What is the value of Mixed Use development?

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What is the value of Mixed Use development?

The joint BCSC IPF panel discussion earlier this evening revealed some interesting viewpoints on the value of mixed use development. Chaired by a pragmatic Peter Drummond, CEO of BDP architects and the new BCSC president, the session was intended to gauge the value of mixed use developments in a changing market. The event was hosted by Pinsent Mason.

Chief diagnosis of what constitutes mixed use development in the UK and how it fares when compared to other ‘pure play’ development fell to the next (2013) BCSC President Marcus Kilby of Lunson Mitchenall. As chief author of the BCSC-LM development pipeline report, Marcus was in position to comment that future development projects were in short supply, and as Drummond had also commented, companies and councils were ‘crying out’ to kick start development.

Alongside Marcus was newly arrived Martin Plocica of Hammerson, 85 days on these shores having spent 3 years consulting after 17 years before that at the Simons Group across the US. Marti had spoken on a BCSC New Generation panel session I chaired in 2009, so it was good to see him working over here in the UK. His most interesting view was that developers must respond better to the psychographic tendencies, wants and needs, rather than simple demographic analysis and the familiar acorn groups we have come to know well. Respond to these triggers, and recognise that in many cases there is a psychographic trend in an entire town or city (eg in a University town, students spend their money in a specific way). The Simons Group had successful achieved this through a notional third of their schemes devoted to ‘lifestyle’ uses in the US, however could this approach be completely applied in the UK’s densely populated cities and town centres where the psychographic breakdown is much harder to decipher due to our towns being multicultural diverse in their makeup? Plocica was also the only panelist to acknowledge the introduction of more community uses into schemes, such as medical centres (and I would add libraries, citizen s advice bureaus or even post offices). Until that point, the mixed use debate had dwelt on the juxtaposition of leisure or residential – part of the property cycle for nearly 20 years, and Drummond ‘may yet see another cycle!’. We believe this is the direction of travel for the Portas Review.

Third panellist was Colin Campbell Chairman of Pradera Europe with significant property portfolio on the  continent. He provided a particularly useful insight into how the European system works, surmising that there can be no real comparison with the extreme UK market, where towns are crucified by lease structures. In effect, Campbell says, there is no comparison. Continental rental values were much less than in the UK – circa £15psf  – for retail parks and shopping centres, and the lease structures shorter and more flexible. In essence, although there were of course differences from country to country, he suggested that there was no need for mixed use development on the continent as the system delivered it quite capably in different ways – many of which would make Mary Portas smile. Campbell highlighted that it was the density of major UK towns and cities that force developers into mixed use development, as otherwise developers “wouldn’t introduce it if they could help it”. He went on to explain that the leisure component of continental schemes become far more important than ithe UK, and indeed more important the further south you go because of the extremes in temperature and space available in such countries.

The Innesco house view is that the real debate lies around identifying the tipping point between consumer demand for mixed uses and developer appetite to move away from pure-play development. If we can identify and anticipate the conditions and scenarios where this might start to happen, then companies like Hammerson could well be the early, successful adopters to take advantage of the consumer demand and associated expenditure. We will of course know more when Grant Shapps publicises the Government’s comments on the Portas Review.

Dan Innes, MD, Innesco

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