The appraisal of urban regeneration land. A contemporary perspective allowing for uncertainty
| Date | 01 June 2005 |
| DOI | https://doi.org/10.1108/14635780510599449 |
| Pages | 213-233 |
| Published date | 01 June 2005 |
| Author | Alastair Adair,Norman Hutchison,Jim Burgess,Stephen Roulac |
| Subject Matter | Property management & built environment |
The appraisal of urban
regeneration land
A contemporary perspective allowing for
uncertainty
Alastair Adair
School of the Built Environment, University of Ulster, Newtownabbey, UK
Norman Hutchison
Department of Property, University of Aberdeen, Aberdeen, UK
Jim Burgess
Chartered Surveyor, Holywood, UK, and
Stephen Roulac
University of Ulster, Newtonabbey, UK and Roulac Group Inc., San Rafael,
California, USA
Abstract
Purpose – The value of land for development is normally estimated by the use of the comparative
method or the residual approach. The aim of the paper is to examine appraisal practice, in particular
the bases of valuation, availability and utilisation of data, reporting of the value figure and the
management of risk.
Design/methodology/approach – The paper reports the findings of a survey of valuers from
leading practices throughout the UK, bank lenders and developers. An example of an appraisal of an
urban regeneration site is included in order to highlight the key issues within the discussion.
Findings – A variety of reporting practices is found from a tightly drawn range of values to
single-point estimates along with a detailed explanation of the assumptions employed. Developers and
lenders favoured the latter, but they appeared to be open-minded about a range of values or an
expression of uncertainty being reported, provided that there is a clear and well supported
justification. Risk management approaches are underdeveloped within the profession.
Originality/value – Thevaluation of urbanregeneration land is said to be one of the most vexed issues
in the appraisal of projects due to a lack of data transparency in urban regeneration markets,
shortcomings in traditional appraisal methodologies and complexities of public sector grant procedures.
Keywords Land, Property,Regeneration, Urban areas
Paper type Research paper
1. Introduction
The theory and practice of the property discipline, especially in the USA, has a bias
towards “greenfield” in contrast to “brownfield” development and investment.
Consequently, much of the property discipline and valuation practice, is directed to
new urban development rather than inner city redevelopment. Since this emphasis is in
the process of changing materially, as cities throughout the world, and especially in the
USA, become more mature, the property profession is called to consider more explicitly
inner city issues. In the UK the Government has set a target of 60 per cent of all new
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1463-578X.htm
Urban
regeneration
land
213
Received July 2003
Accepted July 2004
Journal of Property Investment &
Finance
Vol. 23 No. 3, 2005
pp. 213-233
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780510599449
homes to be developed on brownfield land by 2008 (DETR, 2000), consequently the
valuation of these sites is likely to assume increased significance. Further, the
renaissance of interest in cities (Roulac, 2001) and the growing business attention to the
inner city (Porter, 1995) mean that there is an increasing priority for the property
discipline to accelerate its knowledge and standards of practice concerning inner city
redevelopment and urban regeneration themes.
Among the significant challenges that inner city real estate presents to property
researchers and practitioners is the most fundamental concern of appropriate property
valuation theory and practice. Property valuation in the context of the inner city is
especially significant for multiple reasons. First, government involvement can distort
market function, through the application and consequences of various subsidie s and
incentives, leading to a “things are not always what they seem” condition of the
property market. If valuers employ sales comparison or other market analysis
techniques, the indicated transaction prices can lead to misinterpretation of the market,
unless appropriate adjustments are made for the consequences of subsidies and
incentives. Second, inner city valuation analyses often can be more complex, difficult,
and resource-intensive than valuation assignments implemented in other settings. At
the same time, many inner city properties are both perceived and actually are less
valuable than properties possessing similar physical dimensions, but located in places
that are considered to be more appealing and therefore more valuable. Although many
consider that prejudice and bias largely contribute to depressed inner city real estate
prices, an important explanation for lower inner city property values is the lack of
apparent demand, resulting from inadequate and/or disproportionately low
expenditures for such public/social services as safety, education and transportation.
If more balanced levels of such services were provided, there would be more effective
demand for properties in the urban regeneration areas, producing higher property
values, leading to enhanced fiscal resources to public agencies to fund safety, education
and transportation. Third, because of perceived risks associated with involvement in
the inner city, in circumstances where risks are perceived to be greater, decision
makers tend to endeavour to mitigate those risks by reducing their financial exposure,
by paying less rather than more, for all purchases. This tension is a fundamental
behavioural attribute of inner city property valuation, as explored in this research
study, through an examination of the guidelines for the valuation of urban
regeneration properties in the UK.
The aim of the paper is to analyse the application of Guidance Note 5 of the RICS
Appraisal and Valuation Standards (RICS, 2003a) in the apprais al of urban
regeneration land and in particular, current practice relating to valuation
methodology, market information, the reporting of ranges of values and treatment
of uncertainty. It should be stressed that while this research considers UK market
practice, the authors believe that many of the lessons learned are equally applicable to
other urban regeneration locations across the world. Further, the paper provides
insights into the practi cal challenges of apprai sal implementation on u rban
regeneration land. In this regard, the paper contributes both to the property
valuation literature and also the emerging literature of behavioural real estate,
especially concerning appraisal practices.
The paper is structured as follows. Section 2 provides an overview of the salient
issues relating to the appraisal of urban regeneration land and precedes the discussion
JPIF
23,3
214
To continue reading
Request your trial