Companies in the development and property sectors should consider a far wider assessment of “value” beyond financial metrics when considering new schemes, according to a new report launched this week at the MIPIM property convention in Cannes.
Highly Valued, Hard to Value: Towards an integrated measurement of real estate development was commissioned by law firm Trowers & Hamlins, and proposes a new value measurement tool and “placemaker valuations” to create a balanced view of proposed projects.
The report suggests that new metrics that quantify “successful” developments and factor in social, cultural and environmental aspects could sit alongside financial valuation reports, in a similar way to an EPC report.
The new tools would also help influence planning decisions, by creating a transparent framework for “best practice” in real estate development.
The report says: “Financial viability underpins the real estate sector – but increasingly investors, developers, local authorities and planners must consider a broad range of factors to ensure a successful development balances short-term financial return with long-term financial stability and the need to create successful and sustainable communities.”
The report’s argument was endorsed by David Partridge, managing partner for Argent, who said: “The industry needs clear, established guidelines on how to measure value in order to help achieve beneficial outcomes for all parties, from financial success to positive impacts on places and people.
“A metric which might be modelled on something like a BREEAM-style rating for the positive impact of developments on society in the wider sense could greatly help investors, developers and local authorities to make smart decisions for the long-term. Ultimately, we all benefit if we can raise the bar and deliver more.”
Liverpool One (above) and Argent’s King’s Cross development (top) are considered as examples of good urban development
The research was conducted in conjunction with Oxford Brookes University’s School of the Built Environment and supported by UKTI’s Regeneration Investment Organisation (RIO).
Trowers & Hamlins also held a round table debate with industry professionals that showed support for a metric that would guide them to create developments that are financially and socially prosperous..
There was also support for the idea that a broader definition of “value” would help lead to long-term financial success, and support international investment through increased knowledge of what makes developments successful.
The research looked at four case studies in particular: King’s Cross, Birmingham Municipal Housing Trust, Liverpool One, and Kidbrooke Village in south-east London.
Sara Bailey, partner and head of residential at Trowers & Hamlins, commented: “Our research shows there is a gap between pure financial valuations and the true value of what a real estate development can deliver, along with a strong correlation between successful developments and those which produce a higher return to investors.
“Trowers & Hamlins advises across the real estate industry and we see there is a great opportunity for all parties to work together: for developers to demonstrate the value they deliver, for investors to be better informed of the real estate they invest in, and for central and local government to have confidence that their development partners share their vision of creating successful and economically healthy local economies.”
