ADDING VALUE
3.1.4 What is the cost of bad design?
Well-designed places where people want to live, spend time and work can generate financial value. Some developers understand this and invest their time and resources in delivering quality to obtain high rewards. The value of places designed on principles of good urban design is much wider than just financial value. Embedding the principles of place-making within a scheme also improves the quality of life for those living there, delivering social and environmental value. It is of interest to all parties – including landowners, house builders, developers, local authorities and other public sector promoters – to understand the principles of good urban design and ensure that they are followed.
The added value of a well-designed place can manifest itself in many ways for the different stakeholders involved. It is important that all stakeholders recognise what they are. Some of the long-term social and environmental benefits are less tangible and can be easily overlooked. Table 3.1 clearly sets out the beneficiaries of value in urban design.
3.1.1 Financial value
The argument for investment in good urban design is simple: it can add value. However, short-term considerations sometimes override long-term benefits. To minimise costs, some developers will look to limit upfront investment in design to the minimum required to obtain planning approval. Others invest more upfront, expecting higher values and receipts that will maintain or improve their overall return on the project.
Evidence shows that good design will increase the financial reward landowners and developers can receive for a scheme. Recent analysis suggests that landowners and promoters who invest in place-making can expect to achieve higher development and land value over the
medium and long term. International research has found that developments based on sound design principles can raise values by 10-15 per cent.1 Recent work in the UK undertaken
by The Prince’s Foundation, English Partnerships and Savills confirms the existence of a value premium associated with good urban design.2 A 2007 study undertaken by
NWDA/RENEW Northwest found that not only could good urban design lead to an increase of 15-20 per cent in rental or capital value, but it would also accelerate lettings and sales rates.3 These studies reinforce the findings of CABE’s
studies of the value of good design.4 043
Enlightened developers perceive that there is a strong commercial argument for investment in urban design. Sixty-five per cent of the Building for Life gold winners have proceeded with no public-sector subsidy. In these instances the decision to promote high-quality design has been made on commercial grounds. 044
Good urban design can create a sense of place where there was none, and will build on the assets of an inherently well- located site. Designing well can speed planning consents, add value to land (see section 3.2), achieve faster property sales or lettings, and improve developers’ reputations and brands. It can provide a competitive edge over other schemes. This can be particularly important in the growth areas, where a number of competing new developments may come on stream at the same time. 045
Good urban design has the capacity to change market perceptions and behaviour. It can help to create and establish markets where none exist. Design has been at the heart of recent initiatives such as the coalfields redevelopment and housing market renewal pathfinders. A fundamental understanding of context, urban structure, connections and investment in details and management have helped to make these once more places where people want to be.
Table 3.1 The beneficiaries of value in urban design Source: The Value of Urban Design, CABE/DETR 2001
Stakeholders Short-term value
(social, economic and environmental)
Long-term value
(social, economic and environmental)
Landowners Potential for increased land values
Funders
(short term)
Potential for greater security of investment depending on market
Developers Quicker permissions (reduced cost, less
uncertainty)
Increased public support (less opposition) Higher sales values (profitability)
Distinctiveness (greater product differentiation) Increased funding potential (public/private) Allows difficult sites to be tackled
Better reputation (increased confidence/ trademark value) Future collaborations more likely
Design professionals Increased workload and repeat commissions
from high quality, stable clients
Enhanced professional reputation
Investors
(long term)
Higher rental returns
Increased asset value (on which to borrow) Reduced running costs
Competitive investment edge
Maintenance of value/income Reduced maintenance costs (over life) Better re-sale values
Higher quality longer-term tenants
Management agents Easy maintenance if high quality materials
Occupiers Happier workforce (better recruiting
and retention) Better productivity
Increased business (client) confidence Fewer disruptive moves
Greater accessibility to other uses/facilities Reduced security expenditure
Increased occupier prestige
Reduced running cost (energy usage)
Public interests Regenerative potential (encouraging other
development)
Reduced public/private discord
Reduced public expenditure (on crime prevention/urban management/urban maintenance/health)
More time for positive planning
Increased economic viability for neighbouring uses/development opportunities
Increased local tax revenue More sustainable environment
Community interests Better security and less crime
Increased cultural vitality Less pollution (better health) Less stress (better health) Better quality of life More inclusive public space
A more equitable/accessible environment Greater civic pride (sense of community) Reinforced sense of place
In developing large scale projects in areas of low demand, Crest Nicholson has recognised the necessity of creating a sense of place through strong design concepts from the earliest stage of development in order to raise confidence in the project and bring long-term value to both the developers and those people who are going to live there. At Port Marine, Crest Nicholson has converted a disused contaminated power station site into a mixed-use, mixed-tenure development, providing 3,420 homes, 69,680m2 of employment and 60,390m2 of retail space when complete. A hierarchy of streets, character areas, public, private and semi-private space, extensive hard and soft landscaping, public art works and varying building types have helped create a sense of location in an otherwise low-value site.
Stephen Stone, Chief Executive of Crest Nicholson explained that they as developers commonly invest 10-20% more in build costs than other developers, and that their build cost is
Estimating the value of good design
Port Marine, Portishead, Bristol
The design of high-quality development with a balanced mix of properties at Port Marine, Portishead, Bristol has led to the creation of a prime development location in an otherwise low-value area.
commonly 50% of the sales price. Crest Nicholson offset costs by increasing density. Planners support increased density based on the quality proposed. They believe that they can generate a 15-20% increase in open market sales value because people want to buy into a good environment. This approach was found to work best on medium to large sites due to an increased opportunity to create location.
Crest Nicholson is committed to using external architects and producing bespoke schemes. Creating places brings value, both in terms of financial return and in building a positive reputation as a developer synonymous with quality.
‘It is important to get the right mix of properties within each phase to help speed of sales. Good design can sell property off plan. Rate of sale is as important as £ profit because the turnover is quicker – something that is often overlooked’, Stephen Stone sums it up.