The 1/3 Rule Had a Good Run. The Appraisal Has Moved On.
For years, the 1/3 rule gave developers a quick way to sense-check a deal: roughly a third for land, a third for build cost and fees, and a third for profit and overhead. It was neat, memorable, and increasingly unhelpful.
In 2026, especially across South-East England, that rule of thumb is struggling to survive contact with reality. Biodiversity Net Gain, Section 106 obligations, higher funding costs, and persistently elevated build costs have all taken a larger share of Gross Development Value. The result is simple: land is no longer comfortably sitting at 33%. On many schemes, it is landing closer to 15% to 20% of GDV.
That is not a minor adjustment. It is the difference between securing a viable site and buying a problem with planning drawings attached.
For developers, the key question is no longer “What did this sort of site trade at a few years ago?” It is “What can this site actually support once the real costs are in?” That is where Salvin adds value as both a design and build contractor and main contractor, helping clients test viability early and make decisions based on current delivery conditions rather than outdated rules of thumb. More on that is available through our Services page.
What Is Pushing Land Value Down to 15%–20% of GDV?
The short answer: the spreadsheet has become less forgiving.
BNG is one of the biggest shifts. A mandatory 10% biodiversity uplift may be sensible policy, but it is not free. Whether delivered on-site, off-site, or through a mix of both, it introduces cost, programme considerations, and land-use implications that have to be accounted for properly.
Section 106 obligations are also doing more heavy lifting than they used to. On top of traditional contributions, developers are increasingly dealing with longer-term stewardship, monitoring, and infrastructure commitments. Those costs do not disappear because a landowner prefers the old appraisal logic.
Then there is construction itself. Labour remains expensive. Materials have not exactly returned to a gentler era. Procurement timing matters more. Buildability matters more. And once costs move up, the land line is usually the one that gets squeezed.
From a main contractor perspective, this is now a recurring pattern rather than a one-off exception. Build costs frequently consume far more than the old third, which means the residual land value has to adjust accordingly.
What the Numbers Tend to Look Like Now
Every scheme is different, but many viability appraisals now point in a similar direction. By the time construction, professional fees, finance, planning obligations, and developer return are properly allowed for, the land position is often materially lower than historic expectations.
A broad 2026 working range for residential and mixed-use schemes in the South-East may look something like this:
• Construction and professional fees: 45% – 55% of GDV.
• Profit and finance costs: 20% – 25% of GDV.
• S106 and BNG obligations: 5% – 10% of GDV.
• Residual land value: 15% – 20% of GDV.
This is why the old 1/3 rule now causes trouble. It encourages land appraisals based on optimism just when the market is demanding precision. If a scheme is underwritten on yesterday’s land assumptions, it can unravel during feasibility, procurement, or funding review. None of those are inexpensive moments to discover the numbers never worked.
Why Early Cost Planning Matters More Than Ever
This is where disciplined construction cost planning stops being a nice pre-contract exercise and becomes a commercial necessity.
Developers need to understand what a site can carry before they are too far committed. That means pressure-testing build costs, reviewing buildability, identifying abnormal risks, and making realistic allowances for planning and environmental obligations. Good assumptions can save a scheme. Bad assumptions can make an unviable land deal look flattering for just long enough to cause damage.
Salvin supports this process through pre construction services designed to de-risk projects early. We work with developers to assess delivery risk, interrogate cost drivers, and provide practical cost intelligence that reflects actual market conditions. The aim is straightforward: help clients move forward with clarity, not crossed fingers.
Our approach to construction cost planning is grounded in buildability and market-tested pricing. That gives developers a better basis for land bids, funding discussions, and design decisions, while protecting margin against the kind of late surprises that can turn a promising appraisal into an awkward post-mortem. You can see more about the type of work we deliver on our Projects page.
Just as importantly, early-stage review helps bring BNG and S106 into the core viability conversation rather than treating them as side notes. They are not side notes anymore. They are part of the deal.
Where Salvin Fits: Design & Build or Main Contracting
For some developers, the best route is to bring in a design and build contractor early and align design, cost, compliance, and programme from the outset. That single-point responsibility can be particularly valuable when a scheme is already juggling planning complexity, biodiversity requirements, and tight viability thresholds.
For others, the scheme is already designed and the priority is delivery certainty. In that scenario, Salvin acts as a main contractor, delivering through fixed-price contracts supported by thorough pre-construction planning. The objective is the same: reduce risk, protect programme, and avoid margin erosion once the project is live.
Either way, the earlier the commercial reality is tested, the better. By the time a deal reaches site, the expensive decisions should already have been made with full visibility. Developers exploring opportunities across South-East England can also view our Land Development Opportunities.
The Old Rule Is Dead. The Opportunity Is in Getting Ahead of the Numbers.
The 1/3 rule is not completely useless. It is still a good reminder of a time when appraisals were simpler. But as a basis for current land valuation, it is increasingly detached from how schemes stack up in practice.
Today, many sites need to be assessed on the basis that land value may sit closer to 15%–20% of GDV once BNG, S106, finance, and build cost pressures are properly included. That reality is not especially romantic, but it is highly relevant.
Salvin helps developers respond to that shift with practical pre construction services, robust construction cost planning, and delivery expertise as both a design and build contractor and main contractor. If you want to sense-check a site, de-risk a scheme, or build a more reliable appraisal before committing, get in touch through our Contact page.