COMMENT Experience shows that no matter how good an investor guide, identifying investment opportunities in UK towns and cities is much easier than delivering them.
The smallest amount of investigation into potential sites reveals that there is often a good reason they have not yet been realised. The signs are familiar – sites with multiple landownerships, masterplans by firms which no longer exist, more visions than a Catholic saint.
What is even harder is delivering on these projects in a way that creates real value not just for investors, but for people. Because these sites and projects are not just opportunities for investors – they are opportunities for the towns and cities in which they are located, for the families which will go on to live there, the communities which will take pride in their new local parks, streets and civic spaces, and the businesses which will start and grow there.
Long-term thinking
This may sound rather sentimental, but if the pandemic has shown us anything, it is that the long-term value of real estate is intrinsically linked to how spaces are used by people.
It is this activation by people that turns spaces into places. And getting this right requires not just investment in terms of capital, but time, attention and, perhaps most importantly, care. You would expect that, given their complexity and long timeframes, major regeneration projects are more likely to produce better outcomes in terms of place. But a review of the sector’s track record suggests that this is not always the case.
The common design axiom of “form follows function” is instructive in understanding why the quality of our places is so mixed. In too many instances, it is not so much that form does not follow function, but that one function has been allowed to dominate at the expense of all others – that function being the making of quick money.
Being focused on making an easy return on investment does not make for good places. One factor that many exemplar schemes have in common is the presence of patient capital – or perhaps more accurately, the absence of impatient investors, which extends to cover public sector investment.
This is where patient capital comes in – money that is allied to developers which can design and deliver places that can anticipate and respond to the needs and demands of users, whether this is office occupiers, existing local communities or future residents, rather than just the short-term demands of shareholders. This ability to balance priorities does not guarantee good design or good place outcomes, but it does at least create the breathing room and mindset with which to do so.
It is this breathing room, the ability to spend more money up front in the expectation that it will deliver greater results over time, that can generate the hallmarks of great places.
This includes investment in “non-rentalisable spaces”, such as the ground plane of buildings and public realm, or the retention of heritage assets that sustain a sense of familiarity and authenticity. It helps that as more of these patient capital-backed projects become reality, the stronger the case for adopting similar methods of development becomes. Even the most progressive investors and developers need valuations as part of the evidence that doing the right thing can in fact make money, even if it takes longer to do so.
Meaningful engagement
Place and green premiums are just two demonstrated means of achieving this. And when investors and developers know that they are going to be sticking around in the long term, including by holding on to assets, they make the effort to plan for what that long term looks like, encouraging a focus on resilience and stewardship, including the practicalities of estate management and tenant leasing strategies.
The fact that these projects take years, even decades, can make for meaningful engagement with existing and adjacent communities and neighbourhoods.
Many local authorities, whether as joint delivery partners or planning authorities, are increasingly demanding when it comes to the quality both of design outcomes and the social and economic outcomes of regeneration projects and how they are distributed. This may make for even harder projects, but it arguably makes for better places in the long term.
Urban regeneration is no longer about investors and developers simply identifying opportunities. It is about delivering and distributing them, too.
Kat Hanna is director of strategic advisory and place strategy at Avison Young
