Can valuation factors be prescribed? The case of collective enfranchisement and leasehold extension of flats in England and Wales

Recent concerns over the valuation process in collective leasehold enfranchisement and lease extension cases have culminated in new legislation. To underpin this, the Government (Department of Environment Transport and the Regions (DETR)) commissioned new research, which examined whether the valuation of the freehold in such cases could be simplified through the prescription of either yield or marriage value/relativity. This paper, which is based on that research, examines whether it is possible or desirable to prescribe such factors in the valuation process. Market, settlement and Local Valuation Tribunal (LVT) decisions are analysed, and the basis of 'relativity charts' used in practice is critically examined. Ultimately the imperfect nature of the market in freehold investment sales and leasehold vacant possession sales means that recommendations must rest on an analysis of LVT data. New relativity curves are developed from this data and used in conjunction with an alternative approach to valuation yields (based on other investment assets). However, the paper concludes that although the prescription of yields and relativity is possible, it is not fully defensible because of problems in determining risk premia; that the evidential basis for relativity consists of LVT decisions; and that a formula approach would tend to 'lead' the market as a whole.

The impact of E-commerce on retail real estate in the UK

This article summarizes the main research findings from the first of a series of annual surveys conducted for the British Council of Shopping Centres. The study examines the changing pattern of retailing in the United Kingdom and provides an overview of key research from previous studies in both the U.K. and the United States. The main findings are then presented, including an examination of the impact of e-commerce on sales and rental values and on the future space and ownership / leasing requirements of U.K. retailers for 2000-2005. The impact on a shopping center in a case study town in the U.K. is also considered. The difficulties of isolating the impact of e-commerce from other forces for change in retailing are highlighted. In contrast to other viewpoints, the results show that e-commerce will not mean the death of conventional store-based U.K. retailing, although further benchmark research is needed.

Occupational futures? Divesting real estate and corporate PFI

Property ownership can tie up large amounts of capital and management energy that business could employ more productively elsewhere. Competitive pressures, accounting changes and increasingly sophisticated occupier requirements are building demand for new and innovative ways to satisfy corporate occupation needs. The investment climate is also changing. Falling interest rates and falling inflation can be expected to undermine returns from the traditional FRI lease. In future, investment returns will be more dependent on active and innovative management geared to the needs of occupiers on whom income depends. Occupier and investor interests, therefore, look set to coincide, but unlocking the potential for both parties will depend on developing new finance and investment vehicles that align their respective needs. In the UK, examples include PFI in the public sector and off-balance sheet financing in the private sector. In the USA, “synthetic lease” structures have also become popular. Growing investment market experience in assessing risks and returns suggests scope for further innovative arrangements in the corporate sector. But how can such arrangements be structured? What are the risks, drivers and barriers?

Ecommerce and retail in the UK and USA

Presents findings from separate research projects conducted in the UK and the USA on the impact of e-commerce on retailers and retail property. Examines differences between UK and US retailers along several dimensions: Internet strategies, perceptions of the Internet, barriers to e-commerce growth, and future space requirements. Overall, findings indicate that UK and US retailers have similar attitudes about e-commerce. Specifically, retailers in both samples perceive little threat or impact from e-commerce. Second, barriers to e-commerce growth are similar for UK and US retailers and include fulfillment and security issues. Third, UK and US retailers indicate that their retail space needs will remain the same or increase in the short term, despite the threat of e-commerce. Finally, both sets of retailers believe that entertainment is an important strategy if shopping centers are to remain viable.

A critical review of methodologies for measuring rental depreciation applied to UK commercial real estate

Real estate depreciation continues to be a critical issue for investors and the appraisal profession in the UK in the 1990s. Depreciation-sensitive cash flow models have been developed, but there is a real need to develop further empirical methodologies to determine rental depreciation rates for input into these models. Although building quality has been found to be an important explanatory variable in depreciation it is very difficult to incorporate it into such models or to analyse it retrospectively. It is essential to examine previous depreciation research from real estate and economics in the USA and UK to understand the issues in constructing a valid and pragmatic way of calculating rental depreciation. Distinguishing between 'depreciation' and 'obsolescence' is important, and the pattern of depreciation in any study can be influenced by such factors as the type (longitudinal or crosssectional) and timing of the study, and the market state. Longitudinal studies can analyse change more directly than cross-sectional studies. Any methodology for calculating rental depreciation rate should be formulated in the context of such issues as 'censored sample bias', 'lemons' and 'filtering', which have been highlighted in key US literature from the field of economic depreciation. Property depreciation studies in the UK have tended to overlook this literature, however. Although data limitations and constraints reduce the ability of empirical property depreciation work in the UK to consider these issues fully, 'averaging' techniques and ordinary least squares (OLS) regression can both provide a consistent way of calculating rental depreciation rates within a 'cohort' framework.

Briefing: re-engineering the city 2020–2050 – urban foresight and transition management

Cities may be responsible for up to 70% of global carbon emissions and 75% of global energy consumption and by 2050 it is estimated that 70% of the world's population could live in cities. The critical challenge for contemporary urbanism, therefore, is to understand how to develop the knowledge, capacity and capability for public agencies, the private sector and multiple users in city regions systemically to re-engineer their built environment and urban infrastructure in response to climate change and resource constraints. Re-Engineering the City 2020–2050: Urban Foresight and Transition Management (Retrofit 2050) is a major new interdisciplinary project funded under the Engineering and Physical Science Research Council's (EPSRC) Sustainable Urban Environments Programme which seeks to address this challenge. This briefing describes the background and conceptual framing of Retrofit 2050 project, its aims and objectives and research approach.

Have aerosols caused the observed Atlantic multidecadal variability?

Identifying the prime drivers of the twentieth-century multidecadal variability in the Atlantic Ocean is crucial for predicting how the Atlantic will evolve in the coming decades and the resulting broad impacts on weather and precipitation patterns around the globe. Recently, Booth et al. showed that the Hadley Centre Global Environmental Model, version 2, Earth system configuration (HadGEM2-ES) closely reproduces the observed multidecadal variations of area-averaged North Atlantic sea surface temperature in the twentieth century. The multidecadal variations simulated in HadGEM2-ES are primarily driven by aerosol indirect effects that modify net surface shortwave radiation. On the basis of these results, Booth et al. concluded that aerosols are a prime driver of twentieth-century North Atlantic climate variability. However, here it is shown that there are major discrepancies between the HadGEM2-ES simulations and observations in the North Atlantic upper-ocean heat content, in the spatial pattern of multidecadal SST changes within and outside the North Atlantic, and in the subpolar North Atlantic sea surface salinity. These discrepancies may be strongly influenced by, and indeed in large part caused by, aerosol effects. It is also shown that the aerosol effects simulated in HadGEM2-ES cannot account for the observed anticorrelation between detrended multidecadal surface and subsurface temperature variations in the tropical North Atlantic. These discrepancies cast considerable doubt on the claim that aerosol forcing drives the bulk of this multidecadal variability.

Land use intensity and trees on farms in Malawi

Rapidly increasing population densities in Malawi have put a huge strain on the existing agricultural land and the surrounding woodland. Smallholder agriculture is the dominant economic activity of Malawi’s rural population and many farmers have been forced to cultivate marginal lands with less fertile soils, making conditions much more difficult to grow crops. Natural woodland is under increasing pressure from the opening of new lands for cultivation and the increased demand for firewood, timber and other woody resources, with rural households historically obtaining most of their complementary inputs and saleable commodities from nearby areas of forest (Arnold, 1997a). Despite this increasing pressure, woodlands are not being cleared indiscriminately; selected indigenous species are left standing in fields and around households. These are joined by exotic species that are planted and maintained. These trees provide products and services that are vital, yielding food, firewood, building materials and medicine, replenishing soil fertility and protecting against soil erosion. Following a Boserupian approach, this study attempts to establish the reality of a trajectory of enhanced on-farm tree planting and management as population pressure mounts and as part of a more general process of agricultural intensification. The study examines the combination of factors (social, economic, political and environmental) that either stimulate or discourage on-farm tree planting on smallholdings in Malawi, highlighting how woodland resource use changes over a gradient of land use intensity. This study gives a detailed insight into the way that tree planting and management in the smallholder farming system in Malawi works and identifies a trend of increased tree planting/management alongside an increase in agricultural intensification. However, there is no single ‘path’ of intensification; the link between agricultural change and tree planting is complex and there are many trajectories of intensification that a farmer may follow, dependent on his/her social or economic circumstances. The study recommends that agroforestry interventions give rigorous consideration to the needs of the local community, and the suitability of trees to address those needs, before embarking on programmes that advocate tree planting and management as a panacea.

Dairy farmers’ attitudes and intentions towards improving dairy cow foot health

Dairy cow foot health is a subject of concern because it is considered to be the most important welfare problem in dairy farming and causes economic losses for the farmer. In order to improve dairy cow foot health it is important to take into account the attitude and intention of dairy farmers. In our study the objective was to gain insight into the attitude and intention of dairy farmers to take action to improve dairy cow foot health and determine drivers and barriers to take action, using the Theory of Planned Behavior. Five hundred Dutch dairy farmers were selected randomly and were invited by email to fill in an online questionnaire. The questionnaire included questions about respondents’ intentions, attitudes, subjective norms and perceived behavioral control and was extended with questions about personal normative beliefs. With information from such a framework, solution strategies for the improvement of dairy cow foot health can be proposed. The results showed that almost 70% of the dairy farmers had an intention to take action to improve dairy cow foot health. Most important drivers seem to be the achievement of better foot health with cost-effective measures. Possible barriers to taking action were labor efficiency and a long interval between taking action and seeing an improvement in dairy cow foot health. The feed advisor and foot trimmer seemed to have most influence on intentions to take action to improve dairy cow foot health. Most farmers seemed to be satisfied with the foot health status at their farm, which probably weakens the intention for foot health improvement, especially compared to other issues which farmers experience as more urgent. Subclinical foot disorders (where cows are not visibly lame) were not valued as important with respect to animal welfare. Furthermore, 25% of the respondents did not believe cows could suffer pain. Animal welfare, especially the provision of good care for the cows, was valued as important but was not related to intention to improve dairy cow foot health. The cost-effectiveness of measures seemed to be more important. Providing more information on the effects of taking intervention measures might stimulate farmers to take action to achieve improvement in dairy cow foot health.

Retrofit city futures: visions for urban sustainability

This report (which is part of the EPSRC Retrofit 2050 project) sets out three contrasting long term (2050) visions for retrofit city-regional futures, developed through an in-depth participatory backcasting and foresight process. These contextual scenarios are intended as a tool which can be adapted and used by a wide variety of stakeholders and organisations to stimulate discussion and inform future policy and long-term planning.

City futures: exploring urban retrofit and sustainable transitions

Cities are responsible for up to 70% of global carbon emissions and 75% of global energy consumption. By 2050 it is estimated that 70% of the world's population will live in cities. The critical challenge for contemporary urbanism, therefore, is to understand how to develop the knowledge, capacity and capability for public agencies, the private sector and multiple users in city-regions (i.e. the city and its wider hinterland) to re-engineer systemically their built environment and urban infrastructure in response to climate change and resource constraints. To inform transitions to urban sustainability, key stakeholders' perceptions were sought though a participatory backcasting and scenario foresight process in order to illuminate challenging but realistic socio-technical scenarios for the systemic retrofit of core UK city-regions. The challenge of conceptualizing complex urban transitions is explored across multiple socio-technical ‘regimes’ (housing, non-domestic buildings, urban infrastructure), scales (building, neighbourhood, city-region), and domains (energy, water, use of resources) within a participatory process. The development of three archetypal ‘guiding visions’ of retrofit city-regional futures developed through this process are discussed, along with the contribution that such foresight processes might play in ‘opening up’ the governance and strategic navigation of urban sustainability.

Building dynamic capabilities of adaptation and innovation: a study of micro-foundations in a transition economy

What are the microfoundations of dynamic capabilities that sustain competitive advantage in a highly volatile environment, such as a transition economy? We explore the detailed nature of these dynamic capabilities along with their antecedents by tracing the sequence of their development based on a longitudinal case study of an organization subject to an external context of radical transition — the Russian oil company, Yukos. Our rich qualitative data indicate two distinct types of dynamic capabilities that are pivotal for organizational transformation. Adaptation dynamic capabilities relate to routines of resource exploitation and deployment, which are supported by acquisition, internalization and dissemination of extant knowledge, as well as resource reconfiguration, divestment and integration. Innovation dynamic capabilities relate to the creation of completely new capabilities via exploration and path-creation processes, which are supported by search, experimentation and risk taking, as well as project selection, funding and implementation. Second, we find that sequencing the two types of dynamic capabilities, helped the organization both to secure short-term competitive advantage, and to create the basis for long-term competitive advantage. These dynamic capability constructs advance theoretical understanding of what dynamic capabilities are, whilst their sequencing explains how firms create, leverage and enhance them over time.