Jane Jacobs would ask us to improve our methodology
A couple of months ago, during one of our weekly meetings, we came across an interesting dilemma. Should we downgrade or upgrade properties that are above shops? Put in simple terms, should our analysts be biased towards market opinion by assigning brownie points only to attributes that will have a positive impact on the future property price of the unit in question and the welfare of the buyer?
When we interviewed home buyers and investors in 2009 (80 out of the 92 respondents) told us that they would prefer not to have retail below their property. This is not very surprising when one thinks that:
1. The majority of investors or home buyers would not want an empty shop below their investment.
2. Some mortgage lenders would not consider properties above retail units.
3. The uncertainty of future use is a major liability. What if a change of use attracts retail businesses that may negatively impact the local character of the area, or be a nuisance?
Our meeting became a bit more heated when we brought in the ideas of the great American urbanist, Jane Jacobs to the table. (We actually have a photo of Jane stuck above our ranking desk, so we are big fans).
In her The Life and Death of Great American Cities Jacobs argued that cities and neighbourhoods are vibrant when there is a good mix of use. Retail, residential and commercial space should be mixed together rather than being zoned apart. A number of positive outcomes emerge from this mix of use. Streets are busier for longer periods of the day, there is informal policing of the street with shopkeepers keeping an eye on the sidewalk and more importantly residential areas are served by local shops. One does not need to walk 10 minutes for a loaf of bread.
Jane Jacobs would argue that rather than just benefiting the occupiers of the property in question, allowing retail use at ground level could help uplift the area as a whole.
Somewhere between Jane Jacobs and the worried buyer who dreads to see the opening of the next late night kebab shop below their living room, is the Howard de Walden Estate’s model of regeneration. Here, a good mix of retail and residential can help increase the quality of life of the neighbourhood as well as positively impact the property prices in the area, which will benefit landlord, leaseholder and the freeholder alike.
The Marylebone High Street model of retail to residential mix
The Marylebone High Street example of carefully controlling the types of retailers on a street can be succesful. Indeed the Howard de Walden Estate has benefited from an increased value of residential leases in the area, which cross-subsidise the unique ‘village like’ retail outlets (whose ‘place making’ capacity drove residential prices up in the first place).
The central component in a succesful residential-to-retail mix is the presence of a long-term stakeholder who vets the types of units that would be allowed in the area in both the short and long-term future. This creates confidence both to those who use the street on a daily basis and to future buyers who would trust the retail selection process.
We are currently mapping a series of streets in London, where there is a clear synergy between retail and residential use controlled by such stakeholders. As soon as we have the results, we will reconsider our uniform downgrading of properties above shops.
Anyone interested to attend our next ‘methodology review’ meeting, please email us on support at rankdesk dot com
We would particularly like to hear from Mortgage brokers.
How scalable is Rankdesk?
Investors often ask us how scalable our business model is and if we have got plans to open further ranking desks in other cities. The short honest answer is that we are ‘relatively scalable’!
This is often surprising , for a company that bases most of its day to day work analysing properties remotely (click here for our blog entry on the remote analysis of properties and the HITs model). Surely, we are told, you can start analysing properties in Shanghai, Melbourne & Toronto and provide global weekly rankings from some of the world’s leading residential markets from the comfort of your London desk.
There are four main tests that would determine Rankdesk’s analysis of properties in a new city.
1. The quality of the property data provided by the leading estate agents in a city. Our analysts rely on a minimum level of information in order to provide a preliminary assessment of the quality and investment performance of the property. Interestingly, the London market is characterisied by a culture of rich property data with at least 65% of the Agents in the market meeting our minimum property data requirements. These include:
The quality of property specific data is particularly relevant in markets where agents are answerable only to vendors.
2. Secondly, we rely on rich information at the city or regional level. We would typically consider residential markets where there is a history of property price movements (based on actual transactions) in at least 2 property cycles. This data would also show us if the residential market in question is ‘built on solid foundations’ or on actual demand (growing city economy, labour market dynamics & household formation) rather than just speculation. This makes Rankdesk particularly suited to more mature residential markets with their equivalent growth rates and yield expectations.
3. Local Knowledge. Because of the very ‘local knowledge’ required to understand the quality and investment performance of a property in a specific neighbourhood, analysing a property from a foreign based ranking desk will provide abstract results. The HITs model would technically allow us to carry out this analysis, but having a centralised hub of analysts who are not fed ‘local’ data from on site observation of neighbourhoods and comparable properties would make Rankdesk less diligent. We are even going a step further and exploring the idea of a premium service where we would carry out an actual site visit of a property if requested by a client.
4. The openess of the market to foreign investment and to foreign ownership of property. Bringing a property on our rankings that would have equal relevance to home purchasers as well as to non-domiciled owners increases our user base exponentially.
We would love to hear of any cities that our users would find relevant in our lists and that meet the criteria above!
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