Guest Blog - Cadogan on Development Viability in Central London

Following the publication of our recent BPF report, Boosting Development Viability, we spoke to Jane Henshaw, Director of Projects at Cadogan, to understand more about the viability challenges facing real estate developers in Central London.

So, tell us about Cadogan.

Cadogan is a family owned property business based in Chelsea, London.

It is a long term business and has been in the same family ownership for just over 300 years.

Our focus is always on long-term stewardship – if Chelsea flourishes, so do we. We invest significantly each year into sustainability and community initiatives, from reducing our carbon impact, enhancing biodiversity and improving the public realm for Sloane Square; to subsidising a key-worker housing portfolio, local employment and skills support and funding our charitable partner The Kensington & Chelsea Foundation to reach thousands of grassroots initiatives who make such a difference.

Our buildings are predominantly period properties, and the architecture is synonymous with the “Pont Street Dutch” style terracotta brickwork, elegant windows, porched roofs and other traditional features. The estate is centred around Sloane Square, King’s Road and Sloane Street. The estate is valued at approximately £5bn.

And what is your role at Cadogan?

I am the Director of Projects and lead our development programme.
Our development pipeline has a construction cost of between £450–500m over a five-year period. Most of our development activity involves residential and retail refurbishments, which typically average around £2.5m each. However, every year we also deliver five or six larger projects valued at over £10m, and we currently have two schemes on site exceeding £30m, with a couple over £50m.

You sit on the BPF Development Committee, which contributed to our recent report on viability. What are the particular challenges you see in your role?

The biggest challenge for us is that it can be challenging to deliver viable projects. The BPF report clearly sets out the level of return required to compensate for the risks associated with planning and development, and in the current climate it is increasingly hard to make the business case stack up.

There are several reasons for this, but for me the main issue is delay. In the UK, and in London in particular, developments face lengthy delays due to the planning system, new regulations, labour constraints and infrastructure issues. At Cadogan, the cumulative impact of these delays is considerable.

Does this include delays caused by the new Building Safety Regulator (BSR)?

We never compromise on building safety and fully support strong regulation. However, adapting to the Building Safety Act, registering High Risk Buildings, and managing the multiple gateways for development projects has caused delays. Part of this is due to the newness of the legislation, which everyone is still adjusting to, but it’s also a result of limited resources. Andy Roe, the new Chair, has been transparent about the regulator's challenges and appears determined to address these issues and clear the backlog, which gives me hope.

Nonetheless, BSR processes have caused significant delays for many developers, including us. Since rental incomes in Chelsea are high, our project’s viability depends on quickly securing tenants after completion, any delays reduce income and negatively affect our bottom line.

You mentioned infrastructure challenges. How do these play out?

A key challenge is grid capacity. We know that limited capacity is a barrier to development, and delays in securing grid connections can slow projects and undermine viability. In our viability assessments, we typically allow around £250k if an electricity upgrade is required, and £250k on a £5–10m project is a significant additional cost.

But it is not just the direct cost. Securing an upgraded supply often requires installing a new incoming main and a new substation, and the substation itself takes up space within the development, reducing the net lettable area and further affecting viability.

It also takes time. Obtaining a new connection can take anywhere from 6 to 18 months, and as discussed earlier, delay directly impacts income and therefore viability.

And how might we overcome these infrastructure challenges?

There is no single solution.

At a national level, we need greater investment in grid capacity and faster, more efficient connections.

We also need continued investment in decarbonising the grid. At Cadogan, our sustainability strategy sets out our roadmap to net zero. We are committed to replacing gas boilers in our buildings with air-source heat pumps, but this relies on the grid being sufficiently green so that the electricity we use is genuinely renewable.

On a practical level, having a single point of contact within each utility provider, whether for major developers or individual schemes would make a real difference. The current lack of continuity, with conversations often moving between multiple people, is frustrating and slows decision-making, ultimately adding to delays. To help address this, the BPF Development Committee is looking to host a roundtable with the utility companies in the New Year to explore these issues and identify potential solutions. Watch this space!