Well-Planned Cities Increase Returns for Real Estate Developers.
I have proof and it's awesome
Carla Guerrera, CEO & Founder
Do you know that feeling when your worlds collide in a great way like when two close friends get together or there is a combined wine and chocolate tasting event? As a real estate developer and an urban planner, that is what this study was like for me.
As it turns out, there IS in fact a positive relationship between investment returns, higher density, and lower carbon emissions in cities that are well-planned. The proof from global research is finally in, and the insights we can gain from this are significant both for private sector, and public sector. In a new ULI study based on global case studies, ‘good density’ within cities includes innovation, connectivity, an efficient green transport network, and visionary governance. From my perspective, the ‘good density’ criteria can be reframed as well-planned cities as these are the basis tenants of good urbanism generally.
Below are some insights that can be applied in practical terms for developers and city decision-makers:
Insights for Investors and Developers
Investors should consider not only building-specific elements in their due diligence, but also city- and neighbourhood-specific elements related to whether a city has good density when determining where to invest.
Consider the local governance in looking at real estate investment opportunities. Forward-thinking progressive governance is critical to achieving the density done well to have the positive impact on returns.
Well-planned density improves the lifetime of a building and the area in which it is located in the longer run, developments can be expected to become less volatile through the property cycles and therefore positively affect returns.
In summary, a city needs to have a solid governance and economic framework to attract investors, be of a sufficiently high density (for without density there can be no good density), and needs to provide a high quality of living in the longer run for its residents, workers, and visitors.
Insights for Policy Makers
Public authorities and city governments are responsible for many of the characteristics associated with good density, including strategic land use planning, oversight of built infrastructure, preservation of open space, and transparent and accountable governance.
Cities should realize that their partnerships with national, provincial and regional governments, they can also influence investment into public transport infrastructure and services, and spatial planning which is key to attracting investment.
Governments face a real need to coordinate across different spatial and administrative levels to deliver compact and connected urban forms and to manage the potential costs associated with higher density. This responsibility includes ensuring that the built environment and green spaces within a city are high quality and safe.
Cities who focus on encouraging walkability, provide transport links, and protect the cultural heritage, biodiversity, and ecosystems within cities are cities that are ideal cities to invest in and these cities will only continue to grow in their attraction to investors
There are significant opportunities for governments to work with real estate investors to shape urban form and function in ways that enhance the social, economic, and environmental performance of a city and the health of the people who live and work in the city in the long term.
One of the positive outcomes might be higher and more stable returns on real estate investment, thereby providing an incentive for property developers and owners to work with governments and other urban stakeholders towards a shared vision for a city.
Conclusion
Well-planned urban developments– mixed land use, the conservation of green spaces, social inclusion and proximity to jobs, efficient green transportation networks, services and amenities – is desirable for a city. It minimizes the social and economic costs associated with sprawl, particularly congestion and higher capital expenditure on infrastructure provision. AND this study allows us to draw three essential NEW conclusions:
Well-planned cities can and should be used as a key consideration in investment decisions by identifying investment opportunities beyond the popular tried-and-true markets. This approach is critical to finding opportunities with added value in today’s lower yielding environment.
The key finding, for the cities and variables studied, is that well-planned cities, in addition to the abundance of benefits offered to residents, communities and governments, are also associated with higher returns for real estate investment.
There are endless win-win opportunities that can be achieved by investors and developers recognizing this added value and working collaboratively with cities who are adopting these principles of good urbanism, and vice versa.
Everyone wins with good urbanism and well-planned cities - residents, communities, cities…. and investors.
My company and approach to real estate development is built on the experience of delivering $900 m in complex mixed-use real estate, generating and experiencing these outcomes firsthand, and leveraging this perspective to add value to development and develop exciting win-win opportunities. Contact me to help identify how, as this research shows, the integration of well-planned cities and real estate development is critical to successful project delivery, investment decisions, adding value to development projects, more efficient city approvals, and improved processes/relationships between cities, developers and investors.
Great job ULI on this study! Smart Urban Development
https://europe.uli.org/wp-content/uploads/sites/127/ULI-Documents/supporting_smart_urban_development_web.pdf
