As readers will know, the Blog was at MIPIM this year (again!). One of the highlights was the Trowers & Hamlins Brucnch on Thursday morning (well, we would say that wouldn’t we…).
Yes, the relaxed beach front venue was great but it was the launch of the Trowers research, in conjunction with Oxford Brookes University, into the impact of methods of real estate valuation which was the thought-provoking bit.
In simple terms, the pure financial assessment of success in real estate development can result in the unintended consequence of attributing only cost to some of the “softer” elements of value: those which can be, arguably, just as important to the long term goal of place-making as the “harder” financial measurements which tend to reassure Funders, Investors, Developers, Contrctors etc.
We all know well enough that the economic theory behind the establishment and growth of the Northern Powerhouse (including the devolution of powers to the Greater Manchester Combinded Authority) is to increase productivity on the back of improved connectivity and enhanced life chances in terms of accommodation, health, education and skills.
An element of the overall picture which is an equally key part is, to use a popular meme is “Place Making”. More than just one element of that overall picture – one of the most important elements. The connectivity and all the other stuff will ultimately count for nothing if social and cultural isolation is the outcome of development rather than cohesion and community building.
These are precisely the kind of “soft” value components which are often the first lines in the financial model underpinning a development appraisal to be redlined. They attract a very clear cost but, in terms of current approaches to valuation they very often don’t attract a value. They are, therefore, the easiest a and most obvious targets for shrinking the cost base.
Where does this lead to? A classic case of linguistic misdirection to begin with. Use of the expression “Place Making” is often simply a means by which the exact opposite – the total absence of effective, practical place making – appears as a sticking plaster over the cost savings required to make the financial model “work” in terms of value. In the long term it leads to the exact opposite of the productivity growth upon which the success of the Northern Powerhouse depends.
So, how do we go about addressing these issues? The picture company accompanying this post is of the front cover of the Trowers/ Oxford Brookes research report referred to above: “Highly Valued, Hard to Value – towards an integrated measurement of real estate development” which tackles these, and other, issues.
If you want a copy, let us know by responding to this post. Let’s see how we can move this conversation forwards….