Private investment in public urban space: Dutch real estate developer and investor motivations and conditions

Private investment in and management of public urban space has been a subject of practice and debate in real estate studies and industry in recent years (De Magelhães & Freire Trigo, 2017; Le Clercq et al., 2020). Such mainly Anglo-Saxon endeavours can be explained by an continuous austerity era of government retrenchments in urban planning and expanding private sector-led urban development practices (Heurkens, 2012). Moreover, real estate developers and investors are increasingly aware of the economic added value of attractive public space for their assets and the potential benefits of public space investment and management (Urban Land Institute, 2018). Whilst previous studies focused on the implications of private investment for public space governance arrangements, publicness safeguarding mechanisms, or private sector business benefits, little research has been conducted on the actual reasons for real estate developers and investors to pay for the public realm. Therefore, this research (Van de Gaar, 2023) aims to explore the possibilities of extra voluntarily private investment in the public space of urban regeneration projects, by studying the main conditions and motivations. In order to do so, we conducted a literature review resulting in an adapted conceptual framework from De Magelhães & Freire Trigo (2017) which we specifically applied to the Dutch real estate practice. Based on two qualitative research methods, semi-structured interviews with eighteen real estate professionals and an expert panel validation session, the following results are distilled. In terms of motivations, our study reveals that the location and immediate surrounding is decisive for real estate companies’ willingness to extra invest in public space, as these investments do not pay off as much everywhere and are conditioned by the financial viability of urban regeneration project itself. Additionally, real estate companies indicate that ESG business objectives are increasingly important in investment decisions, with public space functioning as potential tangible means and proof. In terms of conditions, real estate developers and investors indicate that control over assigning rights, distributing responsibilities and shaping characteristics of the investment in public space is decisive. They want to be able control how extra investments are spent to ensure that their own company vision and the development concept for the project is realised to a sufficient degree. The biggest challenge in making public-private agreements about the extra investments are local authority public space standardisation regulations that hinder customization. Additionally, the lack of proven private management instruments for the use phase currently directs Dutch developers and investors to full legal ownership of public space as the only (limited) solution. Based on the above empirical findings, this research illustrates that it is not possible to determine an ‘ideal framework’ for the distribution of roles and responsibilities for private public space investment and subsequently the management thereof, as public space is non-generic in nature. Nevertheless this research indicates possible conditions under which real estate companies are willing and able to extra invest in public space, thereby seeking collaborations with the public sector and establishing attractive public spaces to the potential benefit of both organisations and users alike. Scientifically, our study adds new insights about the importance of private sector investment considerations into public-private agreements besides those that safeguard the publicness of urban spaces. Research limitations include the external validity (generalisability) of the findings beyond the Dutch institutional real estate practice, and the internal validity due to the limited triangulation and qualitative nature of methods used.