ALB Group, a developer in Nottingham, is requesting a waiver on over £500,000 in infrastructure contributions for a new apartment project due to worsening economic conditions and rising construction costs. The developer cites squeezed profit margins and 'substantial abnormal costs' associated with converting existing buildings. This is part of a wider trend impacting developers in the area.
The developer behind an apartment scheme in Nottingham says firms are struggling to provide financial contributions to infrastructure improvements due to a significantly worsening economic situation. Planning permission was given for the conversion of Riverleen House, in Electric Avenue, into 118 studios and flats for professionals in August last year.
Developer Arran Bailey, of ALB Group, is now looking to convert the loft space of the former Experian office block into a further 42 one-bed apartments. However the plans are being brought before a Nottingham City Council planning committee on Wednesday, January 21, because over half a million pounds in developer contributions are proposed to be waived. Councils typically grant planning permission to developers on the proviso they contribute financially to affordable housing and local education, employment and infrastructure opportunities, in a bid to reduce the impact of a scheme. These contributions are made under what’s known as a Section 106 agreement, but fewer and fewer developers are being required to pay out due to market conditions. Developers are entitled to make a reasonable profit under current legislation, but if this cannot be attained any financial contributions may be waived following an independent assessment. It has become a significant problem for councillors, who fear local areas are losing out on vital infrastructure improvements to deal with an influx of residents. Speaking on the issue, Mr Bailey told the Local Democracy Reporting Service: “The local economic situation in development and construction has worsened significantly over the last few years. “We have seen extraordinary increases in construction cost that have not been matched by increases in property sale values. “As a result the margins available to make contributions to infrastructure and affordable housing have been squeezed.” If approved, work on the extra 42 apartments is expected to begin within six weeks, with the first residents anticipated to move in by the end of 2026. ALB Group said the plans align with the Labour Government’s plans to create 1.5 million homes across the UK. According to council planning documents the development would only be policy compliant in the developer providing contributions totalling £528,104, including £456,342 for affordable housing and £71,761 for public open space. However the documents add: “The applicant has submitted a viability appraisal with the application which has been independently reviewed by an assessor appointed by the council. “The independent assessor has concluded that the scheme is not viable to pay any S106 contribution.” Mr Bailey went on to add some developments have “substantial abnormal costs”. He added: “The situation is exacerbated by certain types of development or schemes that have substantial abnormal costs. “In the case of an office to residential conversion like Riverleen, there are significant costs associated with the refurbishment or circulation and ancillary spaces that do not generate any revenue and the installation of new services into existing structures is particularly expensive. “As such most apartment conversions of existing buildings will be marginal in terms of viability and this is recognised by the City Council.” Another scheme, where contributions are expected to be waived due to abnormal costs, is the conversion of the former police headquarters and central fire station, fronting Shakespeare Street in Nottingham, into student accommodation. But, at the same meeting, the council will be seeking to get a Section 106 agreement in the form of adding to local employment and recruitment during the construction phase. Councillors will also be seeking to get a review of viability in two years if substantial work has not commenced in that time.
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