Research study highlights 'positive economic impact' of tall buildings
The British Property Foundation (BPF) has published a report by researchers Colin Buchanan showing that high density developments offer clear economic benefits through increased output of staff.
Colin Buchanan found a range of benefits through modelling the agglomeration effects of high density development. These included a more productive workforce, knowledge spill-over, increased business specialisation and general economies of scale.
John Siraut, associate director of economics at Colin Buchanan, said: ‘This study highlights the positive economic impact that tall buildings can have, provided they are in the right places. It is the first study to focus upon the economics of tall buildings rather than the aesthetics, and we believe it is a positive step in rebalancing the debate surrounding tall buildings and their benefits.’
The report concluded that relocating just 80,000 jobs within London to more accessible high density locations would increase output by £206 million annually, or £2,500 per worker. The report explained that these benefits would be sensitive to location and can only realistically be achieved around existing transport hubs, with capacity for absorption or expansion and where density is already high and land scarce. That means, in practice, building upwards.
Although employment density is not particularly high in the UK, (London has 250,000 employees per sq mile compared to more than 600,000 in mid town Manhattan) London’s dense economic area is seen as a key factor behind its economic performance, estimated at 38% higher than the UK average. This greater marginal output is worth some £45 billion a year to UK plc, around 5% of the UK’s total output.
In many city business locations, where land is scarce, the provision of tall buildings is often the only means by which increased density, and the resulting increased productivity, can be achieved. It is for these reasons many of the world’s major commercial cities have a cluster of tall buildings in the heart of the city. Equally, citing commercial tall buildings in areas outside central business districts or in any areas with poor accessibility appears to offer little or no economic advantage.
While the ‘green’ benefits of high density buildings – reduced land take, more green spaces for other uses, reduced personal travel, better use of public transport - are relatively well known, the economic impact of such buildings is far less understood and has, to date, attracted much less attention.
Liz Peace, chief executive of the BPF, said: ‘It is essential that the debate about high density and tall buildings is well balanced and takes account not just of the impact on the historic environment and sight lines of our cities, particularly London, but also the economic need for efficient growth and development.
‘When the Normans built the Tower of London they didn’t have the technology to go too high, so by default, most modern buildings are going to be higher. While we have a responsibility to protect historical views and sites, we shouldn’t use this as a blanket excuse to stop progress or shelve schemes that could really help generate new investment or provide for our future.
‘Building more densely is better for the environment, as the properties use less land and workers are better placed to make use of public transport. We’re not saying ‘cover our cities in tall buildings’, but what we need is balance, and clusters of tall buildings strategically placed around public transport hubs have clear benefits.
Background
The benefits that high density development can bring in terms of sustainability, notably reduced land-take and the ability to maximise the use of public transport, have been well documented and are already informing planning strategies at all levels.
By contrast the economic significance of high density development has not received as much attention. Greater understanding of the economic impact of such development is essential if a balanced approach is to be struck in assessing the merits of such development.
Previous authoritative research has already established that a doubling of employment density within a given area can lead to a 12.5% additional increase in output per worker in that area. For the service sector the figure is far higher at 22%.
In light of the clear link between employment density and output it is significant that employment density is not particularly high in the UK. Only the Square Mile in the City of London and Canary Wharf are remotely comparable to areas like Midtown Manhattan in New York which has over 600,000 employees per square mile.
The beneficial effect of higher density employment in central London in terms of higher output per person is plain to see. Output per employee in inner London is far higher than output per person in outer London. This higher marginal output is worth some £45bn a year, around 5% of the UK’s total output.
This research has attempted to measure the value of high density development by gauging the value of adding further density to central business districts. Following a methodology in line with Department for Transport guidance, a model was constructed to gauge the impact of adding 80,000 employees to locations near key transport nodes in Inner London.
The exercise was one of changing the distribution of employment, rather than total levels of employment. The economic benefit was equivalent to the annual output for each of those 80,000 workers increasing by £2,500 a year. A second scenario redistributing those 80,000 workers to less accessible parts of Central London produced a decline in output equivalent to £1,600 a year for every one of those 80,000 workers.
The increase in output, resulting from increased density, is an external, public benefit from agglomeration. In our model, around 6% of the agglomeration benefit accrues to the 80,000 ‘added’ employees, while the remaining 94% accrues to other employees in the impacted boroughs – more generally accruing to UK plc. And this benefit accrues only because of the change in the distribution of employment.
How then can we deliver these density increases that contribute to productivity and UK plc? First, the added density must be in the right locations. The modelling suggests that agglomeration benefits are very sensitive to location. Added employment density in less accessible parts of Inner London causes a decline in agglomeration and has a negative impact on productivity. So the focus for increased density should be on locations with good accessibility, particularly with regard to public transport. Furthermore, these locations should be in key commercial districts where private sector businesses can take advantage of existing agglomerations.
Another key question is how increased employment density can be delivered. It is simply not practical to add a few floors across many of the existing commercial buildings in a developed district. Extra floor space, therefore, will principally be delivered by the replacement of existing buildings with new buildings in a few selected locations.
Developers do, of course, need to make a reasonable return on their investments. In weighing up whether to redevelop a site with an existing building which is still letable at a reasonable level of rent a developer has to take into account the cost of demolition, the loss of rent during rebuilding, the cost of building and regulatory and financing costs. For redevelopment to be viable, therefore, there usually has to be a significant increase in development density, which can sometimes be attained only by building up.
Colin Buchanan found a range of benefits through modelling the agglomeration effects of high density development. These included a more productive workforce, knowledge spill-over, increased business specialisation and general economies of scale.
John Siraut, associate director of economics at Colin Buchanan, said: ‘This study highlights the positive economic impact that tall buildings can have, provided they are in the right places. It is the first study to focus upon the economics of tall buildings rather than the aesthetics, and we believe it is a positive step in rebalancing the debate surrounding tall buildings and their benefits.’
The report concluded that relocating just 80,000 jobs within London to more accessible high density locations would increase output by £206 million annually, or £2,500 per worker. The report explained that these benefits would be sensitive to location and can only realistically be achieved around existing transport hubs, with capacity for absorption or expansion and where density is already high and land scarce. That means, in practice, building upwards.
Although employment density is not particularly high in the UK, (London has 250,000 employees per sq mile compared to more than 600,000 in mid town Manhattan) London’s dense economic area is seen as a key factor behind its economic performance, estimated at 38% higher than the UK average. This greater marginal output is worth some £45 billion a year to UK plc, around 5% of the UK’s total output.
In many city business locations, where land is scarce, the provision of tall buildings is often the only means by which increased density, and the resulting increased productivity, can be achieved. It is for these reasons many of the world’s major commercial cities have a cluster of tall buildings in the heart of the city. Equally, citing commercial tall buildings in areas outside central business districts or in any areas with poor accessibility appears to offer little or no economic advantage.
While the ‘green’ benefits of high density buildings – reduced land take, more green spaces for other uses, reduced personal travel, better use of public transport - are relatively well known, the economic impact of such buildings is far less understood and has, to date, attracted much less attention.
Liz Peace, chief executive of the BPF, said: ‘It is essential that the debate about high density and tall buildings is well balanced and takes account not just of the impact on the historic environment and sight lines of our cities, particularly London, but also the economic need for efficient growth and development.
‘When the Normans built the Tower of London they didn’t have the technology to go too high, so by default, most modern buildings are going to be higher. While we have a responsibility to protect historical views and sites, we shouldn’t use this as a blanket excuse to stop progress or shelve schemes that could really help generate new investment or provide for our future.
‘Building more densely is better for the environment, as the properties use less land and workers are better placed to make use of public transport. We’re not saying ‘cover our cities in tall buildings’, but what we need is balance, and clusters of tall buildings strategically placed around public transport hubs have clear benefits.
Background
The benefits that high density development can bring in terms of sustainability, notably reduced land-take and the ability to maximise the use of public transport, have been well documented and are already informing planning strategies at all levels.
By contrast the economic significance of high density development has not received as much attention. Greater understanding of the economic impact of such development is essential if a balanced approach is to be struck in assessing the merits of such development.
Previous authoritative research has already established that a doubling of employment density within a given area can lead to a 12.5% additional increase in output per worker in that area. For the service sector the figure is far higher at 22%.
In light of the clear link between employment density and output it is significant that employment density is not particularly high in the UK. Only the Square Mile in the City of London and Canary Wharf are remotely comparable to areas like Midtown Manhattan in New York which has over 600,000 employees per square mile.
The beneficial effect of higher density employment in central London in terms of higher output per person is plain to see. Output per employee in inner London is far higher than output per person in outer London. This higher marginal output is worth some £45bn a year, around 5% of the UK’s total output.
This research has attempted to measure the value of high density development by gauging the value of adding further density to central business districts. Following a methodology in line with Department for Transport guidance, a model was constructed to gauge the impact of adding 80,000 employees to locations near key transport nodes in Inner London.
The exercise was one of changing the distribution of employment, rather than total levels of employment. The economic benefit was equivalent to the annual output for each of those 80,000 workers increasing by £2,500 a year. A second scenario redistributing those 80,000 workers to less accessible parts of Central London produced a decline in output equivalent to £1,600 a year for every one of those 80,000 workers.
The increase in output, resulting from increased density, is an external, public benefit from agglomeration. In our model, around 6% of the agglomeration benefit accrues to the 80,000 ‘added’ employees, while the remaining 94% accrues to other employees in the impacted boroughs – more generally accruing to UK plc. And this benefit accrues only because of the change in the distribution of employment.
How then can we deliver these density increases that contribute to productivity and UK plc? First, the added density must be in the right locations. The modelling suggests that agglomeration benefits are very sensitive to location. Added employment density in less accessible parts of Inner London causes a decline in agglomeration and has a negative impact on productivity. So the focus for increased density should be on locations with good accessibility, particularly with regard to public transport. Furthermore, these locations should be in key commercial districts where private sector businesses can take advantage of existing agglomerations.
Another key question is how increased employment density can be delivered. It is simply not practical to add a few floors across many of the existing commercial buildings in a developed district. Extra floor space, therefore, will principally be delivered by the replacement of existing buildings with new buildings in a few selected locations.
Developers do, of course, need to make a reasonable return on their investments. In weighing up whether to redevelop a site with an existing building which is still letable at a reasonable level of rent a developer has to take into account the cost of demolition, the loss of rent during rebuilding, the cost of building and regulatory and financing costs. For redevelopment to be viable, therefore, there usually has to be a significant increase in development density, which can sometimes be attained only by building up.
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