### 📄 Context and Authors
The white paper titled "Urban Regeneration: Turning Obsolescence into Value for Society, Nature, Climate - and Investors" was published in September 2024, commissioned by Ginkgo Advisor and Edmond de Rothschild Group. It was independently developed by Systemiq, a consulting firm focused on sustainability, with contributions from a diverse group of experts in urban planning, investment, and environmental fields. The document aims to highlight urban regeneration as a critical investment opportunity to tackle Europe's housing crisis, environmental challenges, and urban economic revitalization.
### 🌆 Urban Regeneration as a Solution
Urban regeneration is defined as the transformation of underutilized land and obsolete buildings into vibrant, mixed-use neighborhoods. This approach addresses pressing housing shortages while promoting environmental sustainability and economic growth. It aligns with Europe’s goals for carbon neutrality, aiming for "no net land take" by 2050 and enhancing resilience to climate-related shocks.
### 📊 Market Opportunity
Europe possesses a significant amount of underutilized urban space that presents a substantial market opportunity:
- Approximately 300 km² of empty office and retail space.
- Between 1,000 to 1,500 km² of brownfield land.
These areas could potentially satisfy most of Europe’s demand for new buildings over the next 10 to 15 years, while providing cities with up to 20% savings in infrastructure costs. Urban regeneration represents an estimated investment opportunity of €4–6 trillion over the next decade.
### 💰 Investment Characteristics
Urban regeneration projects are characterized by several key elements:
1. Creating New Value: The conversion of abandoned spaces into thriving neighborhoods.
2. City-Level Integration: Utilizing urban diagnostics and engaging stakeholders to tailor solutions.
3. Placemaking: Designing public spaces that foster community interaction and connectivity.
4. Resilience: Ensuring sustainability to prevent future obsolescence.
### 🌍 Benefits
The socio-economic and environmental benefits of urban regeneration are noteworthy:
- It provides high-quality housing in well-connected areas, effectively addressing the housing crisis.
- Compact urban designs reduce costs associated with urban sprawl, such as road maintenance and congestion.
- Local economies benefit from job creation and rising land values.
From an environmental perspective:
- Urban regeneration can reduce construction emissions by up to 45%.
- It saves an area of virgin land equivalent to twice the size of Luxembourg.
- The initiative promotes biodiversity through the inclusion of green spaces and reduces vehicular air pollution.
### 📈 Investment Returns
Investors can expect mid-teens returns from urban regeneration projects, with cash multiples around 2x over a 10–15-year horizon. The emphasis on placemaking significantly enhances financial performance by attracting residents and businesses, which raises property values in regenerated neighborhoods and beyond.
### ⚠️ Challenges
Despite the high potential for urban regeneration, it remains underinvested due to:
- The complexity of projects compared to traditional real estate investments.
- Perceived risks, including contamination remediation and planning uncertainties.
- A limited availability of large-scale regeneration funding.
### 🔑 Recommendations for Scaling Urban Regeneration
To enhance urban regeneration, the paper recommends:
1. Demystifying Risks: Classifying projects based on risk profiles and developing tailored due diligence frameworks for institutional investors.
2. Quantifying Returns on Placemaking: Creating tools to assess the financial benefits of placemaking strategies over time.
3. Supporting Developers: Fostering collaboration between experienced developers and local stakeholders, especially in underserved areas.
4. Public Sector Role: Encouraging cities to streamline planning processes, offer tax incentives, and invest in infrastructure to support regeneration efforts.
### 🌟 Conclusion
Urban regeneration emerges as a crucial strategy for addressing Europe’s housing crisis while advancing sustainability objectives. The paper calls on institutional investors to adopt long-term strategies focused on urban regeneration as a viable asset class and emphasizes the importance of collaboration among cities, developers, and investors to amplify its impact across Europe.