At WhatifGroup we believe in doing things differently- not because we want to be awkward, but because the old way is obsolete.
We want to create a new future in town centres where everyone wins. Capitalism can still play an important part, but with the prefix ethical required for a sustainable future. At least a partial circular economy is also essential.
What happened ?
The private sector has played a game of musical chairs ownership for decades, where it has sucked the life out and put very little back – some winners some losers (the latter mostly the banks). The cyclical market has facilitated changes of ownership sometimes rapidly, but stringent rates of return and short term thinking have often meant very little is ever re-invested. Rigid policies on rental growth and valuation methodology have long been unsustainable, factor in the digital world, calamity has ensued. Archaic, unequitable business rates practice has also contributed to the demise but reform is not a silver bullet, although evolution could help.
Councils have been chopping budgets, shedding expertise and resource for years and what follows is almost the perfect storm.
There are also too many organisations, well-meaning, but focussing on granular issues while really needing to solve much bigger ones, leading to dilution and waste of capital resource. Even most private sector so called experts do not really understand the bigger picture and so we get even more waste.
…and retailers with the balance of power are still driving rents to the bottom, the chance of re-investment becomes even less and ultimately the towns fall further. The customers vote with their feet/ clicks and everyone left suffers.
Town centres form a major part of local economies for many reasons including desirability to work and live there, so such decline means the viability gap widens further and increased subsidies are needed ( but still no-one really wants to live there).
So investors new to the sector or those coming back in and chasing yield, still do so at huge risk. The town centre landscape is fraught with challenges and dynamics that many would not even contemplate- Business to 1. Business 2. Customers 3. Stakeholders 4. Councils 5. Politics 6. Community 7. Fractional ownership 8. Austerity etc and now inflation, cost of living and interest rates.
For a better future, we must feed the roots of local economics to start sustainable growth/ improvement and asset owners often lack the influence or power and sometimes knowledge – that’s where Public Private Partnerships come into play. They must be equitable with truly shared risk and reward and with long term ethical investors, if we are to build mutual trust and get these widely adopted.
The public sector needs to understand how to identify the right partners and how to help drive the efficiencies to get the most impact for their towns. Bringing together the skill sets and understanding on both sides is critical– the private sector if willing, really can help the public sector and vice-versa.
Create a quality strategy with an improving place and the viability gap reduces, as do subsidies because people want to live and work there– its common sense ! Even investors will take more risk if they think they are getting in early on an upward curve.
Maybe start by changing shopping hours from 10.30am until 6.30 pm so that we get overlap with people leaving work and the evening economy- guess what – maybe less congestion in rush hour on roads and public transport, plus better air quality ?
The largely unsuccessful One Public Estate ( OPE) could be one answer to help create more vibrant and investable town centres.
Place-makers need to better understand investment rationale to at least in part, commercialise their thinking, and investors still struggle to understand the value of place-makers (although this is improving).
Fortunately however, complete re-structuring of the retail landscape has brought a new dawn, the old ways are broken and like the rapidly changing digital generation, real estate and the people in it need to change fast.
Do not be mistaken either- residential right in the heart of towns is not the only fix and it often clashes with the need to introduce more leisure and a better evening economy.
We need to flip it all on its head and see the bigger picture, not focus on granular elements. We need a reverse gear where in many cases, history can give us the clues we need to create a brighter future. Not one based on growth for growths sake- that’s what busted it all.
A future where ethical capitalism prevails and puts back, to fuel balanced and sustainable growth. We need long term investors and vibrant activities in the hearts of our towns. They then become an organic engine room for enterprise and growth. Town centres need everyone to pull together. The sum of the parts is greater than the individual elements. This includes all the public sector, property owners and local businesses. Clarity on why you are doing it is critical; you then work out how. Start with your objectives.
The good news…
There is finally a new ethical tone emerging wrapped in the ESG acronym. A chink of light in creating a fairer system where the private sector either wants to or in some cases will be forced to be more ethical, so hopefully more of the right partners will emerge. An adoption of Sustainable Development Goals is the base level requirement for everyone.
People at the top are still wrestling with the methodology to how they introduce these ways to their Teams. It’s actually quite simple.
It’s about changing the governance so that Return on Investment (ROI) is not the only metric expected from investing money. If we add in other stakeholder returns as a required outcome to getting investment approval, then we can start adding back to people and place.
To demonstrate how this can work, Whatif… created a framework called Place First Economics (PFE). This can be adapted to suit different circumstances but guides the real estate industry to think more laterally in order to generate multi-stakeholder outcomes. An opportunity to put back in as part of the investment strategy, without necessarily needing to spend more. It’s intellectual capability that drives the outcomes more than extra cost.
PFE can also apply to town centre operators and combined, the social impact magnifies.
Place First Economics is not intended to be a rule book, so let people find their own way of using it or even call it something else, we are not precious. It’s about generating genuine partnership based on long term trusting relationships. Teamwork will spark more ideas and different values will add to the diversity and the outputs. Make this a bottom up approach where community, the third and the voluntary sectors can also be involved in the diversity of ideas- people will buy into their own ideas and future.
If you want your town centre to be part of your better future, we would like to help.
Paul Wright [email protected] Kevin Parkes [email protected]
Photograph by Dmitri Vechorko