimulus package, the city plans among other measures to make
available to developers £3.7m in stopgap funding and it has also
proposed to temporarily ease up on its oft-times notorious
bureaucracy.
The recommendations, which are to be presented for approval
before the council's executive committee on Friday, also involve
putting in place a series of "mechanisms for land disposal" that
include "outright sales" of land for development as well as various
forms of council-developer partnerships, according to documents
seen by The Herald.
If approved, the action plan is expected to come into effect
immediately.
In a recent council report, it was estimated that there is
currently around £4.6bn worth of property development in the city
either under construction or in the planning process.
However, as the credit freeze continues to bite amid the
persistent chill in lending from banks, and as job cuts remain
rampant as businesses retrench, and empty office space becomes
increasingly difficult to fill, growing legions of developers are
either withdrawing completely from land purchases for proposed
projects or deferring them until the economy recovers.
Triggered by the worst economic turmoil in decades, commercial
property values in Scotland are estimated to have slipped 20% over
the past year, thus aggravating an already precarious
situation.
George Ryan, council executive member for development and
regeneration, noted in his report to be presented this week before
the executive committee this week: "There is, for the first time in
several years, an indication that a number of projects will remain
in the pipeline, rather than move forward to 'under construction',
until property conditions improve."
The report also noted that projects which had been expected by
now to have been under construction but have since stalled include
several office developments in the International Financial Services
District, a retail project in Easterhouse and a raft of residential
developments across the city.
In his report, Ryan added: "There is growing evidence that
developers in a range of property market sectors are either
withdrawing from or delaying/deferring proposed land purchases for
their future development pipeline as a result of commercial finance
available to fund land purchases and site development.
"A number of potential land sales by the council have already
been affected by the withdrawal of the proposed purchaser or by
requests to review the terms of the sale."
Meanwhile, industry observers expect no improvement this year or
next.
Steve Inch, Glasgow City Council's executive development and
regeneration director, confirmed that the council had noted a
significant fall in the number of planning applications in recent
months, foretelling a potentially disastrous extension to slowdown
in property development over the next few years.
To finance its action plan, which is expected to be in place for
at least three years, council officials want to dip into the city's
£37m Better Glasgow Fund - normally reserved for regeneration
projects, such as lighting, heritage buildings and greenspace
initiatives - reallocating 10% in the first year, and up to 20%
annually in the second and third year.
The range of mechanisms include fast-tracking planning
applications and building warrants for key developments and those
related to high employment, as well as staged and deferred payments
on land purchases for these projects and to introduce "off-market"
sales on a first-come, first-serve basis, thus suspending the often
costly and time-consuming tendering process.
The idea behind off-market land sales is that developers would
avoid costs normally associated with a competitive bidding process
at a time when the property market is weak.
Inch said: "The is no question that developers are finding it
difficult to get money from the banks, and so far about six major
commercial developments in Glasgow have been stalled.
"What we want to do is mitigate this problem with a series of
measures that will help the property development industry through
this difficult time.
"We want to inject an element of flexibility into the process -
whether that means helping fund an increase in developers'
borrowing charges, more partnerships with developers, fast-tracking
planning applications and building warrants, or speeding up the
land-sale process, we want to help and will try to be as flexible
as possible."
Asked if he felt £3.7m was enough to make a difference, Inch
said: "We believe it will help at the margins and in many cases it
will make the difference between developments going ahead or
not.
"This is not something we have dreamed up. We still have a
healthy flow of developers coming in and many of the measures being
recommended have been suggested by the developers themselves."
Meanwhile, the council is also investigating the use of EU
Jessica, or Joint European Support for Sustainable Investment in
City Areas, to establish a new Glasgow Business Investment
Fund.
Ryan added: "Our message to developers is that, in spite of the
credit crunch, Glasgow is still open for business."
Reproduced with the permission of the Herald & Times
Group