Cost analysis — Why maths is good for you

Although strategic infrastructure can cost up to £2m per hectare, and represents a large proportion of any regeneration project, the costs are generally not well understood. Yet it is inevitable that strategic infrastructure will increasingly represent an opportunity to deliver value, improve cash flow and deliver long-term community benefits.

There are a number of measures being introduced that will put growing importance on managing infrastructure when developing residential schemes. These include the multi-utility service market, environmental legislation, policy guidance such as the forthcoming Department for Transport Manual for Streets and an increasing focus on long-term estate management.

In this article, we provide simple cost benchmarks and identify some of the key drivers and trends affecting strategic infrastructure costs. It is based on an analysis of six recent residential-led regeneration schemes that EC Harris has advised on.

Strategic infrastructure encapsulates not only the main infrastructure elements such as highways and drainage, but also the cost of the Section 106 obligations, public open space, maintenance and commuted sums.

Infrastructure will increasingly represent an opportunity to deliver value and improve cash flow

Chart 1 illustrates the main breakdown of overall costs represented by each element. Perhaps surprisingly, schools provision is the biggest expense, forming on average 16% of strategic infrastructure costs. On-site and off-site highways combined form almost 25%, while community transport and recreational facilities are some 12% of total investment.

Charts 2 and 3 illustrate the anticipated cost of strategic infrastructure associated with a number of regeneration developments (based in South/South-east England). The strategic infrastructure costs for the development project sampled range from £20m-£300m.

The figures have been represented both in terms of cost per residential hectare and cost per dwelling and are based on first-quarter 2006 pricing levels.

Typical strategic infrastructure costs are extremely difficult to quantify as particular schemes vary considerably. Key cost drivers such as Section 106 obligations, utility costs, drainage and earthworks strategies all have a significant impact on the overall development costs.