ULI TRENDS: Density and productivity go hand in hand

A strong correlation exists between density and productivity, according to Alice Breheny, global co-head of research at TH Real Estate.

Speaking at the ULI Trends conference held in London on Tuesday, Breheny said that urbanisation is one of the mega-trends that is most relevant to the real estate sector. ‘Cities are where it’s at rather than countries. All our strategic advice is focussed on cities. They are more productive, buildings in cities are more productive and they collect more rent.’

In this context, the overall scale of a city is less important than density, she added. ‘In the more developed world, it is less clear-cut why we need cities. In terms of our social capital, people don’t need to be in a city to survive, but they do need to be there to thrive.’

The ability of a city to attract people and create a community is what distinguishes them from each other, she added. ‘Not all cities are great, but what makes a city great is youthfulness, diverse industries such as tech and the ability to attract talent and tourists.’

Santi Mercade, chief executive at Layetana Real Estate, pointed out that historically European cities tend to be quite dense. That is certainly true of cities in his home country Spain, he added, 'The costas are an exception but urban sprawl is more of an American phenomenon.’

Speaking in his role as developer, Mercade said density offers a number of key benefits. Mixed uses in each neighbourhood makes life easier for everyone because of the proximity of amenities, he pointed out. ‘This implies less time spent in unproductive activities like commuting. It also implies less CO2 emissions.'

Cities function better when they are dense, he argued. 'Dense areas or neighbourhoods are livelier and they decrease the commercial risk. It is easier to sell products because there are more services and facilities and so it is easier to attract customers.’

Another key benefit of density is that it gives cities the ability to pay for large pieces of infrastructure, noted Isabel Dedring, deputy mayor for transport at the Greater London Authority. London is currently consolidating its position as the best connected place within Europe with Crossrail, the new high-frequency, high-capacity railway for the UK capital and the southeast. Spin-offs of the development include the extension of the Bakerloo tube line, Dedring said.

New transport connections lead to land value uplifts, she added. ‘People are very excited about the Bakerloo line. What we’re trying to do is maximise and broaden regeneration of the area.’

Commenting on the issue of density in London, Dedring said young people are becoming more comfortable with the idea at this moment in time. ‘It’s not so much an issue of age profile, it’s that London attracts young people from some of the densest cities elsewhere in the world.’