Hugh Lumby, Ashurst LLP
In this article, Hugh Lumby at Ashurst LLP discusses the challenges faced in regeneration projects across the UK.
Regeneration of rundown parts of our cities is still a vital task for governments across the developed world. The UK, including London, is leading the way in bringing the public and private sectors together to address the challenges faced and deliver successful regeneration.
One of the first of these challenges is the fear of gentrification by the local community. Indeed, it is often difficult to escape the gentrification debate. Residents will worry about businesses being driven out, housing becoming unaffordable and the identity of their community being lost. In addressing this, the question should not be whether investment should be accepted or rejected; rather, it is how it should be managed for the betterment of the existing community.
The key to making regeneration work is early communication, consultation and collaboration between the community and all stakeholders. It is important to understand and listen to the existing community – this will help create a tailored solution to the regeneration rather than a one-size-fits-all approach. Developers must be pragmatic where viability needs to be balanced with what is achievable. Otherwise, development will not happen and we will have more to worry about than keeping gentrification at bay.
In the UK at least, regeneration tends to be accompanied by investment in community infrastructure – through section 106 agreements – such as education, transport, leisure, health facilities, creation of open spaces, the provision of affordable housing and support for existing businesses. Proper involvement by the community in identifying and understanding these benefits can also help getting crucial local buy-in.
The Mayor of London’s new draft London Plan has a strong emphasis not just on affordable housing provision, but on providing affordable workspace for small businesses and what is termed “good growth”. Developers are becoming increasingly comfortable with this – for example, they are seeing real “value” that creative uses, and new and small businesses, bring to schemes. The transformation of Shoreditch is a case in point here.
But how can we ensure these regeneration projects get off the ground? Public-private partnerships haven’t had a lot of good press recently. The collapse of Carillion generated plenty of column inches, but it also sparked interest once again in other forms of partnership, including the often-derided private finance initiative (PFI). We must learn from previous mistakes made but public-private partnerships remain a great way to deliver benefits that no single organisation or sector would be capable of, if acting alone.
The work we facilitated at Westfield Stratford City is a great example of this. Of course, the site is in some ways special, given the attraction the Olympics location brings to investors and occupiers. However, public money was needed for the infrastructure to attract the large-scale development we see today. For years this part of the East End of London had been ripe for redevelopment and negotiations had been continuing for a long time to develop the site surrounding the new Stratford International station.
There were a number of challenges with this site, chief among them being that it was effectively landlocked with rail lines surrounding it, and that it required a huge upfront investment into roads, infrastructure and utilities. Piecemeal development was therefore unlikely to succeed, and the risk profile was too high for private investors. The public investment for the Olympics unlocked the whole site, allowing the private sector to bring forward the legacy projects we see today, including Westfield Stratford City, at the time the largest shopping centre in Europe (although now passed by the recent opening of the Phase 2 extension at Westfield London). This in turn has boosted further development and helped create a new London destination. Large amounts of new and affordable housing is being provided on the back of that.
Integral to the success of regeneration projects in UK cities and internationally is effective transport links. A notable trend is for city and transport authorities, in partnership with the private sector, to focus on transport-orientated development. The areas around transport hubs are often deprived and so redevelopment of the transport hub can lead to wider regeneration for the benefit of the surrounding communities. A growing part of the funding solution is to unlock value from the development opportunities created by the construction of new infrastructure, and in particular over-station or over-site developments (OSDs).
A change in approach by transport authorities means they are increasingly seeking to release value from their real estate interests to help address funding costs for new infrastructure. Bringing together the private and public sectors, with their different skills, requirements and appetites for risk, allows these developments to be unlocked. Advances in engineering and construction design mean that sites that were previously unviable can now be developed.
A huge amount of value is set to be unlocked in the regeneration proposals that are being brought forward for the HS2 project. By way of example, the Euston station estate has the capacity for six million square feet of mixed-use development that will reshape and regenerate the Camden area of central London.
Of course, there are challenges with all this. At Euston, there are 18 existing mainline platforms, while the west of the station is being adapted to accommodate HS2. Building a structural deck over those lines to accommodate the development proposals is a complicated process and involves constant vigilance when it comes to risk allocation, planning and cost control. The safety of the existing rail operations will remain of paramount concern to the transport authority around whose station or infrastructure any development is taking place. Relevant asset protection arrangements will need to be agreed with the transport authorities to mitigate risk and safeguard the rail operations. These impose requirements for collateral warranties, high levels of insurance cover and may require parent company guarantees to ensure payment of compensation for any possible damage and related costs for possession of operational infrastructure. This helps further reduce risks and exposure for all concerned. The benefit of creating new infrastructure and integrating the design of such works with the design of new commercial developments (whether OSDs or alongside operational rail facilities) is that issues can be anticipated and worked around with integrated solutions.
Similar opportunities and challenges are to be found in Australia, where our Australian team is advising on the delivery of transport infrastructure, including a new 31km Sydney Metro system that is under construction, including six new stations in the central business district, with five including over-station developments. The Sydney model is innovative because the contractors appointed to build the stations are able to pay for the rights to build above them too. This is smart thinking on the part of the city and transport authorities as doing both together should ensure integrated development and the opportunity for intelligent and integrated placemaking around transport hubs.
Successful regeneration projects require full community involvement and with all stakeholders working together and using their respective skills and strengths. Transport links can revitalise and encourage growth in key areas across major global cities. The most ambitious developments are neither purely public nor private; instead, like wider society they are a mixture of both, with every party focused on the end goal of making our cities more attractive and prosperous.