Redeveloping derelict and underused historic city areas: evidence from a survey of real estate developers

Abstract

Are economic incentives and regulatory relief useful tools for encouraging reuse of abandoned or under-utilised urban sites with historic buildings? Answering this question is of key importance for many European cities and for older US cities, and has important implications in terms of urban sustainability and “smart growth” initiatives. This study uses conjoint choice experiments to explore the relative importance of economic incentives, regulatory relief, land use and property regime offerings at under-utilised historic sites in Venice, Italy. Real estate developers and investors were surveyed, and asked to choose between pairs of hypothetical projects in three Venice locations, as well as between one of these projects and the alternative to do a development project elsewhere. Statistical models of the responses to these choice questions indicate that respondents were sensitive to the price of acquiring the land (and hence to any policies that influence prices), and particularly sensitive to the property regime that would be granted to developers and investors and to the allowable land use. It is concluded that the city should focus on offering land uses and property regimes that are more in tune with developer demand.

Keywords:

• conjoint choice experiments
• real estate developers
• building conservation restrictions
• redevelopment incentives
• brownfields
• infill redevelopment

Acknowledgements

This Research was financed by the Italian Ministry of Education, University and Scientific Research, Research Project PRIN 2005 – Economic Valuation for the Conservative Reuse of Historic Buildings and FEEM Fondazione Eni Enrico Mattei.

Notes

 1. Property taxes are calculated using a different approach than in the US. This different approach has encouraged buyers and sellers to under-report the sale price.

 2. The proposed underground system – the Sublagunare – would run from Venice airport to the Arsenale. The proposal is highly controversial: the Mayor, environmental organisations and right-wing parties are opposed to it, while others (members of the City Council) are in favour of it and have expressed a hope that it will help revive the Arsenale (Gazzettino, 4 October 2005). At any rate, the project is slated for priority funding and is currently undergoing a formal environmental impact assessment.

 3. See Meyer (1996) for a lucid presentation of experimental and quasi-experimental approaches in econometrics.

 4. Most applications to date have adopted indirect utility functions that are linear in the attributes and in residual income. Lusk and Bailey Norwood (2005) study the effects of experiment designs and models in the presence of interactions between attributes, and Alberini et al. (2007) adopt an indirect utility function that is non-linear in the coefficients and in the attributes.

 5. See Scarpa and Rose (2008) for an overview and discussion of statistical experiment design concepts – namely, the choice of attribute levels, creation of synthetic alternatives to be examined by the respondents, creation of choice sets for each choice question, and assignment of the respondents to the variant of the questionnaire.

 6. These are selected examples from the environment and planning literature. Additional examples were discussed in Section 3. In the interest of brevity, marketing and health applications have been omitted from this brief review. See Alriksson and Öberg (2008) for numerous references in the environmental area.

 7. Readers are remined that in Italy, the Region is a jurisdiction (not a mere geographical area) with powers and authority similar to those of a State in the US and a Province in Canada.

 8. MIPIM is an international trade fair for the real property sector that is held every year in Cannes, France. In 2009 there were approximately 18000 participants representing real estate development companies, cities and government agencies, institutional investors, etc. from 80 countries (see www.MIPIM.com). The Real Estate Advisory Group (REAG) Italy meeting was held in Milan, and it was a somewhat smaller affair. The interviewers at both venues reported that they were able to persuade one person to complete the questionnaire for about every four that they approached, giving a response rate of about 25%. At both venues, those persons who declined to participate in the questionnaire stated that they were not interested in projects in Venice and/or were unfamiliar with this real estate market.

 9. The survey questionnaire benefited greatly from the small pretest conducted at the UrbanPromo conference in November 2005 in Venice, Italy, which was attended by approximately 180 parties. Ten attendees were persuaded to self-administer a preliminary version of the questionnaire using laptop computers.

10. Respondent types were approximately the same across the three survey waves.

11. A total of 21 respondents consider the cost of purchasing the property ‘often’, ‘sometimes’ or even ‘never’ important. Of these respondents, 17 also consider the prestige of the location ‘always’ or ‘almost always’ important, suggesting that price considerations might be tempered by the prestige of the location. It is also likely that those 21 respondents reasonably expect to recover purchase costs completely when selling the development project.

12. This news appeared in The Gazzettino, the local Venice and Veneto newspaper (Unknown author 2006).