Unlocking the next wave of city centre development in Birmingham
According to the Birmingham Crane Survey 2026, a total of 4,594 new homes were completed in the city in 2025. But while these figures seemingly represent a large number of units, this is predominantly the result of planning applications and construction that predated the current market volatility. Despite this legacy pipeline, and some notable exceptions including Sphere Group’s Edition and One Eastside, high-rise city-centre development is facing an evident slowdown as builders now grapple with rising delivery hurdles.
The central challenge remains: how can developers effectively unlock value within such a constrained landscape?
Viability pressures reshape the city-centre pipeline
The ’perfect storm’ of regulatory, economic and market forces has transformed the appeal of these previously sought-after sites. In Birmingham, we’re witnessing a growing number of prime urban locations either stalled or sitting vacant, as viability concerns discourage developers and investors and sales levels sit significantly lower than we have seen in recent years. Some city centre sites are having to adapt their design to meet the current regulatory requirements, which is ultimately having an impact on site value, with reality and expectation misaligned.
The first obvious hurdle is wider economic pressure. With higher interest rates, the cost of holding land has skyrocketed. Landowners still want a high price for their sites, but developers cannot meet these expectations as the cost of borrowing has increased. There is also a correlation between finance costs and yields, which has had an impact on investment values. Managing expectations and seeking realistic professional advice has become increasingly important.
Additionally, we are seeing a shift in sales rates and buyer confidence. Although the market has shown resilience, off-plan sales for city centre apartments have cooled. Higher mortgage rates and a more cautious investor sentiment have resulted in a slowdown of sales velocity.
Consequently, the increased cost of holding debt has created a reluctance to pursue this type of development, and the increased cost of living, due to sustained higher rates of inflation, together with higher build costs, is also impacting purchaser demand and viability.
The regulation reset
Another hurdle being navigated by city centre developers is the Building Safety Act 2022. The implementation of the regulation has significantly altered the financial and operational risk profile of high-rise developments. In addition to the increased time commitment, new requirements, such as the mandate for second staircases in buildings over 18 metres high, have forced developers to redesign schemes, negatively impacting net-to-gross ratios and building efficiencies.
We have witnessed developers restrict the design of their proposed developments to six storeys to avoid the financial and time constraints that the regulation presents. The viability gap has widened to the point that traditional funding models no longer stack up without significant adjustment in land value or a more creative approach to delivery.
With viability challenges impacting many developments, we are seeing an increase in private sector clients seeking our support to navigate access to public sector funding to bridge the viability gap. Across the city, the public sector continues to collaborate with the development community to drive forward commercial-led schemes like Paradise and Smithfield, backed by various Enterprise Zone, Brownfield and Housing Delivery funding pots.
Looking ahead, the role of the public sector will continue to be critical in unlocking residential delivery across the region and leaning on the new National Housing Bank and pooled local government pension funds will be key.
How developers can bridge the viability gap (and how we can help)
Whilst headwinds continue to exert pressure on developers and investors, we are working with our clients to find solutions to navigate through the turbulence. Our planning team, for example, has successfully negotiated amendments to a consented high-density city centre scheme that significantly increased the site capacity and modified the mix to match current market requirements, whilst respecting prevailing heritage and townscape constraints.
We regularly work in tandem with our planning team on city centre schemes to provide robust and rigorous advice on viability, and to negotiate planning obligations that are structured (both in relation to their scope and their trigger) to enable and support scheme delivery, rather than place a burden on developers.
Avison Young has the technical depth and market foresight required to navigate today's increasingly complex urban landscape. By integrating our specialist planning expertise, we can successfully renegotiate Section 106 obligations to restore viability to stalled schemes, and we also have extensive experience in securing the funding required to deliver schemes that were initially considered unviable. Our strategic advice is engineered to unlock value and maximise capital receipts in a shifting market.
Navigating an everchanging commercial property market is tough, but our experts are here to help. Get in touch with our specialist team in the Midlands to find out more.
