anthony ferguson planning policy 18 march 2015 15:13:25 ... · from: anthony ferguson to: planning...

From: Anthony FergusonTo: Planning PolicySubject: Bournemouth Borough Council - CIL Draft Charging Schedule (Representations by Morrisons)Date: 18 March 2015 15:13:25Attachments: 150318 Bournemouth AVL DCS Rep_v2.pdfImportance: High

Dear Sir/Madam We have been instructed by our client, Wm Morrison Supermarkets plc (‘Morrisons’), to strongly objectto the proposed Community Infrastructure Levy (CIL) rate of £250/sq m for new convenience retailprovision (both inside and outside the Town Centre Area Action Plan area) set out in the draftCharging Schedule (February 2015) published by Bournemouth Borough Council (the ‘Council’) forconsultation. Morrisons is actively seeking representation in Bournemouth. There is the 'real' opportunity forMorrisons, as the fourth largest grocery retailer in the United Kingdom, to contribute to the creation ofnew jobs and training opportunities for local people; and respond to the growing population.Representation by Morrisons in Bournemouth would also serve the wider public interest by helping toenhance consumer choice and improve competition. Each new Morrisons store introduces significant investment into the local economy and is an integralpart of the community. Many act as catalysts for further physical and economic development in theirimmediate areas. The stores encourage people into the locality frequently and regularly which, inturn, has ‘spin-off’ benefits for other businesses. Our client is gravely concerned that the suggested 'abnormal' charge will have a significant adverseimpact on the overall viability of future convenience retail development in the borough. A balance hasnot been found between infrastructure funding requirements and viability. Effectively, new retaildevelopment is being used as a 'scapegoat'. The draft charge will put undue additional risk on the delivery of new proposals for convenience retaildevelopment and will be an unrealistic financial burden. This poses a ‘real’ threat to potential newinvestment and job creation in the borough at a time of economic uncertainty. It should also be noted that the £250/sq m charge for convenience retail development is significantlyhigher than those being proposed by other local authorities. Whilst the CIL regulations allow charging authorities to set differential rates for different geographicalzones or for different uses of development, they do not permit differential rates within the sameintended use of development. Therefore, the Council should be mindful that it proposes a rate of£250/sq m for convenience retail development (both inside and outside the Town Centre Area ActionPlan area) and a proposed CIL rate of £0 for comparison retail inside the Town Centre AAP area. At Examination, Sainsbury's objected to Borough of Poole's proposal to charge differential rates withinthe same intended use of development, which included £200/sq m for superstores. This prompted theInspector to adjourn the Hearing to allow the Council to review its approach in relation to separaterates for different sub-categories for Class A1 development. Subsequently, Borough of Poole, Mid Devon District Council and Elmbridge Borough Council alldropped their plans to charge differential rates for retail development, because the same CIL rateshould apply across all retail development. Aspinall Verdi Ltd, Chartered Surveyors, was commissioned by Morrisons to critique the evidence inthe economic viability report produced by Peter Brett Associates (PBA) on behalf of the Council. Asset out in the attached representations, they conclude that a number of deficiencies need to beaddressed. We respectfully request that this objection and the attached representations by Aspinall Verdi are fullytaken into account during the formulation and progression of the emerging CIL Charging Schedule. Welook forward, with great interest, to your response.
mailto:[email protected]:[email protected]

Bournemouth Borough Council – CIL Rep on behalf of W.M. Morrison Supermarkets Plc.

1

Bournemouth Borough Council – Community Infrastruct ure Levy Viability Study Representation on behalf of W.M. Morrison Supermark ets Plc. 12 March 2015 This representation has been prepared in the context of the consultation that Bournemouth Borough Council have launched in respect of their Draft CIL Charging Schedule (9 February – 23 March 2015). We are instructed by W.M. Morrison Supermarkets Plc. to make representations on their behalf. Introduction AspinallVerdi – Property Regeneration Consultants are Chartered Surveyors and Chartered Town Planners specialising in property regeneration and development, with direct experience of advising both public and private sector clients in respect of development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets, valuation and development economics and delivery. This representation has been prepared by Ben Aspinall, BSc(Hons), MRICS, Registered Valuer, MRTPI. Ben is a founding Director of AspinallVerdi and has over 20 years’ experience in the planning and development consultancy sector. Ben as advised on whole plan viability and CIL viability for Authorities throughout England. This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Supermarkets Plc. For the purposes of these representations we have reviewed the following documents:

1. Bournemouth CIL – Economic Viability Study, Peter Brett Associates (PBA), report October 2014

2. Draft Regulation 123 List, Bournemouth Borough Council, February 2015 3. Bournemouth CIL Preliminary Draft Charging Schedule: Summary of Representations Received

and Council’s Response, February 2015 4. Bournemouth Community Infrastructure Levy – Draft Charging Schedule, February 2015

General Comments Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:

1. The interrelationship of CIL and site specific S106 – This is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical ‘site specific’ S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. This issue is specifically covered in the Planning Practice Guidance within the section ‘Other developer contributions’ paragraph 093 Reference ID: 25-093-20140612 onwards.

2. Viability Approach – It is widely accepted that best practice requires a residual appraisal

approach to calculate the residual land value (RLV). This has to be compared to and be greater than the benchmark ‘threshold land value’ (TLV) in order for the policy to be viable. In making this comparison (whether in absolute or £ per ha terms) it is fundamental that the site


2

area for the hypothetical scheme/typology being tested is appropriate. This requires relevant benchmark development densities to be used.

3. Request to be heard - We would lie to reserve the right to be heard at the Examination in Public.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the PBA CIL Economic Viability Study report, October 2014:

Item (Paragraph Number)

Comment

Viability Assessment Method - benchmark land value (paragraphs 4.16 – 4.1.9)

As noted above the residual land value (RLV) has to be compared to the benchmark or threshold land value (TLV) – we prefer the terminology threshold land value as this is an accurate description of the land transaction process. The Harman report refers to the concept of ‘Threshold Land Value’ as the ‘value at which a typical willing landowner is likely to release land for development.’

You will note below that PBA have articulated their benchmark TLV’s by reference to values per hectare (£ per ha). However, in order to draw any comparison between the RLV and the TLV one needs to know the size of the site. This requires an analysis of the development density of the scheme.

For example, if the absolute RLV of a 2,750 sqm commercial scheme typology is £800,000 and the TLV is assumed to be £1,000,000 per ha, then a scheme which has 40% site coverage would be viable (TLV > RLV) but as scheme with 30% site coverage would not be viable (TLV < RLV).

This is illustrated below.

This same is applicable in terms of residential development and density in terms of sqm per ha or dwellings per ha.


3


Comment

This illustrates that density assumptions are as fundamentally important as benchmark TLV assumptions. This is not acknowledged in the PBA methodology.

S106 Contributions on Non-Residential Development (para 5.2.13)

PBA have included an allowance for site specific S106 on the larger retail typologies of £25,000.

We note that ASDA made a representation on this point at the PDCS stage. They noted that this was a ‘rather low allowance’ and ‘we would urge the Council to reconsider this’. The Council’s response does not address this point and no adjustment has been made to the PBA assumptions.

We concur with ASDA in that £25,000 is woefully inadequate given the list of site specific requirements is likely to arise as set out in the Council’s Regulation 123 list (February 2015).

It is our client’s experience is that in the majority of cases they will make significant contributions in the order of £0.5m for S106 and £0.5m for S278 costs for a large foodstore. It is reasonable to assume that for a larger convenience retail scheme that works relating to traffic impact, landscape and other issues directly related to the scheme would need to be mitigated.

Net site area (para 5.3.7 and Table 5.1)

Paragraph 5.3.7 states that PBA have ‘used the following net to gross site development percentages to allow for car parking, landscape and open space’ as set out in Table 5.1.

This approach is unclear and flawed. In commercial scheme typologies, any undevelopable land is implicitly excluded as the typologies are hypothetical. Therefore the calculated RLV is the value / price that a developer can pay for net developable site area to deliver the assumed quantum of floor space in


4


Comment

the scheme.

In the case of both convenience retail typologies (out of town centre and metro) PBA have used a gross to net ratio of 71%. This in itself is flawed as one would expect the metro scheme to be higher density than the out of town scheme.

However, furthermore, 71% is way too high a development density, if this is what the figure is supposed to represent (given that the text refers to parking, landscaping etc. which would be within the net developable area). For large convenience foodstores we would expect a development density in the region of 28% to include all the required car parking, landscaping etc.

The impact of this is illustrated below.

Build Costs (para 5.4.5 and Table 5.4)

PBA have used a build cost allowance of £1,400 psm for convenience retail (out of town centre) and £1,150 psm for convenience retail (metro). This is perverse as one would expect the town centre store (which is often part of a more complex mixed use scheme with higher design requirements in the town centre) to be more expensive to construct than an out of town store.

In any event these costs are too low. The BCIS has median construction cost figures of £1,624 for supermarkets of 1,000 to 7,000 sqm in the South West. This is 15% more for the out of town store and 30% more for the metro store. This has a significant impact on viability and the appraisals should be re-run based on more appropriate construction rates.

Finance / build period (paragraphs 5.4.22 onwards)

Development finance assumes a 12 month build period in all cases. This is unrealistic as a large store would require longer than say a small metro scheme. Also there is significantly longer pre-build period required in a larger scheme for planning etc.

No finance has been accounted for on the land purchase costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Retail land values (paragraphs 7.4.16 and 7.4.17)

PBA have used £2,500,000 per ha (£1,011,736 per acre) for comparison retail TLVs and £4,000,000 per ha (£1,618,777 per acre) for convenience retail. PBA has offered no specific commentary or evidence as to the basis of these values.

We cannot reconcile these assumptions as landowners have similar aspirations of value any type of out of town retail – i.e. they do not differentiate between comparison and convenience retailing and in the majority of cases there is a mixture of uses on any new scheme. Also one would anticipate that land value in the town centre scenarios (i.e. metro stores) would be significantly higher as developers have to compete with other high value land uses in the town centre.

Notwithstanding the above, we consider the above land values to be low as they do not take into account the fact that landowners will reflect the full


5


Comment

development value in their aspirations. Landowners are likely to “hold out” until they have explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL.

Note also that the PBA report does not contemplate retail development on brownfield sites. Brownfield sites are likely to have an existing use value which could in itself be relatively substantial. In addition, the developer will also incur substantial demolition and related site clearance costs to enable a new redevelopment scheme to come forward and these should be factored into the evidence.

Retail scenarios tested (para 7.4.16)

PBA have tested two convenience retail typologies – 1,000 sqm metro in town grocery store and 2,500 sqm out of town centre store.

We are concerned particularly with the 1,000 sqm metro store. This is 10,640 sqft and is way too large for most requirements including our clients and is not representative of the industry for convenience stores. Most town centre convenience stores are likely to be c 280 – 300 sqm.

Similarly, 2,500 sqm for a ‘large’ out of town store is on the low side. We would expect typical store formats to be closer to 2,800 sqm.

This is important because the PBA viability evidence does not reflect the type of development likely to come forward over the Plan period.

Rents & Yields (para 7.4.24)

PBA have used £215 psm and 5% for out of town centre convenience retail stores and £185 psm and 5.25% for in-town metro stores.

No property market evidence is given to support these rents/yield values. We can therefore not comment on the validity of the value assumptions used where no supporting market evidence has been provided. We note that reference is made to generic evidence from local, regional and at national level, however we would expect the underlying evidence to be made explicit, i.e. in the very least the sample size, location and date of comparable evidence.

Viability findings for convenience retail (Tables 7.6 and 7.7)

Notwithstanding our reservations herein about the appraisal assumptions used by PBA, we have analysed the results in Tables 7.6 and 7.7. This is based on more appropriate assumptions for development density and therefore TLV. Our analysis is set out below.


6


Comment

The top half the table is from the PBA report Tables 7.6 and 7.7.

The bottom half of the table is our analysis. This comprises the following columns –

• Absolute RLV – this is the absolute RLV based on the PBA appraisals using their outturn RLV per ha and their net site area assumption.

• Development density – these are our assumptions for more realistic development densities.

• Site area required – this is based on the PBA typologies assumed (1,000 sqm and 2,500 sqm) divided by our development density assumption. This gives the required site area in square meters and hectares.

• Absolute TLV – this is the absolute TLV based on the PBA benchmark TLV’s per hectare x the required site area based on the appropriate densities.

• Surplus/(Deficit) – as can be seen, following these adjustments for density, both convenience retail scenarios are not viable i.e. the RLV < TLV.

This shows that even using the PBA appraisal assumptions for costs and values the typologies are not viable.

Appendix B – Non-residential Viability Appraisals

Note the first convenience retail appraisal is titled “out of town centre” but we think this should read “in-town (Metro)” given the size of scheme (1,000 sqm).


7


Comment

(spreadsheets) - “in-town (Metro)”

We note at 4.1 that there is no allowance for S106. This is unrealistic as in the majority of our clients store developments (including convenience stores), site specific S106 is required.

Professional fees are assumed to be 8% (at 2.4). This is unrealistic given the amount of upfront planning and design work often required for commercial retail schemes. This is a more appropriate 8% for residential developments which is the figure used by PBA, but they have not differentiated between residential and commercial/retail topologies. Professional fees for convenience retail should be at least 10%.

There does not seem to be any allowance in the appraisal for marketing, agency fees and/or investment fees. This is an omission.

Note the Site Value in the appraisal (2.1) is £924,727 as shown in our analysis above.

Appendix B – Non-residential Viability Appraisals (spreadsheets) – out of town centre

We note at 4.1 that there is only £25,000 allowance for S106. This is unrealistically low (see above).

Professional fees are assumed to be 8% (at 2.4). This is again unrealistically low (see above).


Note the Site Value in the appraisal (2.1) is £2,839,306 which differs from our analysis above which makes us question the appraisal.

CIL rates (Table 7.8 and DCS) – appropriate balance

We note that PBA has recommended a discount from the CIL overage rates to £250 psm for convenience retail typologies and that this has carried through to the Council’s Draft Charging Schedule.

However, based on the above analysis and adjustments for development densities the schemes are not-viable (even with PBA’s costs and value assumptions).

Given our comments on land values, build costs and other elements of the development appraisals/evidence we consider that the Council has failed to achieve an ‘appropriate balance’ and that the proposed rates are set at unviable levels and need to be excluded from the CIL Charging Schedule.

Summary and Conclusions We are pleased to have been given this opportunity to comment on the Bournemouth Borough Council CIL Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed. The economic viability evidence provided by the Council has a number of deficiencies which need to be addressed. The key elements to be reconsidered are:

1. We would recommend that the PBA report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date.


8

2. The methodology and approach to calculating the absolute TLV on schemes needs to be reconsidered. We calculate that the convenience retail schemes are not viable based on PBA cost/value assumptions and realistic development densities.

3. Appropriate allowances need to be made with regard to site specific S106/S278 which

inevitably would form part of a convenience retail development in addition to CIL. Such charges would be incurred to deal with ’site specific’ issues and avoid ‘double-dipping’.

4. The build cost assumptions are low compared to BCIS benchmarks.

5. The assumed professional fee rates need to be reviewed and increased in line with market rates.

Contact details

Please note that we would like to appear at the Examination in Public.

Please would you register our interest as follows:

Atam Verdi Director AspinallVerdi – Property Regeneration Consultants Suite 21 30-38 Dock Street Leeds LS10 1JF 0113 243 6644 [email protected]

. 150312 Bournemouth AVL DCS Rep_v1

Please acknowledge receipt of this email and keep us updated with all progress. Should you require any further information and/or clarification please do not hesitate to contactAnthony Ferguson. Kind regards.

Anthony FergusonSenior Associate

Second Floor | 2 Sycamore Street I London | EC1Y 0SF

Tel: 0203 122 0030

Mob: 07534 611309

Email: [email protected]

Web: www.peacockandsmith.co.uk

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1

Bournemouth Borough Council – Community Infrastruct ure Levy Viability Study Representation on behalf of W.M. Morrison Supermark ets Plc. 12 March 2015 This representation has been prepared in the context of the consultation that Bournemouth Borough Council have launched in respect of their Draft CIL Charging Schedule (9 February – 23 March 2015). We are instructed by W.M. Morrison Supermarkets Plc. to make representations on their behalf. Introduction AspinallVerdi – Property Regeneration Consultants are Chartered Surveyors and Chartered Town Planners specialising in property regeneration and development, with direct experience of advising both public and private sector clients in respect of development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets, valuation and development economics and delivery. This representation has been prepared by Ben Aspinall, BSc(Hons), MRICS, Registered Valuer, MRTPI. Ben is a founding Director of AspinallVerdi and has over 20 years’ experience in the planning and development consultancy sector. Ben as advised on whole plan viability and CIL viability for Authorities throughout England. This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Supermarkets Plc. For the purposes of these representations we have reviewed the following documents:

1. Bournemouth CIL – Economic Viability Study, Peter Brett Associates (PBA), report October 2014

2. Draft Regulation 123 List, Bournemouth Borough Council, February 2015 3. Bournemouth CIL Preliminary Draft Charging Schedule: Summary of Representations Received

and Council’s Response, February 2015 4. Bournemouth Community Infrastructure Levy – Draft Charging Schedule, February 2015

General Comments Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:

1. The interrelationship of CIL and site specific S106 – This is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical ‘site specific’ S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. This issue is specifically covered in the Planning Practice Guidance within the section ‘Other developer contributions’ paragraph 093 Reference ID: 25-093-20140612 onwards.

2. Viability Approach – It is widely accepted that best practice requires a residual appraisal

approach to calculate the residual land value (RLV). This has to be compared to and be greater than the benchmark ‘threshold land value’ (TLV) in order for the policy to be viable. In making this comparison (whether in absolute or £ per ha terms) it is fundamental that the site


2

area for the hypothetical scheme/typology being tested is appropriate. This requires relevant benchmark development densities to be used.

3. Request to be heard - We would lie to reserve the right to be heard at the Examination in Public.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the PBA CIL Economic Viability Study report, October 2014:


Comment

Viability Assessment Method - benchmark land value (paragraphs 4.16 – 4.1.9)

As noted above the residual land value (RLV) has to be compared to the benchmark or threshold land value (TLV) – we prefer the terminology threshold land value as this is an accurate description of the land transaction process. The Harman report refers to the concept of ‘Threshold Land Value’ as the ‘value at which a typical willing landowner is likely to release land for development.’

You will note below that PBA have articulated their benchmark TLV’s by reference to values per hectare (£ per ha). However, in order to draw any comparison between the RLV and the TLV one needs to know the size of the site. This requires an analysis of the development density of the scheme.

For example, if the absolute RLV of a 2,750 sqm commercial scheme typology is £800,000 and the TLV is assumed to be £1,000,000 per ha, then a scheme which has 40% site coverage would be viable (TLV > RLV) but as scheme with 30% site coverage would not be viable (TLV < RLV).

This is illustrated below.

This same is applicable in terms of residential development and density in terms of sqm per ha or dwellings per ha.


3


Comment

This illustrates that density assumptions are as fundamentally important as benchmark TLV assumptions. This is not acknowledged in the PBA methodology.

S106 Contributions on Non-Residential Development (para 5.2.13)

PBA have included an allowance for site specific S106 on the larger retail typologies of £25,000.

We note that ASDA made a representation on this point at the PDCS stage. They noted that this was a ‘rather low allowance’ and ‘we would urge the Council to reconsider this’. The Council’s response does not address this point and no adjustment has been made to the PBA assumptions.

We concur with ASDA in that £25,000 is woefully inadequate given the list of site specific requirements is likely to arise as set out in the Council’s Regulation 123 list (February 2015).

It is our client’s experience is that in the majority of cases they will make significant contributions in the order of £0.5m for S106 and £0.5m for S278 costs for a large foodstore. It is reasonable to assume that for a larger convenience retail scheme that works relating to traffic impact, landscape and other issues directly related to the scheme would need to be mitigated.

Net site area (para 5.3.7 and Table 5.1)

Paragraph 5.3.7 states that PBA have ‘used the following net to gross site development percentages to allow for car parking, landscape and open space’ as set out in Table 5.1.

This approach is unclear and flawed. In commercial scheme typologies, any undevelopable land is implicitly excluded as the typologies are hypothetical. Therefore the calculated RLV is the value / price that a developer can pay for net developable site area to deliver the assumed quantum of floor space in


4


Comment

the scheme.

In the case of both convenience retail typologies (out of town centre and metro) PBA have used a gross to net ratio of 71%. This in itself is flawed as one would expect the metro scheme to be higher density than the out of town scheme.

However, furthermore, 71% is way too high a development density, if this is what the figure is supposed to represent (given that the text refers to parking, landscaping etc. which would be within the net developable area). For large convenience foodstores we would expect a development density in the region of 28% to include all the required car parking, landscaping etc.

The impact of this is illustrated below.

Build Costs (para 5.4.5 and Table 5.4)

PBA have used a build cost allowance of £1,400 psm for convenience retail (out of town centre) and £1,150 psm for convenience retail (metro). This is perverse as one would expect the town centre store (which is often part of a more complex mixed use scheme with higher design requirements in the town centre) to be more expensive to construct than an out of town store.

In any event these costs are too low. The BCIS has median construction cost figures of £1,624 for supermarkets of 1,000 to 7,000 sqm in the South West. This is 15% more for the out of town store and 30% more for the metro store. This has a significant impact on viability and the appraisals should be re-run based on more appropriate construction rates.

Finance / build period (paragraphs 5.4.22 onwards)

Development finance assumes a 12 month build period in all cases. This is unrealistic as a large store would require longer than say a small metro scheme. Also there is significantly longer pre-build period required in a larger scheme for planning etc.

No finance has been accounted for on the land purchase costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Retail land values (paragraphs 7.4.16 and 7.4.17)

PBA have used £2,500,000 per ha (£1,011,736 per acre) for comparison retail TLVs and £4,000,000 per ha (£1,618,777 per acre) for convenience retail. PBA has offered no specific commentary or evidence as to the basis of these values.

We cannot reconcile these assumptions as landowners have similar aspirations of value any type of out of town retail – i.e. they do not differentiate between comparison and convenience retailing and in the majority of cases there is a mixture of uses on any new scheme. Also one would anticipate that land value in the town centre scenarios (i.e. metro stores) would be significantly higher as developers have to compete with other high value land uses in the town centre.

Notwithstanding the above, we consider the above land values to be low as they do not take into account the fact that landowners will reflect the full


5


Comment

development value in their aspirations. Landowners are likely to “hold out” until they have explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL.

Note also that the PBA report does not contemplate retail development on brownfield sites. Brownfield sites are likely to have an existing use value which could in itself be relatively substantial. In addition, the developer will also incur substantial demolition and related site clearance costs to enable a new redevelopment scheme to come forward and these should be factored into the evidence.

Retail scenarios tested (para 7.4.16)

PBA have tested two convenience retail typologies – 1,000 sqm metro in town grocery store and 2,500 sqm out of town centre store.

We are concerned particularly with the 1,000 sqm metro store. This is 10,640 sqft and is way too large for most requirements including our clients and is not representative of the industry for convenience stores. Most town centre convenience stores are likely to be c 280 – 300 sqm.

Similarly, 2,500 sqm for a ‘large’ out of town store is on the low side. We would expect typical store formats to be closer to 2,800 sqm.

This is important because the PBA viability evidence does not reflect the type of development likely to come forward over the Plan period.

Rents & Yields (para 7.4.24)

PBA have used £215 psm and 5% for out of town centre convenience retail stores and £185 psm and 5.25% for in-town metro stores.

No property market evidence is given to support these rents/yield values. We can therefore not comment on the validity of the value assumptions used where no supporting market evidence has been provided. We note that reference is made to generic evidence from local, regional and at national level, however we would expect the underlying evidence to be made explicit, i.e. in the very least the sample size, location and date of comparable evidence.

Viability findings for convenience retail (Tables 7.6 and 7.7)

Notwithstanding our reservations herein about the appraisal assumptions used by PBA, we have analysed the results in Tables 7.6 and 7.7. This is based on more appropriate assumptions for development density and therefore TLV. Our analysis is set out below.


6


Comment

The top half the table is from the PBA report Tables 7.6 and 7.7.

The bottom half of the table is our analysis. This comprises the following columns –

• Absolute RLV – this is the absolute RLV based on the PBA appraisals using their outturn RLV per ha and their net site area assumption.

• Development density – these are our assumptions for more realistic development densities.

• Site area required – this is based on the PBA typologies assumed (1,000 sqm and 2,500 sqm) divided by our development density assumption. This gives the required site area in square meters and hectares.

• Absolute TLV – this is the absolute TLV based on the PBA benchmark TLV’s per hectare x the required site area based on the appropriate densities.

• Surplus/(Deficit) – as can be seen, following these adjustments for density, both convenience retail scenarios are not viable i.e. the RLV < TLV.

This shows that even using the PBA appraisal assumptions for costs and values the typologies are not viable.

Appendix B – Non-residential Viability Appraisals

Note the first convenience retail appraisal is titled “out of town centre” but we think this should read “in-town (Metro)” given the size of scheme (1,000 sqm).


7


Comment

(spreadsheets) - “in-town (Metro)”

We note at 4.1 that there is no allowance for S106. This is unrealistic as in the majority of our clients store developments (including convenience stores), site specific S106 is required.

Professional fees are assumed to be 8% (at 2.4). This is unrealistic given the amount of upfront planning and design work often required for commercial retail schemes. This is a more appropriate 8% for residential developments which is the figure used by PBA, but they have not differentiated between residential and commercial/retail topologies. Professional fees for convenience retail should be at least 10%.


Note the Site Value in the appraisal (2.1) is £924,727 as shown in our analysis above.

Appendix B – Non-residential Viability Appraisals (spreadsheets) – out of town centre

We note at 4.1 that there is only £25,000 allowance for S106. This is unrealistically low (see above).

Professional fees are assumed to be 8% (at 2.4). This is again unrealistically low (see above).


Note the Site Value in the appraisal (2.1) is £2,839,306 which differs from our analysis above which makes us question the appraisal.

CIL rates (Table 7.8 and DCS) – appropriate balance

We note that PBA has recommended a discount from the CIL overage rates to £250 psm for convenience retail typologies and that this has carried through to the Council’s Draft Charging Schedule.

However, based on the above analysis and adjustments for development densities the schemes are not-viable (even with PBA’s costs and value assumptions).

Given our comments on land values, build costs and other elements of the development appraisals/evidence we consider that the Council has failed to achieve an ‘appropriate balance’ and that the proposed rates are set at unviable levels and need to be excluded from the CIL Charging Schedule.

Summary and Conclusions We are pleased to have been given this opportunity to comment on the Bournemouth Borough Council CIL Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed. The economic viability evidence provided by the Council has a number of deficiencies which need to be addressed. The key elements to be reconsidered are:

1. We would recommend that the PBA report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date.


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2. The methodology and approach to calculating the absolute TLV on schemes needs to be reconsidered. We calculate that the convenience retail schemes are not viable based on PBA cost/value assumptions and realistic development densities.

3. Appropriate allowances need to be made with regard to site specific S106/S278 which

inevitably would form part of a convenience retail development in addition to CIL. Such charges would be incurred to deal with ’site specific’ issues and avoid ‘double-dipping’.

4. The build cost assumptions are low compared to BCIS benchmarks.

5. The assumed professional fee rates need to be reviewed and increased in line with market rates.

Contact details

Please note that we would like to appear at the Examination in Public.

Please would you register our interest as follows:

Atam Verdi Director AspinallVerdi – Property Regeneration Consultants Suite 21 30-38 Dock Street Leeds LS10 1JF 0113 243 6644 [email protected]

. 150312 Bournemouth AVL DCS Rep_v1

DCS 06 1 Morrisons (Peacock and Smith)DCS 06 2 Morrisons (Peacock and Smith)

anthony ferguson planning policy 18 march 2015 15:13:25 ... · from: anthony ferguson to: planning...

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