Julia Okatz, Julie Hirigoyen, Amy Paterson & others
Systemiq
2024
### 📜 Context and Background The white paper titled "Urban Regeneration: Turning Obsolescence into Value for Society, Nature, Climate - and Investors" was published in September 2024. It was commissioned by Ginkgo Advisor and Edmond de Rothschild Group and developed independently by Systemiq, a consulting firm focused on sustainability. The paper addresses the urgent need for urban regeneration as a strategic investment opportunity to tackle Europe’s housing crisis, environmental challenges, and the revitalization of urban economies. ### 🏙️ Key Findings on Urban Regeneration Urban regeneration involves the transformation of underutilized land and obsolete buildings into vibrant, mixed-use neighborhoods. This approach aims to alleviate housing shortages while promoting environmental sustainability and economic growth. The strategy aligns with Europe’s objectives of achieving carbon neutrality, "no net land take" by 2050, and enhancing resilience against climate shocks. ### 💰 Market Opportunity Europe is home to vast areas of underutilized urban space, including 300 km² of empty office and retail locations and 1,000–1,500 km² of brownfield land. These spaces could satisfy much of Europe’s demand for new buildings over the next 10–15 years while reducing infrastructure costs by up to 20%. Urban regeneration presents a substantial investment opportunity, estimated to be worth €4–6 trillion over the next decade. ### 📈 Investment Characteristics and Benefits Urban regeneration projects focus on creating new value through the transformation of abandoned areas into thriving communities. They emphasize city-level integration, placemaking, and resilience, ensuring sustainable development to prevent future obsolescence. The socio-economic benefits include high-quality housing in well-connected locations, reduced urban sprawl, and enhanced local economies through job creation and increased land values. Environmentally, these projects can decrease construction emissions by up to 45%, save substantial virgin land, and promote biodiversity. ### 🔄 Challenges and Recommendations Despite the potential, urban regeneration faces underinvestment due to its complexity compared to traditional real estate investments and perceived risks such as contamination and planning uncertainties. Recommendations for scaling urban regeneration include categorizing projects by risk, quantifying returns on placemaking, supporting developers through collaboration, and enhancing the public sector's role in streamlining processes and providing financial backing. ### 🌍 Conclusion Urban regeneration stands out as a pivotal strategy for addressing Europe’s housing crisis while advancing sustainability goals. The paper encourages institutional investors to consider long-term strategies focused on this asset class, highlighting the need for collaboration among cities, private developers, and investors to maximize its impact across Europe.
Systemiq
Summary of the White Paper: Urban Regeneration: Turning Obsolescence into Value for Society, Nature, Climate - and Investors
Context and Authors
The white paper, published in September 2024, was commissioned by Ginkgo Advisor and Edmond de Rothschild Group. It was developed independently by Systemiq, a sustainability-focused consulting firm, with contributions from experts across urban planning, investment, and environmental fields. The document aims to position urban regeneration as a critical investment opportunity for addressing Europe's housing crisis, environmental challenges, and urban economic revitalization.
Authors / contributors:
- Julia Okatz, Julie Hirigoyen, Amy Paterson, Lara Rabinowitz, Isha Patel, Elena Georgarakis, Bruno Farber, Laura Nolier, Victor Granet.
Key Findings
Urban Regeneration as a Solution
Urban regeneration involves transforming underused land and obsolete buildings into vibrant, mixed-use neighborhoods that address housing shortages while contributing to environmental sustainability and economic growth. It is presented as a strategy to meet Europe's goals of carbon neutrality, "no net land take" by 2050, and resilience to climate shocks.
Market Opportunity
- Europe has vast amounts of underutilized urban space:
- 300 km² of empty office/retail space.
- 1,000–1,500 km² of brownfield land.
- These spaces could meet most of Europe’s demand for new buildings over the next 10–15 years while saving cities up to 20% in infrastructure costs.
- Urban regeneration represents an investment opportunity worth €4–6 trillion over the next decade.
Investment Characteristics
Urban regeneration projects are characterized by:
- Creating new value: Transforming abandoned spaces into thriving neighborhoods.
- City-level integration: Using urban diagnostics and stakeholder engagement for tailored solutions.
- Placemaking: Designing public spaces for community interaction and connectivity.
- Resilience: Ensuring sustainability to avoid future obsolescence.
Benefits
Socio-Economic:
- High-quality housing in well-connected areas addresses the housing crisis.
- Compact cities reduce urban sprawl costs (e.g., road maintenance) and congestion.
- Regeneration boosts local economies through job creation and increased land values.
Environmental:
- Reduces construction emissions by up to 45%.
- Saves virgin land equivalent to twice Luxembourg’s size.
- Promotes biodiversity through green spaces and reduces air pollution caused by vehicles.
Investment Returns
- Projects offer mid-teens returns with cash multiples around 2x over a 10–15-year horizon.
- Placemaking significantly enhances financial performance by attracting residents and businesses, raising property values within regenerated areas and beyond.
Challenges
Despite the potential, urban regeneration remains underinvested due to:
- Complexity compared to conventional real estate investments.
- Perceived risks such as contamination remediation or planning uncertainties.
- Limited availability of large-scale regeneration funds.
Recommendations for Scaling Urban Regeneration
- Demystifying Risks:
- Categorize projects into sub-classes based on risk profiles (e.g., contamination levels, location).
- Develop due diligence frameworks tailored to institutional investors.
- Quantifying Returns on Placemaking:
- Establish tools to evaluate the financial benefits of placemaking strategies over time.
- Highlight how upfront investments in public amenities lead to higher returns.
- Supporting Developers:
- Encourage collaboration between experienced developers and local stakeholders in underserved areas (e.g., secondary cities).
- Provide technical support for innovative approaches in smaller cities or regions with high potential.
- Public Sector Role:
- Cities should streamline planning processes, offer incentives like tax breaks or expedited permissions, and invest in connecting infrastructure.
- Public financial institutions should back city networks (e.g., EuroCities) to build capacity for private-public cooperation.
Conclusion
Urban regeneration offers significant socio-economic, environmental, and financial benefits. It is a critical strategy for addressing Europe’s housing crisis while advancing sustainability goals. Institutional investors are urged to adopt long-term strategies focused on urban regeneration as an asset class. Collaboration among cities, private developers, and investors is essential to scale its impact across Europe efficiently.