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Developing at the Rail Interface

24th August 2016


We see increasing levels of collaboration taking place in the market where developers focusing on the commercial and residential sectors have been coming together to create their own fusion of mixed use “destination” development. Many are now exploring new and less conventional settings such as at the rail Interface, with interesting outputs. But, this is not without its challenges and savvy developers need to ensure their supply chains are up to the task.


There has been a shift in approach to expansion of developments to meet market demand. In the past such expansion was outwards and created urban sprawls of existing towns and cities. New trends are driven by land availability, global warming, traffic, pollution, air quality, and the demise of the car.  There is a growing demand to design developments that address how we move in and around cities to create communities within our cities that are sustainable and environmentally friendly. This has created the need for better use of brown sites and to create communities within cities that are focused on public transport. These new communities are adapted to use transport to generate new developments which would not have been considered previously. These are Transport Orientated Developments (TOD) and we provide services that have been tailored to maximise value by exploiting opportunities between station hubs and communities, and by de-risking the interfaces between developments and surrounding Transport Infrastructure.

UKPLC is now quite literally in the business of “hot property”, as investment growth in property developments presents an attractive opportunity to funds seeking reliable returns. The challenge for developers however has been in finding viable land parcels which are accessible by local transport links and have minimal physical and planning policy constraints.

The growth in Transport Oriented Developments involving a physically closer tie between private developments and the railway infrastructure has resulted in a resurgence of new development opportunities on redundant railway land particularly in London and the South of England.

Many rail infrastructure asset owners like TfL, London Underground and Network Rail, have sought to realise better value from their real estate by attracting developers keen to build out schemes on or near to their assets. This has however come at the cost to developers facing new railway related risks.  Such risks materialise as commercial risks due to delays and cost escalation but more significantly, where the consequence of loss or damage is measured in fines worth millions of pounds and in severe cases, a jail term for the directors and managers involved.


So, why is it so difficult to deliver next to a railway?


To put it simply, the priorities of rail infrastructure owners and property developers do not generally align. Developers want value for money, a quick build and a reliable supply chain that understands its commercial drivers…all with a sprinkle of innovation and creativity thrown in to maximise commercial gain! Meanwhile, railway infrastructure owners are charged with providing a safe, reliable and disruption free railway corridor for train and freight operating companies to use, under the watchful eye of the regulator.

This begs the questions, “Is there a way for developers and rail infrastructure owners to align their objectives? Can both entities bend and be flexible enough to accommodate each other’s drivers? Will aligned objectives and flexibility come at the expense of railway safety and service continuity or development viability?

To the uninitiated, the answer to these questions would seem to be “NO.” However when one scratches a little deeper beneath the surface, a number of observations can be made to the extent that we could consider the goals of developers and infrastructure owners may not be mutually exclusive. We explain…

Both entities work to strict timescales. Rail infrastructure owners and their asset managers use windows of time within service patterns, known as “a possession” to deliver their works. These asset managers and owners are generally unwilling to commit to project development programmes, constraints and budgets. This position can put at risk the commerciality of the development unless the issues are effectively managed. With the right kind of planning and foresight, smart and organised developers can take advantage of these and be assured that key milestones are met within finite periods of time and budgets are delivered.

Moving on to our second point. Both entities operate from funding provided by external sources, Network Rail being funded by the DfT and Developers normally funded by Investors. As such, both represent delivery vehicles charged with delivering greater value. Conceiving well planned schemes with integrated rail and development cost plans makes it possible for projects to identify and isolate key areas of risk, where targeted allowances can be made for implementing effective mitigations. When this is achieved with the right combination of rail and commercial development expertise, the results can offer an attractive opportunity for investing in the upgrade of railway assets in return for developers maximising their real-estate potential.

Both entities have to deliver an undertaking that schemes will meet assured technical requirements. Developers often require assignable warrantees that effectively tell investors and leaseholders alike, that due skill and care have been used in conceiving the scheme and that a continuing liability will remain in place for the developer to put things right should future issues arise. Network Rail, through its technical standards makes it mandatory for schemes to comply with its regulated requirements at all stages. The opportunity here is that developers who pass these railway tests of compliance, can use this to demonstrate to their funders and their underwriters how delivery and operational risks are minimised.

To make this work all the way through planning, design, construction and into operation, it is important to find the right people who understand these motives in equal measure, who have a detailed knowledge of the rail regulations as well as a detailed knowledge of property development as they have to be able to answer the question “What comes next?” when plaiting together each strand of rail infrastructure and development at the interface.

Is this in the public interest?


With the right planning policies in place, effective management of the railway interface and innovation, TOD provides new opportunities to turn around areas of disused railway infrastructure blighted by environmental contamination, crime or other forms of decline. New and sustainable communities in our cities become real possibilities with the potential to create developments that meet the aspirations of society, the environment and investors. However, conceiving such plans requires a change of image as much as a change in physical makeup and this is where engagement from Registered Providers, Local Authorities, as well as community and stakeholder groups can be used to come up with creative, relevant and sustainable solutions that have an easy fit with existing maintenance and operating frameworks.


Unlocking the potential


Armed with the tools and understanding described above one can step back from the detail and look at the opportunities that TOD can open up on a macro scale. With this new perspective it is easy to see how new untapped veins of development can be targeted by developers or marketed by rail infrastructure, asset owners and operators. New opportunities will exist for both to work in partnership to plan and develop schemes around transport hubs, offering a “focal point” for urban growth connected by a framework of multi modal transport links. The government has done a lot in recent years to help incentivise this approach, designating Opportunity Areas along new and existing transport corridors across the UK. At these locations, established Enterprise Zones with Community Infrastructure Levies have made it possible for Local Authorities to invest in enablement, using new critical infrastructure to unlock land and make it viable for new off shoots of TOD style growth.

So will this work across all of the UK’s railways? Well “super-cities” such as Delhi, New York, Dubai, Singapore, Hong Kong, China and Tokyo have all been built on the premise of TOD and they have emerged as real examples of success. Their symmetry between commercial opportunity, personal access and operational efficiency have set them apart as destinations that offer huge economic potential. However, the UK is a much older canvas which has “signature cities” that are rich in history and cultural influence. It therefore faces the challenges of trying to achieve the benefits of TOD, within the constrained geography of its long established railway infrastructure. Perhaps a TOD “light” should be considered for the UK instead, where a blended use of the existing infrastructure, with different classifications of developments at strategic locations will be the way forward for new developments along the rail interface. All of this can be achieved through consultancies such as Capita Property and infrastructure, who have the skills and ability to combine expertise in real-estate with infrastructure delivery, bringing together the right developers, social groups, town planners and master planners to conceive new developments and regeneration opportunities in balance with local communities and in partnership with rail infrastructure, asset owners and operators

Capita have a lot of experience of delivering interface management services to UK developers and rail infrastructure asset owners on schemes. Two of our current schemes are along the Network Rail Anglia route running east from Fenchurch Street, at Tower Hill and Camden but also a major new scheme at Brent Cross Thameslink. Other TOD type schemes that Capita are currently working on involve delicate interface with both TfL and Network Rail transport infrastructure in urban regeneration programmes in London. Our services have transformed schemes that were previously nonviable, reduced risk and improved certainty of outcome for our clients. In doing so we have played a leadership role in shaping our client’s delivery strategies, realising development opportunities hitherto not possible.

 

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