THE REGENERATION GAME

With so many real estate sectors in a state of flux, mixed-use regeneration schemes are looking like a surer bet

Everyone in real estate has their favoured sectors. However much we like to think of ourselves as dispassionate analysers of markets and potential returns, we all have an asset class where we’re more inclined to see the upside and look past some of the negatives. For every person that loves the glamour of luxury retail, there’s another that can’t get enough of the simplicity of sheds.?

For those that like a challenge, it is large-scale urban regeneration that gets them out of bed in the morning. There is something undeniably appealing about taking a site that has fallen from grace and creating a place where people come together to live, work and play.

Done well, regeneration is that rare mix of commercial viability and social usefulness that seals the legacy and reputation of developers for decades to come. And the potential for private returns and public benefit is clearly there. Related Argent is estimated to have spent ￡3 billion at King’s Cross, with the project now worth in the region of ￡5 billion; in parallel, the Urban Regeneration Alliance reckons that for every ￡1 invested in regeneration, an average of ￡4.23 is generated for the wider economy.

But delivering such schemes is hard. Really hard. Vision, optimism and persistence are some of the real estate sector’s most attractive qualities, but regeneration specialists need these attributes more than most. These projects take years, decades even, and it’s a fight all the way. Spotting an opportunity is one thing; convincing everyone from local authorities to capital partners to join you on the ride is quite another.

Given the challenges and long-term commitments involved, it is no surprise that many look elsewhere when devising their investment strategies. But the equation is shifting in favour of the big regeneration schemes. London’s recent successes, such as King’s Cross and Battersea Power Station, will soon be joined by other projects that look similarly impressive. Yoo Capital’s Olympia is approaching completion, work continues at British Land’s Canada Water and planning was recently granted for Earl’s Court. These sites may have the in-built ‘London’ advantage, but it still takes chutzpah and skill to see them through. You may like some of these more than others, but what is undeniable is how they all have taken former industrial sites or dilapidated iconic buildings, and given them a new role for the modern age.

If the attractions of major regeneration are a significant ‘pull’ factor for investment capital, there are increasingly ‘push’ factors too. In times past, developers looking for an exciting, long-term project would have eyed a landmark office tower or major shopping centre as the best ways of making their mark. But the uncertainty surrounding these sectors makes such schemes far less attractive than they once were. Logistics looks safe, but hardly glamorous. Living sector assets are usually at too small a scale, and the specialisation of some alternatives leaves them vulnerable to changing occupier requirements. If you want to create something with the potential to be genuinely loved – by occupiers, residents and visitors alike – then mixed-use regeneration is increasingly the game to be in.

Across much of the UK and Europe, there are plenty of locations that are ripe for just such an approach. Deindustrialisation and, latterly, the impact of the internet on how people live have left a swathe of assets unviable for the role they were initially built for, but not necessarily at the end of their useful lives. Olympia was first opened 138 years ago; reimagining a much-loved building to position it for the next 138 years is quite the legacy.

There are probably easier ways to make money from real estate, but surely none as ultimately satisfying as breathing new life into something that had lost its way. As we look to build cities that truly cater to the way we live now, it is the urban regenerators that will lead the way.

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Have a great weekend.