Future-proofing development in the wake of Covid-19
The way we interact with our cities and the purposes for which we use offices, retail space and residential areas has changed in recent months and this has given rise to an industry-wide reassessment of the approach to development.
Bisnow’s webinar “The Art of the Mix: Covid-Proofing Existing & Future Developments” considered the reaction of developers, investors and stakeholders to the immediate effects of the pandemic and what the longer-term outlook might be for mixed-use development.
Please click on the following headings to see a short summary of the discussion in each area.
Bill Hughes of LGIM, speaking from an investor viewpoint, predicted that developers would be operating in a “strange environment” in the next couple of years until technology and science deliver a return to a semblance of normality. He also noted that in many cases it may not be possible to deliver buildings with existing planning within the immediate short term so adapting to the "current context" would be required.
David Partridge of Argent Related provided a developer perspective agreeing that “developments don’t happen overnight” and commented that many projects, such as Argent’s Brent Cross development, take years to come forward. As a result, current projects are already forward-looking and anticipatory by virtue of the length of their development timescales.
The panel acknowledged that discussions around "future-proofing" mixed-use developments had been accelerated but agreed that it wasn’t a different conversation.
The panel agreed that there will be a rise in localism as a result of a change in behaviours during the pandemic. There was a consensus of expectation that there will be a broadening of local economic development and increased demand for local work spaces as people reassess the balance of work and lifestyle. It was noted that, in the last 3 months, community has returned to the centre of people’s leisure and work life. Bill Hughes commented that this refocus on localism could result in the emergence and/or re-emergence of some urban areas which prioritise quality of life.
The panel concluded that it would be necessary for developers, investors and planners to give greater consideration to the requirements of the end user rather than continuing to base decisions on quickly outdated assumptions. Mixed use developments would need to deliver diversity of activity and create places that provide people with everything that they expect of urban living - for example prioritising green space and amenities in BTR projects.
From an architectural perspective, Jorge Beroiz of Callison RTKL questioned what it now means to live safely and suggested that this might mean “lowering density and increasing the distribution of development”.
Unwillingness to tolerate overcrowding is here to stay and developers and architects will need to reconsider how people will be able to live, work and enjoy leisure time in close proximity. Bill Hughes explained that for decades, if not centuries, society has deliberately separated the places where we work and where we have leisure. This has changed drastically and flexibility is now paramount; spaces must be capable of accommodating all aspects of people’s lives and to be capable of adaptation to best serve those needs.
Siobhan Jared of Transport for London described how TfL's development teams are focused on multi-use space and actively factoring in agile outcomes to suit what she referred to as development work on a “flexible agenda.” One example of this flexibility can be found in the construction dimensions of residential projects which are being designed in such a way so as to make it possible to easily repurpose them into offices.
Jorge Beroiz shared his thoughts on the importance of air flow within buildings from a health perspective and the need for breathable buildings rather than enclosed environments. He also anticipated that there will be a general trend away from tall buildings (China is ceasing construction of buildings above 500m) and an increase in construction of structures of four or five storeys. This will alleviate reliance on lifts and close proximity movement within buildings and will enable us to be more resilient in the future.
The panel recognised the importance of connectivity. Siobhan Jared commented that “it will be important to reconnect people whilst ensuring that they are safe and the key to this will be clear communication to manage expectations.” Jorge Beroiz agreed that we need to be more connected to where we live and use our cities in a different way.
The panel predicted that buildings will become social community hub spaces at ground floor with private spaces on higher floors. Community interaction will become more important in informing building design and will be necessary to achieve the right mix of uses and the right connectivity.
Digital connectivity will also be key, especially as working from home is likely to become more prevalent. People will still move around but will use their time flexibly, perhaps working from an office for part of the week and working from home locally for the remainder. Individuals will “dip into different resources” depending on which of the two locations they are working from, therefore everywhere needs to be “work, play and live.”
Siobhan Jared expects that the working day might be longer as people seek to avoid busy transport times. She anticipates that there will be reorganisation of space and its uses which will result in the workplace, and specifically offices, being used differently. Ultimately space will need to have greater flexibility. The panel agreed that the places we create to work and live are going to have to adjust to be more flexible, more resilient and more open for people to live in them the way they want to. The workplace will change but office use will not subside entirely on the basis that there is great business value in face-to-face interaction.
However, the development and investment world will need to be much more agile. David Partridge cited the trajectory of the commercial lease term over recent years (down from 25 to 5 years) as an example of a trend towards flexibility. He suggested that we might end up in a position where, for example, the market will demand 1 year turnover rent leases and landlords will need to be prepared to be receptive to change.
In terms of food, beverage and retail aspects in mixed-use developments there will be greater scrutiny on the reliance currently placed on long supply chains. It was predicted that the renewed community orientation which will place increased emphasis on locally produced goods and may have the effect of reviving the long declining high street. People will be able to walk to conveniences and congregate around local activities. There will be less reliance on securing long leases from household names which will create opportunities for the “gig-economy” in our town and city centres. Ultimately, this will impact on the design and mix of buildings and how they are invested in.
It is always challenging to achieve the ‘correct’ mix for an investment portfolio. In the medium term, Bill Hughes suggested that the “obsession with cyclical real estate” will fall away and the e-commerce cycle that traditionally drove retail, offices and part of the industrial sector will change.
Investment will be directed into flexible / adaptable space for commercial activities with an increased capital investment into social infrastructure i.e. homes and healthcare. Investors will also look to invest longer-term in infrastructure relating to individual cities and how they work, for example renewal energy and digital infrastructure. Mixed use developments will need to be capable of greater endurance - it will no longer be acceptable or appropriate to construct buildings with a limited lifespan of 25 years.
From a mixed-use development point of view the panel agreed that buildings need to be sustainable and that developers, planners, investors and architects need to be answerable to communities. The industry needs to remember where it was before the pandemic and the impetus behind the debate on social and environmental responsibilities – the financial responsibilities being already roundly understood.
Jorge Beroiz reminded the panel that the theme of MIPIM 2020 was going to be "humanity" so these ESG matters were already at the fore and this trend needs to be connected to the new reality. Bill Hughes shared his view that pre-Covid the agenda around environmental and social considerations for long term investors in the built environment were prevalent and it was becoming unavoidable for people in the sector to think about ESG.
The panel agreed that in conversations around ESG the environmental aspect is fundamental but measuring social impact is more nuanced and that will be something the industry will have to focus on to ensure the impact is positive. Bill Hughes referred to the concept of social equality through “inclusive capitalism” and the need to more widely share the benefits of investment.
In terms of sustainability, the total life cycle of a building needs to be considered to ensure buildings are re-usable and flexible enough to respond to change of use i.e. retail to residential. This is partly because buildings should adapt to societal need but also because resources should be treated as finite.
The increased flexibility of the planning system over the last 3 months was debated by David Partridge who noted that planning authorities have had to quickly adapt and embrace change (for example holding online committee meetings). The Government has announced a review of how planning could be accelerated for ‘building back better’ but this begs the question what ‘better’ entails. David’s view of Local Authorities that he was dealing with is that they were “incredibly focussed on what it will take to get their borough / city back up and running” so definite motivation for the planning system to adapt at local government level.
Mechanisms will need to be put in place in the partnerships formed between banks, investors, authorities and governments not just to ensure that developments produce financial return but also deliver social returns. In development terms a lot is driven by investors dictating what they want and since ESG is high on the agenda this should translate directly into what developments are delivering.
Environmental impact is something that has already been introduced into planning requirements. The old approach to section 106 agreements was about mitigating the impact of developments as though development was something negative that was happening to towns and cities. However, the planning approach now is one of environmental and social sustainability – section 106 contributions are more aligned with ensuring that developments provide opportunity to those who live and work in the surrounding area and to provide facilities for children to learn and play.
