Town centres remain essential hubs for our communities. But the retail core is smaller than it once was, and is typically surrounded by under-occupied buildings and a grim environment.
In an article for Property Week nearly two years ago, I highlighted how the obstacles of fragmented ownership and occupation, and a lack of joined-up thinking, have hindered progress. I now set out a possible solution.
My proposal is to establish a new kind of partnership vehicle, enabling both physical change and a more flexible mix of uses, particularly more residential, within a designated area of the town, as a catalyst for wider regeneration.
Each property owner within the designated regeneration area will be encouraged to contribute their property ownership into the vehicle at its current market value, in return for a proportionate percentage financial interest in the vehicle’s portfolio. Agreement will be sought with the occupying tenants in each property; some may wish to relocate within the new development.
The vehicle will draw on appropriate features from the Business Improvement District, Development Corporation and Elected Business Council models. The precise design is being formulated, and will depend on local circumstances.
The vehicle will appoint its experienced management team to work with the local council to secure planning consent, raise funding, and deliver change. It will commission a development masterplan for its designated regeneration area, alongside a viable management and financing business plan. It will be able to borrow and raise third-party equity to finance its plan.
To minimise the risk of the project being frustrated, a defined planning framework will be devised in conjunction with the local authority. Alternatively, the vehicle could be granted its own planning powers, within defined parameters.
The aim will be to secure voluntary agreement for participation by landowners and occupiers, by making a compelling and financially attractive case. Local authority-supported CPO powers will only be used as the ultimate back-stop, where voluntary agreement has not proved possible within a defined timetable. This last-resort approach will prevent ransom positions, and will provide a valuation benchmark to voluntary agreements.
The vehicle will take responsibility for the long-term estate management of the new neighbourhood, funded by a combination of a service charge on the properties and appropriate local authority support. Once income-producing, potential exit routes can be explored to provide liquidity to shareholders, for example by injecting institutional investment, or the involvement of a REIT.
Public sector support, such as cash, property and financing, will help the creation of these vehicles and accelerate change.
As part of the package, and to help wider regeneration, the local authority should commit to improving the surrounding public realm, including car parking and traffic-management measures.
Suitable pilot projects will flesh out the technical, practical and political details involved, to demonstrate proof of concept.
The benefits of this approach are clear. Landowners will see an uplift in the value of their property, greater liquidity and more sustainable investment growth. Tenants can relocate to more profitable premises within the new development, or exit an existing lease liability. The local authority would take pride in regenerating a challenged neighbourhood, creating a more attractive prospect for inward investment.
Having additional affordable homes within the town centre will benefit older citizens, as well as younger buyers and the disadvantaged.
The wider economy will benefit from stronger business rate and other tax revenues from higher property values and a more robust economic base. Such a boost will deliver jobs and skills to the local community, alongside a more fit-for-purpose and sustainable town centre.
The details are challenging, the potential obstacles many, but the underlying principles are simple to grasp. If nothing happens, the decline and community disenchantment that we see today will get worse.
Government seems keen to enable and support change. We must now define the means for that change and make it happen.
Stephen Barter is chairman of real estate advisory at KPMG
This article is a shorter version of a more detailed paper to be published shortly.