Enhancing the role of benevolent property developers in town-centre regeneration

The rise of e-retailing and changes in transport and vehicle parking preferences, and opportunities in edge- and out-of-centre sites, has meant that regional town-centres must innovate to attract investment. Timaru’s Stafford Street.

A team of Building Better researchers studying town-centre regeneration in the South Island say a lot more could be done by local and central government to assist and work with benevolent property entrepreneurs who want their development projects to be both profitable and enhance the social, economic, and aesthetic elements of their home communities.

Regional settlement regeneration in New Zealand is usually undertaken by locally-based people with very limited external resourcing. Since 1984, New Zealand’s central government, consistent with a neo-liberal market-centred policy stance, has pursued only limited regional development objectives. The net results are uneven impacts on regions, their economies, settlements, and people.

This contrasts with the practices and organisational arrangements prevailing in a number of overseas places, particularly in Europe and North America. There, a range of local and extra-local resources is available to those advancing regeneration in a number of spheres, including town-centre regeneration. The level of regeneration activity in some national settings is such that support and advice for private initiatives are common and a cadre of expert professionals is advancing regeneration practice and training. Even in conditions of post-Global Financial Crisis austerity, centrally allocated, charitable, and EU funds for local regeneration in the UK remain available to a degree not experienced in New Zealand for many decades.

The Building Better researchers studied South Island settlements in the mid and South Canterbury regions, their observations of landscape change and reading of construction statistics show that town-centre property development, as opposed to out-of-centre investment, has been limited in scale.

The rise of e-retailing and changes in transport and vehicle parking preferences, and opportunities in edge- and out-of-centre sites, has meant that aging town-centres are often seen as unattractive and they struggle to gain patronage and investment, a situation not uncommon in the rest of New Zealand. In these circumstances, responsibility for town centre regeneration is left to local government, with limited expertise and finance, and town-centre property owners, who often hold under-utilised space and earn low rental returns. As a result, very little regeneration has been attempted over a number of years.

The researchers say the exception to this gloomy town-centre regeneration story is attempts by a small group of locally-based developers to take the lead in this field. This has worked well where developers have had the support of local government and where the developer had prior experience of property development or had a good understanding of the system or they were well-advised.

However, in some places progress is often hampered by mis-aligned planning instruments, misunderstandings, and a lack of cooperation between developers and local authorities. As a result, proposed developments are either slow to reach fruition or they fail altogether.

The rise of entrepreneurial local developers

“We studied the situation in two towns, Ashburton and Timaru, but note, as reported in the news media, that this story is working itself out elsewhere in New Zealand’s South Island, in, for example, Waimate, Geraldine, and Invercargill,” says lead researcher Professor Deborah Levy from the University of Auckland Business School’s Property Department.

“These entrepreneurial local developers, part of a group that has been categorised as benevolent entrepreneurs, a sub-category of social entrepreneurs, are strongly place-attached, keen to invest locally, and are passionate about their town-centre development projects for the benefits they will bring to their communities.

“They are also very often wealthy business people, who, while business-savvy, and having made their fortunes in businesses other than property, are property development newbies. They have little or no experience of this field of endeavour. These people are therefore quite different from main-stream commercial property developers, whose prime motivation is to build for-profit developments and who, typically, have few benevolent aspirations.”

Geographer and planner, Emeritus Professor Harvey Perkins says the study of these benevolent property development entrepreneurs and their interactions with a range of regeneration stakeholders gives us an opportunity to think about how better to integrate them into settlement regeneration practice.

“Recent regional development policy changes in New Zealand encourage us to think that there is scope to help these developers and local government to engage more effectively and cooperatively.”

The researchers say the Building Better study was guided by two questions: How might property-led town-centre regeneration in small New Zealand towns be characterised? and, Reflecting on New Zealand and international regeneration experience, what kinds of policy development would help local government and other stakeholders to engage more effectively and cooperatively with local benevolent property development entrepreneurs?

Passionate about place

Drawing on key concepts underlying town-centre regeneration in small regional settlements around the world, the researchers outlined town-centre regeneration case studies in Ashburton and Timaru and draw a number of conclusions about what might be done locally and nationally to recognise the significance of local property developers passionate about place and to improve property-related town-centre regeneration governance and practice.

“For various reasons central government has found it difficult to support local government by providing it with the statutory instruments and financial resources to plan for and incentivise the regeneration of town-centres. Early pronouncements from the review of the Resource Management Act 1991 suggest that a new strategic approach to planning may help change this situation, but there has yet been no public discussion about significant revenue sharing between central and local government, essential for a greater level of local activity. It will also take a good deal of time to overcome the path dependent nature of local government’s general unwillingness to engage in town centre regeneration in small towns, despite new statutory arrangements. Making settlement master plans and allied integrative strategic planning mandatory will be important, linking Long Term Plans and District Plans so that all parties in the development process are given adequate and clear guidance about planning objectives,” says Harvey.

“A growing number of South Island small towns are seeing local property entrepreneurs beginning to make notable contributions. Demonstrating a form of benevolent ‘social entrepreneurship’ these developers are turning to commercial property development, encouraged by their success in other business ventures.

“They are willing to invest in their town’s future at the risk of, at least initially, less-than-optimal financial returns, but believe that their investments have the potential to bring long-term benefits to the town and a future financial return for them. Some of their proposed developments are large scale and risky, placing them in a situation of financial pressure. However, these developers often confront difficulties in putting their plans into operation in a timely manner – they often underestimate the complexity and costs of planning and building consent processes. They also have expectations of consenting authorities and local councils that under current circumstances are overly optimistic, leading to disappointment and frustration,” says Harvey.

Present role of local councils

Fellow property researcher Dr Raewyn Hills, from the University of Auckland, says that local councils as they are presently empowered and financed are unable and unwilling to take an active role in the kinds of advisory, facilitative, and collaborative partnerships demanded.

“They, and many members of the general public, also often misinterpret the position of these property entrepreneurs, believing that they have endless funds and that they are likely to profit significantly from their proposed developments.

“This, in small towns, is invariably not the case. It is also evident from our data that when the Ashburton and Timaru developers were faced with time delays, complex planning processes, and escalating costs, their views about their proposed developments changed. As their development proposals progressed, they became more aware of the risks involved and the limited gains that were to be made from their town-centre commercial property developments.

“A key lesson from this experience for regeneration practitioners and researchers in New Zealand and internationally is that the scale and form of the property development proposal, relative to local conditions, is a key factor to consider. Smaller investments, tailored to obvious demand, are likely to be less risky and more likely successful,” says Raewyn.

The researchers believe from their study and review of the international literature that if local government and allied stakeholders are to engage more effectively and cooperatively with benevolent property development entrepreneurs, then effort must be directed toward creating stronger local governance, and well organised and effective locally-based leadership.

“New approaches need to be found to help local actors to engage more capably, cooperatively, and collaboratively with all property developers, including those with a benevolent entrepreneurial orientation. Without adopting such approaches, potential new town-centre investment might either be lost or used unwisely, with public-private partnerships either not eventuating, or not reaching their potential,” says Professor Deborah Levy.

“Central and state governments have an important role in this process, establishing appropriate and effective local authority instruments and governance mechanisms, and resourcing local governments’ property-led regeneration efforts. This will require applying funding and expertise to local capability building, ensuring that the necessary skills and capacity exist in regional communities to deal flexibly and creatively with regeneration opportunities as they arise.

“The appearance of local benevolent entrepreneurial property developers in New Zealand’s small-town regeneration is throwing into interesting relief the challenges and opportunities presently faced. These financially well-resourced, strongly place- attached locals, offer a particular type of opportunity and source of investment as they attempt to build new retail, hospitality, and service spaces. It would seem a great pity if ways cannot be found to take advantage of their offerings, while remaining true to locally established town-centre planning and related regeneration objectives. Their experiences should be used as exemplars to be learned from, both in terms of practice and research,” says Deborah.

Read the research

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