The South East development market has opened with heightened activity on the back of base rate reductions last year, according to SHW’s Q1 2026 South East Development Focus.
Peter Coldbreath, Partner at SHW, says: “Further reductions in case rate would be welcome to provide more momentum in what is a complicated, time consuming and costly market. We aren’t yet seeing evidence of larger volume sites trading more dynamically, however well-located land and refurb opportunities in good villages, towns and cities are driving new green shoots of activity.”
Ongoing planning delays, plus a raft of additional information needed to obtain a planning consent, together with debt finance costs have impacted prices being paid for sites across the South East. Despite this, activity remains positive in the both the residential and commercial development markets. Developers, however, are being more selective and focusing on prime locations, unless there is a significant upside on considering non-prime.
Peter adds: “2025 closed with buzz words such as BNG, Ground Rent Interventions, Local Government reorganisation, Gateway 2 and the UK’s Building Safety Act, along with the eradication of ‘No Fault Evictions’. Each new hurdle to overcome hinders the ability the ability to get diggers breaking ground. So, will 2026 be the year that Government action will match the rhetoric of super heating the process for development to be an engine for growth? Will super mayoral authorities for the South East come to fruition? Simplified structures would be welcome, and care needs to be taken so that years are not lost while the new regimes bed in.”
In the London and South West M25 region, price sensitivity continues to drive the residential development market with overpriced opportunities not selling. Developers are preferring housing schemes over flats and housing associations are in need of funds to unlock sites, with G15 group of London leading housing associations reporting a 66% drop in the number of new affordable homes being built in London over the last two years.
High build costs have continued to impact activity by developers. Appetite for strategic land has increased following recent planning policy changes, especially for grey belt sites in the South East.
Across Surrey and Sussex, smaller sites are attracting developers/investors, mainly for family houses trading. Tim adds: “Viability challenges remain, especially for flatted schemes where cost side pressures remain uppermost in buyers’ minds.” Slow sales rates and extended holding costs are impact the market further. House builders are looking at strategic land opportunities in readiness for anticipated upswing in sentiment.
Planning risk is an issue on sites, even those with an allocation, due to the increasing planning delays, increased surveys required and red tape increasing development costs and frustrating developers, with planning taking at least 12 months and often much longer to secure.”
Sites with restricted planning use or trading hours restrictions are having to be discounted due to less occupier demand and 80% of occupier interest continues to be storage and distribution lead.
All schemes aiming for EPC A / BREEAM Very good or Excellent due to occupier wishes and ESG requirements becoming higher to meet their own targets and for contracts specifying ‘Greener’ buildings’.