Projects and Activities

Projects and Activities

An Investigation of Real Estate Developer Returns

Research Team: Pete Wyatt, Neil Crosby, Steven Devaney

The detail of returns secured from real estate development varies depending on the nature, location and timing of each scheme. Similarly, development valuation methods vary in the way that they account for developer return. For example, cash margins on cost, or value and rates of return, are frequently used. Sometimes finance is incorporated in the appraisal explicitly, and sometimes it is handled within the developer’s target rate of return.

This variation in practice and often opaque handling of developer returns raises important methodological questions when it comes to development appraisal. For example:

  • Is there a relationship between expected cash margins (profit on cost of value, for example) and rates of return (internal rate of return, for example)?
  • What is an ‘appropriate’ developer return and how does this vary depending on scheme, timing and the way that return is measured?

This project will attempt to answer these questions by reviewing relevant literature, conducting theoretical modelling, undertaking an online survey of developers, and examining published development viability appraisals and financial statements.


Investigation of Potential Land Value Tax Policy Options for Scotland (Funder: Scottish Land Commission)

Research Team: Cathy Hughes, William McCluskey, Sarah Sayce, Edward Shepherd, Pete Wyatt (Henley Business School)

The aim of this research was to assess, with reference to international experience, the potential of land value taxation to contribute to a more productive, accountable and diverse pattern of land ownership and use in Scotland. Based on a literature review, stakeholder interviews and international case studies, the research team reviewed the various approaches to land value taxation elsewhere in the world, and analysed the key challenges and lessons learned. Taking in to account the policy context that has framed the recent debate around land value tax in Scotland and the rest of the UK, the team generated a set of outline policy options for further consideration by the Scottish Land Commission.


Supporting Smart Urban Growth: Successful Investing in Density (Funder: Urban Land Institute in association with New Climate Economy)

Research Team: Kathy Pain (Henley Business School), Daniel Black (Daniel Black & Associates, Bristol), Sue Grimmond (Meteorology, University of Reading), Jon Blower (Institute of Environmental Analytics, University of Reading), Alistair Hunt (University of Bath), Stanimira Milcheva (formerly Henley Business School), Ben Crawford (Meteorology, University of Reading), Nick Dale (University of Bath), Sam Doolin (Institute of Environmental Analytics, University of Reading), Senjuti Manna, Shuai Shi, Ruth Pugh (Henley Business School)

This research analysed the characteristics of “good density” in relation to investor returns, carbon emissions and infrastructure costs to city governments. The research has evidenced that, as well as being better for real estate investors, well-designed and compact cities are also better for the community and the environment. The study is the first of its kind to quantify the impact of quality of place on overall property returns. Findings show links between well-managed densification (good density), and higher risk-adjusted returns, capital values and investments in commercial real estate; they also demonstrate that good density enhances resilience and prosperity of an area in the long-term and is therefore more likely to continue providing sustainable returns for investors over cities without good density. It sets out six good density characteristics: clustering structure (land use patterns within cities and regions), economic and employment infrastructure (availability of investment, jobs, and talent), built infrastructure (physical density and mixture of uses), green and blue infrastructure (hedgerows, woodlands, ponds, waterways etc.), public transport infrastructure, and good governance.

Summary Report

Full Technical Report


Economic Impact of Dubai Metro (Funder: Dubai Road and Transport Authority)

Research Team:Anupam Nanda, Miriam Marra, Davide Castellani, Vicky Li and Steffen Heinig

The cross-disciplinary outcomes from this project span many areas of research interests within the Business School, such as impact on property and real-estate market, finance and foreign investments, environmental costs and urban congestion. The project incorporated innovative research tools using existing and new forms of data, such as textual sentiment analysis of international news items, to evaluate the international brand-image and attraction of the infrastructure. The team has used both quantitative and qualitative research methods and developed several transferable tools for the project.


Valuing Land Tenure Rights (Funder: Food and Agriculture Organisation of the United Nations)

Research Team: Pete Wyatt (Henley Business School) and a team of international consultants (see published guidelines below)

Valuations of tenure rights are required by the State and by the private sector for a wide variety of reasons, often forming and informing the basis of transactions, taxation, compensation and accounting. Value and the valuation process have a direct legal and financial impact on our everyday lives, and yet they are often shrouded in mystery and not clearly understood.

A number of technical guides have been prepared by technical specialists for the Food and Agriculture Organisation of the United Nations setting out principles and standards to assist stakeholders when establishing land tenure policy; the aim is to promote responsible governance and thus secure sustainable livelihoods, social stability, housing security, rural development, environmental protection, and sustainable social and economic development. This technical guide on valuation of tenure rights is aimed predominantly at developing countries, and is a set of recommendations for valuation that comply with international norms in relation to fairness, transparency, gender equality and free prior informed consent.

UNFAO Technical Guide: Valuing Land Tenure Rights


Impact of changes to the Planning System on Land Values in London (Funder: Islington Council)

Research Team: Sarah Sayce, Neil Crosby, Peter Garside (Kingston University), Rob Harris (Ramidus Consulting), Ali Parsa (Royal Agricultural University)

This research project demonstrated that interpretation of recent changes to the planning system has had a significant negative impact on affordable housing provision in London, through unintentionally inflating land values. The study, commissioned by 13 London Boroughs, reports that since April 2009 the surge in London house prices, together with a raft of new national planning measures intended to stimulate house building in the wake of the 2008 financial crisis, has led to a rise in residential land values of nearly 150 percent, but has not significantly boosted the delivery of new affordable homes as hoped.

A central part of the planning process, reinforced by the National Planning Policy Framework introduced in 2012, is the requirement for the assessment of economic viability of residential developments. The research revealed key flaws in this viability testing system, particularly in relation to the way that land is valued and found that these were a major cause of reduced affordable housing delivery.

Final Report


EeMAP (Energy Efficient Mortgages Action Plan) Initiative (Funder: EU)

Research Team: A consortium led by the European Mortgage Federation (EMF)/European Covered Bond Council (ECBC) together with e.on, University of Foscari, Venice, the European Group of Green Building Councils, a research group based at Goethe University (SAFE) and the Royal Institution of Chartered Surveyors (with Sarah Sayce Henley Business School)

The EeMAP Initiative is an EU funded project which has the stated aim “to create a standardised “energy efficient mortgage”, according to which building owners are incentivised to improve the energy efficiency of their buildings or acquire an already energy efficient property by way of preferential financing conditions linked to the mortgage.”

Significantly, the Energy Efficient Mortgages Initiative represents the first time a group of major banks and mortgage lenders, as well as data providers, companies and organisations from the building and energy industries, and the valuation profession, have proactively come together to discuss private financing of energy efficiency. The underlying assumption is that improving the energy efficiency of a property has a positive impact on property value, reducing a bank’s asset risk. The second assumption is that energy efficient borrowers have a lower probability of default as a result of more disposable income in the household due to lower energy bills, reducing a bank’s credit risk. Sarah Sayce (Henley Business School) is working with Royal Institution of Chartered Surveyors on the valuations aspect of this work. In particular Sarah is working with RICS colleagues to produce guidance aimed at helping valuers better advise bank clients on the risks relating to the energy efficiency characteristics of buildings offered for security to aid in the arguments for energy retrofits.


Food4Families: Health Impact of Community Gardening Places and Urban Spaces (Funders: Big Lottery Fund and Berkshire Community Foundation)

Research Team: Richard Nunes (Henley Business School) and Aileen Ho (School of Psychology and Clinical Language Sciences, University of Reading)

It is widely claimed that active participation in gardening and community food-growing projects can improve the physical and mental health of its participants. Community gardens offer their participants the opportunity to spend more time outdoors and to engage in physical activity. At the same time, these gardening projects also facilitate urban community building and ‘place attachment’ by helping people connect with their neighbourhood and immediate natural environment.

Addressing mental health problems in urban communities has become one of the primary concerns for spatial planners, policy makers and health professionals alike. Urban community gardens and community food growing projects can offer strategic solutions to urban mental health and well-being issues.

The current four year research project aims to explore these domains by studying food4families, an urban community food-growing project, over a period of four years across four distinct community gardening sites and urban neighbourhoods. This research project is an observational study conducted in co-ordination with Reading International Solidarity Centre and aims to understand the impact of urban community gardens on the physical and mental health of people who take part in gardening activities, and also the effect that urban environments may have in mitigating these health outcomes.


Residual Land Values - Measuring Performance & Investigating Viability

Research Team: Steven Devaney, Neil Crosby, and Pete Wyatt (Henley Business School)

There is limited information on commercial real estate land values in the UK. This reflects the thinly traded nature of land markets and heterogeneous nature of each site that is traded. Actual transaction prices reflect a variety of site and location specific factors. Given this context, theoretical land values for different locations, estimated using a consistent set of assumptions, provide a useful benchmark for developer and investor decision making processes. The project produced quarterly estimates of residual land values for the apartment, retail, office and industrial sectors. The findings revealed a North/South divide in land values for all land uses analysed and development would not be viable without intervention for some uses in some areas. The research establishes a framework for continued recording of UK land value trends into the future, which could increase the transparency of land markets. The approach could also assist policy-making in relation to land value capture.

Final Report


Personalised Urban Living Solution (Funder: Innovate UK)

Research Team: Anupam Nanda, Rachel McCloy, Kecheng Liu, Weizi Li and Ruth Pugh

The UK population is getting older with 18% aged 65 and over and 2.4% aged 85 and over. By 2036, this it is predicted that 23.9% of the population will be over 65 (Office for National Statistics). In addressing the increasing needs for appropriate social care, the UK faces a number of challenges ranging from a lack of state funding to a poorly paid workforce. However, maintaining independence within individuals own homes and community is often considered to be important for elderly wellbeing. Exploiting the integration of technology to assist with this aim, whilst complementing other face to face social care measures, will therefore be key to addressing some of these challenges. Wearable devices and mobile technology offer technology with potential to facilitate targeted and timely assistance for those living independently, thus preventing the development of more serious healthcare incidents. This project analyses the perceptions of older generations in terms of the value and use of wearable technology which records key medical indicators (e.g. temperature, heart rate).


The value, impact and delivery of the community infrastructure levy (Funder: DCLG)

Research Team: Pete Wyatt (Henley Business School), Three Dragons (consultants), in association with Smiths Gore and David Lock Associates,

The aim of the research was to provide an evidence base that would inform an independent Government review of the CIL. This research has since been published as supporting evidence underpinning the Housing white paper.

A range of measures have been introduced over the years by Governments to ensure that infrastructure required to support development, and other community benefits, are provided. This principle currently operates through a system of developer contributions, secured via Section 106 planning obligations under the Town and Country Planning Act 1990 and additionally, since 2010, via the Community Infrastructure Levy (CIL). Examples include provision of roads, schools, flood defences, health facilities, and in the case of section 106 planning obligations, delivery of affordable homes.

Although CIL is a relatively new policy, the research showed that many welcomed the introduction of CIL, particularly the predictability it offers in comparison with negotiated section 106 planning obligations. Meanwhile, some argued that section 106 agreements are preferable to CIL, and considered that section 106 provided a more direct local connection between money collected and infrastructure provided; others indicated that there was a perceived complexity in operating CIL (including when development viability is also in place), and viewed it as an unwelcome “tax” on development.

The report highlights that implementation of CIL by local authorities was initially slow, but by the end of August 2015, 58% of authorities were engaged with CIL (having adopted CIL, or progressing towards adoption). The research showed that operational CILs are concentrated in more affluent parts of the country where market and land values are higher; reasons for not adopting CIL included the lack of viability and the prioritisation of affordable housing delivery which cannot be funded through CIL. Finally, the research indicated that it is unlikely that CIL in its current form will yield the income anticipated by local authorities.

Research Report


Unravelling liquidity in International Commercial Real Estate Markets (Funder: Investment Property Forum)

Research Team: Steven Devaney (CASS Business School), Nicola Livingstone (Bartlett School of Planning, University College London), Pat McAllister (Henley Business School) and Anupam Nanda (Henley Business School)

Liquidity is a multidimensional phenomenon. Transaction timing and costs, and the ability to sell without affecting the asset price are examples of how liquidity can impact investors' behaviour and institutional asset portfolios. Real Estate markets are often seen as “illiquid”. The research sought to determine how liquidity can inform investor decision processes in the commercial sector. Recent research has looked at liquidity in international real estate markets within different cities and countries. The research shows that internationally, markets differ in their transaction times, costs and processes. As expected, leading global cities have the highest amount of absolute transaction activity, which appears to be a useful proxy for liquidity.

Summary_Report.pdf


Financial Viability Appraisal in Planning Decisions: Theory and Practice (Funder: Royal Institution of Chartered Surveyors)

Research Team: Neil Crosby (Henley Business School) and Pete Wyatt (Henley Business School)

In England, appraisals of the financial viability of development schemes have become an integral part of planning policy-making, initially in determining the amount of planning obligations that might be obtained via legal agreements (known as Section 106 agreements) and latterly as a basis for establishing charging schedules for the Community Infrastructure Levy (CIL). Local planning authorities set these policies on an area-wide basis but ultimately development proposals require consent on a site-by site basis. It is at this site-specific level that issues of viability are hotly contested. This research examined case documents, proofs of evidence and decisions from a sample of planning disputes in order to address major issues within development viability, the application of the models and the distribution of the development gain between the developer, landowner and community. The results have specific application to viability assessment in England and should impact on future policy and practice guidance in this field. They also have relevance to other countries that incorporate assessments of economic viability in their planning systems.

Financial Viability Appraisal in Planning Decisions_Final Report.pdf

Cities on the Grow: Pathways to supporting the sustainable growth of urban food enterprises in London, Reading and Almere (Funder: European Institute of Innovation and Technology)

Research Team: Richard Nunes (Henley Business School), Suzanne van der Meulen (Deltares), and Gerben Mol (Wageningen University and Research)

Cities on the Grow was a one year collaborative venture between Wageningen University, the University of Reading, and Deltares Institute, which has been funded by Climate KIC, an initiative of the European Institute of Innovation and Technology (Horizon 2020). The project began in early 2014 with the aim of investigating the local food systems of London (UK), Reading (UK) and Almere (NL). The case studies were selected for their unique urban characteristics as a global city, a regional town centre, and polycentric ‘garden city’ respectively. It set out with the intention to establish how Urban Food Enterprises (UFE), operating in these locations, can be supported to realise their goals of localised, commercially viable, socio-ecologically just food systems. The project has focused on the potential benefits of local food systems for climate change mitigation and adaptation strategies, and on health and well being. It has sought to understand how these potential benefits can be captured whilst securing the commercial viability of actors involved.

The findings from this study reveal a mixed picture of networked activity albeit incoherent as far as any ‘local food movement’ is concerned in the case study regions. This mixed picture of craft and micro-enterprise practices is tied to pre-conditions set out by funding agencies such as the Lottery Fund and the availability of small business grants, the ideological slants of these community-led projects, urban morphology, historical institutional ties, and the nature of urban-rural linkages. This poses a complex and challenging environment for urban and regional policy and planning intervention, including the challenges for delivering on genuine community engagement, on identifying monitoring and evaluating mechanisms for climate and health impact, and on economic development.

Cities on the Grow website


Support for Community Led Planning (Funder: Royal Town Planning Institute)

Research team: Gavin Parker, Emma Street

The aim of the research was to reflect on how community-led planning could be best supported by Planning Aid England in a changing environment. The research recommendations were set within the context of funding cuts, local government reorganisation, policy change and the localism and devolution agenda in planning (including neighbourhood planning)

Key Findings


Cycle BOOM (Funder: EPSRC)

Research Team: Oxford Brookes University, Emma Street University of Reading, University of West England, and Cardiff University

The aim of the research was to develop a better understanding of how the design of the built environment and technology shapes engagement with, and experience of cycling as people get older, and how this affects their independent mobility, health and wellbeing. And following this; to provide advice to policy makers and practitioners on how the built environment and technology could be better designed to support and promote cycling among current and future older generations in order to improve independent living, health and wellbeing.

The investigation considered the built environment and technological ‘system’ at different scales from the micro-level (e.g. bicycles, equipment and cycle paths), the meso-level (e.g. housing, street design/layout and cycle routes) to the macro-level (e.g. land use patterns and information/service provision). It also considered the influence of early life experience in shaping later life outcomes and therefore the wider social/cultural, organizational, environmental, economic and technological changes over time.

Summary of Key Findings and Recommendations


The Accuracy of Consensus Real Estate Forecasts Revisited

Pat McAllister

For institutional real estate investors, forecasts of future costs, rents, vacancy rates, yields etc. and future returns for assets, sectors, regions, country and across other asset classes are key inputs into decisions about stock selection and tactical and strategic asset allocation. Consequently, the ability of real estate forecasters to provide investment organisations with forecasts that add value should be a concern to both users and producers of real estate forecasts. Beginning in 1999, the IPF’s Consensus Forecasts have provided a rich source of data on market expectations of real estate investors. Building on previous research that has evaluated the accuracy of the IPF Consensus Forecasts, this study updates this existing work on the accuracy of rental growth, capital growth and total returns at the All Property level. In addition, it evaluates forecasting accuracy at the sector level. Given that real estate forecasters have stated that their main contribution is to identify relative rather than absolute performance, the availability of sector level forecasts presented an opportunity to assess the extent to which the consensus forecasts were able to predict the relative performance of each sector. Further, since it has been argued that failures in forecasting real estate returns are caused by limitations in yield forecasting, a further contribution of the research is that it evaluates the performance of the yield forecasts implied in the relationship between the explicit forecasts of rental and capital growth.

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