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Negotiating between Urban Planners, Developers, and Investors

Large Scale Mixed-use Urban Development as a Platform to Assess Actor Interactions by Mariam Hussain

There has been a sudden attention ranging from asset management, financial portfolio composition, leasing strategy, and associated components, to co-locate different building uses within existing urban areas, and renovate cities to reach a Jane Jacobs-esque romanticism based in the “15-minute city”. This new type of urban renovation adds further complexity to intangible development processes by requiring more deeply intertwined negotiations and relationships between municipalities, developers, and private investors. This is also occurring along a backdrop of lingering post Global Financial Crisis uncertainty, and a new, inexhaustible shock, of the Covid-19 pandemic. 

In the fourth session of the Property Webinar Series titled “Mixed-use Urban Development as a Method for Risk Mitigation”, the discussion explored how urban planners can better negotiate with real estate industry actors, to ultimately establish better outcomes for property development in the urban landscape, and to limit some of the negative spatial consequences that we see after project completion. The three experts were invited to this  dialogue:  Dr. Jochem de Vries (Department Chair & Associate Professor, Urban & Regional Planning, University of Amsterdam), Dr. Herman Kok (Vice President & Head of Research, MARK Capital Management), and Dr. Gert-Joost Peek (Professor, Area Development & Transition Management, Rotterdam University of Applied Sciences; Lecturer, Amsterdam School of Real Estate; Owner, SPOTON Consulting). Each speaker provided a different perspective depending on their roles in the urban planning and property development landscape. 

Defining Large-Scale Urban Mixed-use Projects in the ‘Post Crisis Era’

A traditional role of planning is to create certainty for investors…that they can be sure that their investment is safe, at least for a certain moment of time Dr. Jochem de Vries

Popular amongst both property developers, investors, and urban planners are concepts of higher density, large scale mixed-use projects such as Zuidas or ArenApoort in Amsterdam, that first appear to act as a safe haven for the commercial property sector. During the discussion, different approaches to mixed-use development were illustrated; from the planning perspective, mixed-use varies in terms of scale ranging from individual buildings to the city overall and continues to evolve in dynamic and globalising economy. From the property market perspective, a definition from the Urban Land Institute is commonly used which states that mixed-use should have a minimum of three different functions in a single project, and limits to the share of space that each of these individual functions can take-up. Translating this to real estate cycles, private market actors can simultaneously harness different demand cycles in the market, and “maintain relevance in the urban tissue for longer”. As developers and investors move to integrating more functions in order to access these different phases of the real estate cycle, the number of actors involved and how they interact becomes much more complex.  Implementing new construction with more functions requires a thorough understanding of how all of these different parts will interact, complement, and contradict each other, throughout the life span of the development.

Spatial Consequences of Hostile Negotiations between Property Market Actor & Urban Planners

On the public side, a municipality can never leave they city, they have to stay…but on the private side, there is far less staying power Dr. Gert-Joost Peek

Translating the abstract concept of disagreement of time to the physical consequences to the built environment concludes differences in both political and financial commitments of different actors involved. Private actors for the most part are committed for 5-7 years on a project, much less than an actual neighbourhood lifecycle. However, for municipalities, when development projects are complete and investors have sold or closed projects, government entities are usually left to deal with the projects, including failures i.e. vacancies. Events like the GFC and the Covid-19 pandemic, are examples of severe shifts in real estate cycles host potential to disrupt commercial real estate in both the short and long term. In addition to these formative events, uncertainty can also be introduced by municipal governments themselves in which, large scale urban mixed-use projects actually experience multiple election cycles, and changes in leadership, deterring from initial plans. For investors, that are dependent on key principles of steady income and income growth to deter risk, governments “activating other plans” of similar retail and office development, that can challenge market feasibility and positioning, thus, provoking the risk of structural vacancy by oversupply.

Hastily addressing structural challenges with volume and economies of scale will still produce negative spatial consequences, even if the foundation of the solution is to resolve socio-economic issues. With urban planners, developers, and investors all inherently playing a leading role in shaping the future of our cities, issues such as the housing crisis seems to be an obvious common ground to produce innovative solutions. These actors are coming together but reacting with economies of scale of housing-focused development, instead of neighbourhood-focused development models, echoing characteristics of homogenous suburbanization and auto-oriented development that came in the last century. This large-scale demand for housing in combination with societal shifts to embrace online environments for work and play, is unnecessarily focusing all of these different actors to replace social and public spaces with residential units. What this means is that future inner-city areas can potentially actually lose all other functions, and space where people interact and engage, and ultimately damage the effervescent life of these areas.

Another key risk that produces negative spatial consequences stems from a lack of trust between actors, between urban planners and property market actors, in which developers and investors end up isolated, and thus also projects themselves from the urban fabric. When trust is not is not initially established in the different relationships and engagement structure, physically this can result in standardization and commodification of space at the street level, where developments do not actually engage with the rest of the city. A weak urban fabric and a lack of cultural components are intangible necessities are not a result of financial and economic factors, but because of actors unable or unwilling to come together in the built environment production process.

Formulating a ‘Process Architecture of Urban Development’

Participation can help, but in many cases, participation is initiated too late, and it is [just] to explain and discuss the fundamentals of the project which results in more distrust rather than less Dr. Herman Kok

In order to resolve issues with completed projects, the experts agreed that first it is important to establish trust between actors, as well as to actually engage members of the public in pivotal decision making in the development process. Thus, ultimately creating a “process architecture” for urban development which can help account for differences in the time, financial commitment, and occupancy. This type of systematic and structured approach can help provide clarity, and introduce collaborative incentives such as density bonuses for developers integrating social functions, as more standard per North American practice.

At present day, urban development, like any other sector is experiencing the pressure of adapting to the realities of 2020 and crises to come. Furthermore, it is also facing a pressure of a recent record of investor capital targeted to create and improve built environments. As financial capital further infiltrates cities, large scale mixed-use projects are a common ground for investors, developers, and urban planners to interact, with combined high levels of: commitment to improved urban design standards, complexity of actors involved, investor capital, and of course, the number of people that are influenced by new neighbourhoods. This iterates a call for planners and planning practitioners that the commercial real estate sector has become a significant part of our cities and is shaping planning regardless of whether urban planners are prepared and willing to embrace it. Establishing trust by developing more transparent and binding engagement frameworks, and thoroughly integrating planning and market actor resources, are required to jointly solve greater challenges in the realm of city building.

Mariam Hussain is a PhD candidate at the University of Amsterdam. Her PhD research examines property market actors and large scale mixed-use urban development projects in European cities. She is a professional researcher for Multi Corporation and an active member of the Urban Governance Research Network (UGoveRN).