Perspectives on the role of UK planning in land and property markets

There is a popular view that land use planning regulations (‘planning’) is hostile to both development and the development industry. Part of the reason for the prominence of this view is the homogenising of the notion of ‘planning’ and its reduction to development control. This paper argues that panning controls in the UK are far more sophisticated and, drawing upon empirical evidence of key property interests proposes a more complex and nuanced view of planning controls that, in large part, has the support of the developers and others.

Decision theory and real estate development: a note on uncertainty

Real estate development appraisal is a quantification of future expectations. The appraisal model relies upon the valuer/developer having an understanding of the future in terms of the future marketability of the completed development and the future cost of development. In some cases the developer has some degree of control over the possible variation in the variables, as with the cost of construction through the choice of specification. However, other variables, such as the sale price of the final product, are totally dependent upon the vagaries of the market at the completion date. To try to address the risk of a different outcome to the one expected (modelled) the developer will often carry out a sensitivity analysis on the development. However, traditional sensitivity analysis has generally only looked at the best and worst scenarios and has focused on the anticipated or expected outcomes. This does not take into account uncertainty and the range of outcomes that can happen. A fuller analysis should include examination of the uncertainties in each of the components of the appraisal and account for the appropriate distributions of the variables. Similarly, as many of the variables in the model are not independent, the variables need to be correlated. This requires a standardised approach and we suggest that the use of a generic forecasting software package, in this case Crystal Ball, allows the analyst to work with an existing development appraisal model set up in Excel (or other spreadsheet) and to work with a predetermined set of probability distributions. Without a full knowledge of risk, developers are unable to determine the anticipated level of return that should be sought to compensate for the risk. This model allows the user a better understanding of the possible outcomes for the development. Ultimately the final decision will be made relative to current expectations and current business constraints, but by assessing the upside and downside risks more appropriately, the decision maker should be better placed to make a more informed and “better”.

Real option pricing in mixed-use development projects

The application of real options theory to commercial real estate has developed rapidly during the last 15 Years. In particular, several pricing models have been applied to value real options embedded in development projects. In this study we use a case study of a mixed use development scheme and identify the major implied and explicit real options available to the developer. We offer the perspective of a real market application by exploring different binomial models and the associated methods of estimating the crucial parameter of volatility. We include simple binomial lattices, quadranomial lattices and demonstrate the sensitivity of the results to the choice of inputs and method.

Forecasting the future: an overview of the strategic planning of the Bournemouth and Poole conurbation

An important part of strategic planning’s purpose should be to attempt to forecast the future, not simply to belatedly respond to events, or accept the future as inevitable. This paper puts forward a conceptual approach for seeking to achieve these aims and uses the Bournemouth and Poole area in Dorset as a vehicle for applying the basic methodology. The area has been chosen because of the significant issues that it currently faces in planning terms; and its future development possibilities. In order that alternative future choices for the area – different ‘developmental trajectories’ – can be evaluated, they must be carefully and logically constructed. Four Futures for Bournemouth/Poole have been put forward; they are titled and colour-coded: Future One is Maximising Growth – Golden Prospect which seeks to achieve the highest level of economic prosperity of the area; Future Two is Incremental Growth – Solid Silver which attempts to facilitate a steady, continuing, controlled pattern of the development for the area; Future Three is Steady State – Cobalt Blue which suggests that people in the area could be more concerned with preserving their quality of life in terms of their leisure and recreation rather than increasing wealth; Future Four is Environment First – Jade Green which makes the area’s environmental protection its top priority even at the possible expense of economic prosperity. The scenarios proposed here are not sacrosanct. Nor are they simply confined to the Bournemouth and Poole area. In theory, suitably modified, they could use in a variety of different contexts. Consideration of the scenarios – wherever located - might then generate other, additional scenarios. These are called hybrids, alloys and amalgams. Likewise it might identify some of them as inappropriate or impossible. Most likely, careful consideration of the scenarios will suggest hybrid scenarios, in which features from different scenarios are combined to produce alternative or additional futures for consideration. The real issue then becomes how best to fashion such a future for the particular area under consideration

Rational expectations? Developer behaviour and development cycles in the central London office market

Purpose – Expectations of future market conditions are acknowledged to be crucial for the development decision and hence for shaping the built environment. The purpose of this paper is to study the central London office market from 1987 to 2009 and test for evidence of rational, adaptive and naive expectations. Design/methodology/approach – Two parallel approaches are applied to test for either rational or adaptive/naive expectations: vector auto-regressive (VAR) approach with Granger causality tests and recursive OLS regression with one-step forecasts. Findings – Applying VAR models and a recursive OLS regression with one-step forecasts, the authors do not find evidence of adaptive and naïve expectations of developers. Although the magnitude of the errors and the length of time lags between market signal and construction starts vary over time and development cycles, the results confirm that developer decisions are explained, to a large extent, by contemporaneous and historic conditions in both the City and the West End, but this is more likely to stem from the lengthy design, financing and planning permission processes rather than adaptive or naive expectations. Research limitations/implications – More generally, the results of this study suggest that real estate cycles are largely generated endogenously rather than being the result of large demand shocks and/or irrational behaviour. Practical implications – Developers may be able to generate excess profits by exploiting market inefficiencies but this may be hindered in practice by the long periods necessary for planning and construction of the asset. Originality/value – This paper focuses the scholarly debate of real estate cycles on the role of expectations. It is also one of very few spatially disaggregate studies of the subject matter.

Development-led archaeology in north-west Europe

Many countries in northern Europe have seen a huge expansion in development-led archaeology over the past few decades. Legislation, frameworks for heritage management and codes of practice have developed along similar but different lines. The Valetta Convention has had considerable impact on spatial planning and new legislation on archaeological heritage management within EC countries as well as on the funding, nature and distribution of archaeological fieldwork. For the first time these 12 papers bring together data on developer-led archaeology in Britain, Ireland, France, the Low Countries, Germany and Denmark in order to review and evaluate key common issues relating to organisation, practice, legal frameworks and quality management.

Local agenda 21 and planning practice: structural transformation or window dressing?

Local Agenda 21 seeks the meaningful involvement of a wide range of local groups and stakeholders in the formulation and implementation of public policy and a free flow of communication and discussion between them and their respective local authorities (and other areas and levels of decision-making). This paper explores the reality of this process using case study evidence from local planning practice in Liverpool (in the north of England) and Reading (in the south of the country). It concentrates on the interaction between LA21 groups and local planning authorities around the preparation of local land use plans and other policy initiatives and the day-to-day regulation of development permits. The paper builds on ‘New Institutionalist’ theory to explore the constraints and opportunities for significant transformations in social, political and economic ‘structures’ or ‘ways of doing things’ through the LA21 process. It concludes that the two cases provide evidence of mixed success in achieving such changes in established planning practices.

Weighing up the ODDs: options, development and diversification

The growing trend of development and diversification in the British countryside stems from three main causes: the decline in farm incomes, the growing influx of non-agricultural commerce into rural areas and a change in planning policies. Even before the foot and mouth disaster, farm incomes have been in decline over the last five years, falling by as much as 90% overall in that period according to the figures issued by the Ministry of Agriculture, Fisheries and Food (MAFF). Farmers have responded to this situation in many ways, but notably through diversification. This paper examines some of the options available.

Governing the clean development mechanism: global rhetoric versus local realities in carbon sequestration projects

Global agreements have proliferated in the past ten years. One of these is the Kyoto Protocol, which contains provisions for emissions reductions by trading carbon through the Clean Development Mechanism (CDM). The CDM is a market-based instrument that allows companies in Annex I countries to offset their greenhouse gas emissions through energy and tree offset projects in the global South. I set out to examine the governance challenges posed by the institutional design of carbon sequestration projects under the CDM. I examine three global narratives associated with the design of CDM forest projects, specifically North – South knowledge politics, green developmentalism, and community participation, and subsequently assess how these narratives match with local practices in two projects in Latin America. Findings suggest that governance problems are operating at multiple levels and that the rhetoric of global carbon actors often asserts these schemes in one light, while the rhetoric of those who are immediately involved locally may be different. I also stress the alarmist’s discourse that blames local people for the problems of environmental change. The case studies illustrate the need for vertical communication and interaction and nested governance arrangements as well as horizontal arrangements. I conclude that the global framing of forests as offsets requires better integration of local relationships to forests and their management and more effective institutions at multiple levels to link the very local to the very large scale when dealing with carbon sequestration in the CDM.

Engaging in European spatial planning: a central and Eastern European perspective on the territorial cohesion debate

The following paper sets out to determine the differential extent of the engagement of Central and Eastern European (CEE) member states with the European spatial planning (ESP) debate over territorial cohesion. It focuses on the written statements submitted in response to the European Commission “Green Paper on Territorial Cohesion” consultation in 2009. The geographical distribution of the respondents is analysed, before CEE member states’ responses are examined in detail, to explore the diverse interpretations of the concept of “territorial cohesion” among CEE actors. While the data collection for this paper has been restricted empirically to the consultation process, it reflects its findings in consideration of member states’ engagement with the debate as it manifested before and after the Green Paper. The debate over the exact conceptual and operational “framing” of territorial cohesion, launched by the European Commission's Green Paper, constitutes one of the many arenas through which ESP currently evolves, together with the transnational initiatives developed in the framework of the European Territorial Cooperation objective, the European Observation Network for Territorial Development and Cohesion (ESPON) and the process that recently led to the publication of the Territorial Agenda of the European Union 2020. The paper concludes that the overall level of engagement of CEE actors in ESP is proportionally lower in comparison with that of their northwestern European counterparts. The increasing involvement of some CEE member states within the ESPON 2013 Programme, as well as the activities undertaken by the Hungarian and Polish EU Presidencies in 2011, suggests that this level of CEE engagement is growing albeit differentially.

The engagement of territorial knowledge communities with European spatial planning and the territorial cohesion debate: a Baltic perspective

Recent, dramatic spatial development trends have contributed to the consolidation of a unique territorial governance landscape in the Baltic States. The paper examines the transformation of this evolving institutional landscape for planning practice and knowledge, which has been marked by the disintegration of Soviet institutions and networks, the transition to a market-based economy and the process of accession to the EU. It explores the evolution of territorial knowledge channels in the Baltic States, and the extent and nature of the engagement of actors' communities with the main knowledge arenas and resources of European spatial planning (ESP). The paper concludes that recent shifts in the evolution of these channels suggest the engagement of ESP has concentrated among epistemic communities at State and trans-national levels of territorial governance. The limited policy coordination across a broader spectrum of diverse actors is compounded by institutionally weak and fragmented professional communities of practice, fragmented government structures and marginalized advocacy coalitions.

Policy ‘framing’ and evidence-based planning: ‘epistemic communities’ in the multi-jurisdictional environment of an enlarged Europe

The following paper builds on ongoing discussions over the spatial and territorial turns in planning, as it relates to the dynamics of evidence-based planning and knowledge production in the policy process. It brings this knowledge perspective to the organizational and institutional dynamics of transformational challenges implicit in the recent enlargement of the EU. Thus it explores the development of new spatial ideas and planning approaches, and their potential to shape or ‘frame’ spatial policy through the formulation of new institutional arrangements and the de-institutionalization of others. That is, how knowledge is created, contested, mobilized and controlled across governance architectures or territorial knowledge channels. In so doing, the paper elaborates and discusses a theoretical framework through which the interplay of knowledge and policymaking can be conceptualized and analyzed.

Precisely wrong or roughly right? An evaluation of development viability appraisal modelling

Purpose – The purpose of this paper is to investigate the effect of choices of model structure and scale in development viability appraisal. The paper addresses two questions concerning the application of development appraisal techniques to viability modelling within the UK planning system. The first relates to the extent to which, given intrinsic input uncertainty, the choice of model structure significantly affects model outputs. The second concerns the extent to which, given intrinsic input uncertainty, the level of model complexity significantly affects model outputs. Design/methodology/approach – Monte Carlo simulation procedures are applied to a hypothetical development scheme in order to measure the effects of model aggregation and structure on model output variance. Findings – It is concluded that, given the particular scheme modelled and unavoidably subjective assumptions of input variance, that simple and simplistic models may produce similar outputs to more robust and disaggregated models. Evidence is found of equifinality in the outputs of a simple, aggregated model of development viability relative to more complex, disaggregated models. Originality/value – Development viability appraisal has become increasingly important in the planning system. Consequently, the theory, application and outputs from development appraisal are under intense scrutiny from a wide range of users. However, there has been very little published evaluation of viability models. This paper contributes to the limited literature in this area.