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Placemaking is growing up, says The Place Economy Volume 3 eBook which launches today. It’s evolved from a ‘nice to have’ to an ‘essential’, as the property industry recognises and quantifies its value.
Placemakers have long argued that magnetic, attractive and comfortable places provide benefits to the wider public. Now evidence is accumulating, showing these elements can also make money for developers.
When clients bring sites or projects to Hoyne, we consistently recommend that ‘place potential’ be considered seriously, not just for planning and design, but also for the profit increases and other positive commercial outcomes it can deliver.
Many of the world’s most-celebrated developers now prioritise placemaking when describing their services and accomplishments. From Argent in the UK, which describes itself as “people who make places for people” to Canada’s Brookfield Properties, which emphasises “making lasting impressions on the cities and neighbourhoods where we do business,” the commercial imperative of place is now explicit.
More and more clients were interested in how placemaking could add value, Savills director of residential research and consultancy Lucy Greenwood said in London.
“There are always multiple considerations,” she said.“Landowners are increasingly interested in leaving a legacy along with creating the optimum value from a project.”
The key is understanding that early investment will be required to achieve better returns in the long-term.
“Clients know they will need to put the money in but there are lots of competing pressures. They want to investigate what aspects will be most beneficial, have the most impact.
“Ultimately, they want to know if they will get a return on the investment they make.”
In 2016 Savills released Spotlight on Development: The Value of Placemaking, a groundbreaking report analysing how placemaking “pays off financially as well as socially”.
Critically, it set out the financial case for early investment in place (things such as schools, the public realm, shops, services and employment uses) and directly addressed some of the challenges facing developers, while offering real-world solutions.
The report concluded: “Spending more upfront and achieving higher sales values and sales rates can increase land values by around 25 per cent.”
Based on experience with clients and in-depth market knowledge, Savills created a simplified land value model for a theoretical urban extension of 3000 homes. The company also showcased case studies from three major UK projects to illustrate their findings.
“The report still gets referred to today,” said Greenwood, one of its authors.
“There have been studies on house price performance before but by considering the land values, we were able to show the potential return to the landowner if they are prepared to wait.”
While Savills stands by the hypothetical 2016 calculation presented in the report, Greenwood said that, for individual clients, there was still the question of how to apply it to a specific site.
“Things change markedly depending on if you are in an already strong market or in an isolated location, and so forth. We can help clients the most when they allow us to engage deeply, which more people are asking us to do.”
One of the most pressing concerns facing clients, she says, is deciding what to invest in first.
Savills’ work starts with identifying who will be attracted to the site or project and what is going to be important to them. “For instance, if it’s going to be family-driven, then we’re looking at schools, play parks and green spaces,” Greenwood said.
“If the audience is young professionals, it will be more about vibrancy and amenity on the doorstep. Creating footfall on the site early is crucial, so temporary uses can be really important in establishing the site as a place.”
Consequently, conversations about placemaking must start as early in a project’s life as possible.
“The best time to consider placemaking is when a client is masterplanning. This is when we can help shape the best outcomes.
“Later on, it can be too late. Having said that, we have a client who is looking at the next phase of their development—they already have the first phase of homes completed on site—and they’re wondering what they should invest in next as the site evolves.”
London-based Avison Young global director of insight Nick Axford has spent more than 25 years in research and consultancy, including five years as global head of research for CBRE. He said his company’s experience as global real estate advisors echoed Savills’.
“The earlier the better,” is his advice to maximise the financial benefits of placemaking.
“There are all manner of things to consider—everything from a site’s local demographic to logistical considerations and connectivity, including access points, turning circles, load bearing, landscaping—driving the types of placemaking activities that are feasible.”
The impact of place on profits for clients could be demonstrated using “many measures”, including “ revenue [rent price shifts, commercialisation income or other sources], profile [media coverage, on and offline, engagement on social media, etc] and footfall”, Axford said.
The pandemic had forced the property industry to play catch-up with what he called the “experience economy trend”, which was already well established in other sectors, he said.
“Where placemaking has been a key aspect to retail and more recently mixed-use, we are now seeing demands from other areas keen to use it to create destinations and to improve occupier experience…This all loops back to the way increased consumer expectations regarding lifestyle are informing how we act in our workplace, as well as our leisure time, combined with the war for talent.
“Placemaking has never been more important.”
Historically, developers have used floor-space calculations to develop the viability of a project but this approach fails to consider the additional values that emerge through quality, place-led development.
More exciting destinations and pleasant, welcoming environments lead to increased footfall and longer dwell times.
Great place brands deliver higher tenancy values, while higher long-term land values result from the halo effects of good placemaking for entire precincts and neighbourhoods.
Feasibility studies are a bedrock in the real estate industry, conducted as a way of determining whether a project is likely to succeed.
Never a once-off, set-and-forget exercise, most developers understand this is an evolutionary process.
Placemaking is now a necessary line item to be added into the process.
By interrogating and determining how a place can offer a point of difference, and provide high quality place outcomes, landowners and developers can optimise investment returns.
This is a summarised extract from The Place Economy Volume 3 eBook by Hoyne. The Place Economy is a series of resource books which look at best practice placemaking around the world. Purchase your copy here: https://hoyne.com.au/the-place-economy/
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