Drop in value of shelved projects

There has been a decline in projects being placed on hold over the first quarter of 2012. Glenigan data shows there was a 14% drop in the underlying value of shelved projects compared to the same period a year ago.

This decline in the value of shelved projects extends a broad trend seen over the past three years. In 2009, the value of projects starting on site fell 14% and this was accompanied with a big increase in projects being placed on hold. Some of these projects were then cancelled, though many – especially private housing schemes – contributed to a recovery in starts in 2010 as developers revisited these schemes.

Since then developers have been more cautious with the projects they bring through the development pipeline, meaning that more schemes are well financed, in prime locations and less vulnerable to volatile business conditions.

However, the negative trend over the three months to March was not universal. In particular, there was a 189% increase in the underlying value of retail projects being placed on hold, compared to the first three months of 2011. Many of these were Tesco stores – either stand alone schemes or as part of a wider mixed development. Tesco built the most stores last year as supermarket expansion fuelled a second year of growing project starts, so a reduction in spending from the firm would be a blow.