Property Markets and Urban Development A Case Study of Central Area Office Development

The operation of the real property market will inevitable impact on the ability of an urban region to exploit, maintain or create competitive advantage and thus its ability to generate high and sustainable economic growth relative to its competitors. In the past decade the ability to retain and attract advanced services has been a key dynamic of urban growth and development in both primary and secondary cities. Thus a built environment which is equipped to meet the accommodation needs of such activities becomes a key pre-requisite for growth. A key issue relates to the very problematic nature of the markets supply side adjustment. This reflects the complexity of the process through which new space is created and the necessity within this to satisfy a significant range of legitimate and sometimes conflicting interests. The institutional capacity of a local property market to deliver new space will inevitably play a role. Adjustment is further complicated by issues of path dependency in the urban build environment. Buildings once created have market implications which may in certain circumstances last hundreds of years. The urban built environment is inevitably locked-in by its past history with the timing of previous development cycles influencing both the timing and supply of future developing opportunities Combined all these factors ensure that there will always be an unavoidable mismatch between accommodation requirements and the characteristics of the stock which is actually provided. This mismatch manifests itself in terms of pricing with markets exhibiting persistent problems of over and under pricing which distort market responses with the consequent over and under production of space. Using a broadly institutional economics approach to markets (DíArcy 2006) this paper attempts to further our understanding of the role played by property markets as determinants of urban economic development through a comparative case study analysis of recent office development activities in the central areas of two contrasting British urban regions ñ Manchester and Reading. This has two principal objectives. The first is to use the case study analysis as a mechanism for furthering our understanding of how the production of office space is driven by a complex combination of factors related to the institutional structure and capacity of local property markets interacting with wider market circumstances. As a result emphasis is placed on the characteristics of the players involved, both private and public ñ or some combination of both, their objectives, the respective policy and market contexts, and finally issues of path dependence as determinates of development opportunity. A second objective is to provide a critical assessment of the potential contribution of urban restructuring strategies based on central area office renewal as an effective contributor to urban growth and development. The paper concludes with a consideration of the contribution of the analysis to furthering our understanding of the role played by property markets as both facilitators and inhibitors of urban development and provides some suggestions for future research.