“It is very difficult to keep price bids between project developers at the same level.”

Flanders likes to use open spaces sparingly. Intensification is the password. But for real estate developers, expansion projects that take up more space are now more profitable.

Open spaces are rare in Flanders. Projected population growth will put more pressure on open spaces, unless we decisively start building differently and elsewhere: more in cities and village centers and with a more efficient use of space. Sometimes by building higher, sometimes by sharing space and using it multiple times. In short, this is the approach of the Flanders Spatial Policy and Transformation Building Plan. ‘Compact’ is the verb that must make this change possible.

Stepping up comes with a price, especially for enterprise developers. A study commissioned by Bouwagenda, a partnership between the Department of the Environment and representatives of the construction and real estate sectors, showed that intensification projects are more expensive and riskier than expansion projects. “It confirms the sentiment that has been present for some time in this sector,” says researcher Arnout De Waele, partner at engineering firm Atelier Romain. Project developers face many hurdles with ramp-up projects, which they believe increase the cost price. We are now showing this in black and white for the first time based on a number of real cases. Ordinarily, project developers aren’t keen on looking on their books, but due to the initiation of study by the sector, they are now willing to do so.”

Project developers encounter many obstacles in the ramp-up projects, which increases the cost price.
Arnott de Wailly, Study Desk Atelier Roman

For intensification projects, the engineering offices Atelier Romain and IDEA Consult come to a total cost of €2,308 per square meter of gross floor area, compared to €1,857 for extension projects. Intensification projects also bring in more money: €2,642 per square metre, compared to €2,248 for extension projects. These additional returns do not outweigh the additional costs. As a result, ramp-up projects achieve a much lower gross margin: 14.5 compared to 21.1 percent.

complexity and land costs

Higher requirements and greater complexity largely explain the additional cost of densification projects. For example, infrastructure costs for densification projects are four times higher than for expansion cases, as a result of a higher level of finishing and smaller plots. Urban planning conditions and urban planning fees (compensation for a benefit resulting from licensing) also raise the cost price. More complex site organization, adherence to underground parking spaces and increased difficulty of embedding into the existing fabric, in turn lead to higher construction costs. Indirect costs, such as marketing and project management, are also much higher if ramped up. In this context, the researchers point out, among other things, the larger number of stakeholders.

It is not surprising that land costs also play a negative role in intensification projects. The average land price for intensification projects was 326 euros per square metre, nearly four times the price for extension projects (83 euros). Location, often in an urban environment, increases the value of the land, while larger land areas in expansion projects lower the average price per square meter.

But aren’t project developers themselves partly responsible for higher land prices in densely populated locations due to mutual price bidding? Arnott de Waele replies: “That’s right.” “Sometimes it is as if land costs hardly matter: the project developer has a budget and, if necessary, goes to great lengths with it. Then, he wants to offset that disproportionately high amount with excessive software, with all that entails. Consequences. It is very difficult to keep the quotation mechanism in the same direction. I think the sector should work on this on its own, for example by raising awareness. “

Remove obstacles

The researchers concluded that scaling cases were “rewarded” with a higher return, despite lower risk. This is not good news for a policy that, like the building shift, wants to focus on strengthening the core and increasing spatial efficiency. Should we reduce the level of intensification projects? “No, that is not the conclusion,” says de Wile. “We now know that demonstration projects are more profitable for developers. So either they make these projects impossible as a government, or they try to remove a number of hurdles in ramp-up projects.”

At the Flemish level, researchers are calling for a legal framework for urban development charges. Today, each municipality or city has its own approach to charging urban planning fees. “This proliferation of systems and methods leads to ambiguity and increases risks for developers,” the study says.

According to Arnout De Waele, it is important for local authorities to communicate as early and as openly as possible about the vision of intensification and its modalities. “I prefer to be very specific,” he says. “Where do you still want to squeeze? With what kind of housing and in what ratio between built-up and undeveloped land? Right now, municipalities are often caught up to speed: a project developer knocks on the door with a plan and the municipality has to improvise. By communicating proactively, a lot of problems can be avoided. frustrations for all parties.”