Modelling%20the%20Relationship%20between%20Development%20Design%20and%20Financial%20Viability%20%20John%20Henneberry1*,%20Eckart%20Lange2,%20Sarah%20Moore3,%20Ed%20Morgan2%20

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Modelling the Relationship between Development
Design and Financial Viability John
Henneberry1, Eckart Lange2, Sarah Moore3, Ed
Morgan2 Ning Zhao1 Departments of Town and
Regional Planning1, Landscape2 and Civil
Structural Engineering3, University of Sheffield,
Western Bank, Sheffield, S10 2TN, UKSpeaker
j.henneberry_at_sheffield.ac.uk 44 (0)114 222 6911

• European Real Estate Society
• Annual Conference
• Milan, 23-26 June 2010

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(Lack of) engagement between development and
design processes
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A process whereby "each time the design is
refined, viability is reassessed" (Adams, 1994,
page 50) but how?

• Development appraisal software

• CAD software

• Takes a single, fixed design as the starting
  point
• Sensitivity analysis of cost and value variables
  but not of design
• Design may be changed but not very quickly or
  easily

• Design-driven
• No link with financial appraisal (although link
  to QS software may occur for cost estimates)

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Approach linking visualizations and physical/
financial modeling(URSULA project, funded by
EPSRC, see www.ursula.ac.uk)
Rave studio VR stereoscopic, 3D viewing
Simmetry3d Design and visualization software
using gaming technology
SketchUp Proprietary design and visualization
software
Excel Proprietary spreadsheet
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Rave studio VR stereoscopic, 3D viewing
Simmetry3d Design and visualization software
using gaming technology
SketchUp Proprietary design and visualization
software
Excel Proprietary spreadsheet
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Rave studio VR stereoscopic, 3D viewing
Simmetry3d Design and visualization software
using gaming technology
SketchUp Proprietary design and visualization
software
Excel Proprietary spreadsheet
7
Rave studio VR stereoscopic, 3D viewing
Simmetry3d Design and visualization software
using gaming technology
SketchUp Proprietary design and visualization
software
Excel Proprietary spreadsheet
8
Rave studio VR stereoscopic, 3D viewing
Simmetry3d Design and visualization software
using gaming technology
SketchUp Proprietary design and visualization
software
Excel Proprietary spreadsheet
9
Rave studio VR stereoscopic, 3D viewing
Simmetry3d Design and visualization software
using gaming technology
SketchUp Proprietary design and visualization
software
Excel Proprietary spreadsheet
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Major Design Change
Wicker Riverside, Sheffield Park
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Design Quality and Development Viability

• "good urban design adds value by increasing the
  economic viability of development" (Carmona et
  al, 2001, page 8)
• "good urban design can add value to development
  through using land highly efficiently" (Roger
  Evans Associates, 2007, page 110) that is, by
  increasing the density of development.

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The argument
The Optimum Development Density of a Site
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Every element is open to question

• Positions and slopes of MC and MR curves
• Increased density higher prices (Eppli Tu
  1999)
• Increased density lower prices (Song Knaap
  2003 Waasmer Bass 2006)
• MR increases exponentially with height for a site
  with good external environment (Chau et al 2007)
• Point of inflection of MC curve
• 6 storeys (Flanagan Norman 1978)
• 35 storeys (Picken Ilozor 2003)
• Requires much more detailed research

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Analysis of design and property values

• Breadth strong evidence base

• Depth refined understanding

• Hedonic analyses
• Mainly of housing more homogeneous and numerous
  than business property
• Influence of design and green space on house
  prices identified
• BUT treatment is basic and historic

• Qualitative case studies
• Contextual sensitivity and empirical richness
• Accommodate complexity of subject and
  circumstances
• Consider many aspects of design and value
• BUT provide restricted evidence base

Physical-financial modelling a complementary
approach
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Bottom-up Modelling Apartment Block(constant
prices)
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Bottom-up Modelling Apartment Block(price
increases with height _at_ 2 per storey)
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Bottom-up Modelling Apartment Block(price
decreases with height _at_ -2 per storey)