Pension investors must be careful their backing of redevelopment projects does not create stranded assets elsewhere within their portfolio, according to the head of Santander’s £10bn (€13.7bn) UK pension fund.

Antony Barker, director of pensions at the Spanish bank’s UK division, said MediaCity – a newly regenerated hub for the creative industry near Manchester, which houses offices for British broadcasters BBC and ITV – should be viewed as a success, as it brought “a new community and new interests” to the area of Salford.

Speaking at the joint IPE/IP Real Estate Real Assets & Infrastructure conference in London, he said: “That is the problem of regeneration. You have to avoid, effectively, a substitution effect.

“You have to ask yourself ‘Why has this brownfield site occurred?’ Well, it became unloved and unwanted. By creating something shiny and new, yes, you may relocate something new into it, but you are actually at risk of therefore creating a new stranded asset somewhere else.”

To illustrate the risk of stranded assets, he cited the change that occurred before and after the advent of the automobile, leaving many with the dead weight of an animal no longer needed for transportation.

Lisette van Doorn, chief executive of the Urban Land Institute in Europe, shared some of Barker’s concerns, noting that it was important for her organisation to ensure that “thriving” communities continued to prosper.

She said cities currently seeing significant inflows from rural areas needed to examine regeneration as a way of dealing with the inflows.

“We think the way to do it is to densify,” she said, explaining it was important to learn from past mistakes surrounding regeneration.

“That means use the brownfield projects available within cities to regenerate and intensify the built environment.”

Van Doorn said, as soon as a decision had been reached, the natural focus was infrastructure – a “critical” factor in the success of any more densely populated urban area.

“To densify creates the opportunity to finance infrastructure, and, at the same time, it helps to accommodate our people in those cities.”

Paul Marsh, head of projects and finance at the UK government-backed Regeneration and Investment Organisation, said the problem facing his organisation was that interest from overseas investors could not necessarily align with what was available in the cities.

“All of our projects are too small – we had an enquiry from someone who wanted 150 acres in central London,” he said to laughter from the audience, questioning whether such a large development would ever be possible in the UK capital.

He added that interest from Gulf investors was in “high profile, glitzy, vanity projects”, but that the interesting inflows were coming from Hong Kong, Singapore and Malaysia.

“[The three] appear to have developed a much more sophisticated understanding of our space, the risks associated with it, the risks associated with coming into a new market environment,” he said.

“They have worked out an optimal solution of the best things they have got – not just capital, but skills – aligned with good, local partners.”