The '3 key elements' for Developers looking to trade through Covid19
By Matthew Saunders
When lockdown was announced a little over a month ago, the impact on businesses was instant and wide-ranging. Most were closed indefinitely. However, construction/building sites were allowed to continue seemingly as normal. The assumed logic behind this situation is open to debate but seemed to centre around social distancing being achievable on building sites; construction being one of the largest sectors in the UK economy; and many workers being self-employed, so not covered by the government furlough scheme introduced at the time. However, this was not a simple ‘keep calm and carry on’ message, it was still a significant problem for developers. This blog will aim to highlight why, by considering responsibility, labour and materials.
Responsibility - it is easy to assume that the opportunity to continue developing would be well received, as opposed to closing down and losing time and income. However, there is an ethical question as to whether it is right to continue work in a global pandemic that has closed down many industries to protect people and NHS resources. Some large developers chose to close completely so not be seen to be favouring profit over their staff members health. In the scenario that work carries on, there is a responsibility to discuss this with the contractor, clarify this position to workers, give them the option to work or not (with consideration for their families etc) and then ultimately protect them and implement suitable conditions if they choose to continue.
Labour - most contractors have been left with a reduced team of labourers to some extent as many chose to follow government guidance and self-isolate. Those that continued operating have been restricted in some capacity - it’s difficult to fit windows while maintaining social distancing or have a team of trades in one area of a site at the same time for example. These scenarios have a knock-on effect to build schedules and times. The biggest impact arises if a whole team of trades disappear completely, for example bricklayers, which can significantly delay development altogether. Developers have had to try to retain capability in all areas, even if minimal, and adjust their schedules where necessary to maintain momentum with a project. Replacing good workers at a later date when demand may be higher again is also a potential problem.
Materials - this is arguably the most difficult issue for developers and one that they have little or no influence over. Many building suppliers closed almost immediately, whether due to a lack of staff (self-isolating) or because there was a concern over operating under social distancing measures. There was a narrow ‘window’ of a few days that contractors were notified by suppliers. At this point some decided to follow their lead and close sites, others chose to load up on materials as much as possible to hopefully get through the next phase of development - whether bricks, timber, tiles or whatever. They were though heavily reliant on suppliers to be able to meet deliveries in a short space of time. A big factor in this has been the ability to make a larger or earlier draw down of funds to be able to execute this plan – having a reliable, co-operative funding channel for this is essential. For those that have been able to bulk order supplies in time, and remain flexible with their processes, there has been an opportunity to make progress with projects and minimise delays and cost overruns.
To conclude, many elements in the property development chain have certainly been impacted despite the industry being allowed to continue. Developers have had to implement new measures, adapt to reduced teams of workers and act quickly in effectively stockpiling materials if possible. This has inevitably caused changes to development timelines and processes. At the time of writing, some building suppliers have begun to re-open slowly but not all materials are readily available and this lag in supplies will continue for a while yet, potentially with an uptick in cost due to demand.
A notable yet often overlooked aspect of development which has become creative is building inspections. Simply scheduling a tea/lunch break at a time when a building inspector attends site is a very helpful way of facilitating the necessary inspection without breaking social distancing. Likewise, for smaller inspection issues, building inspectors have allowed contractors to provide camera images. This should help prevent a backlog of inspections and enable continued progress with developments.
Some developers have also been using this time to think ahead and focus on planning - starting and improving plans for pipeline sites, or working up funding options, to give themselves a more favourable position in the near future when some form of normality returns to the market.