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People: in focus – Dr Sulafa Badi on the ripple effect of infrastructure investment

25 August 2016

sulafa-badi

Dr Sulafa Badi, together with Dr Stephen Pryke, has recently finished a report into how infrastructure hubs act as strong economic stimulants. Among the fascinating findings of the report, published by The Royal Institute of Chartered Surveyors (RICS), they found that every dollar spent on infrastructure generates a 5-25% return on investment. We spoke to Sulafa to find out more about this exciting research.

What made you interested in studying this area?

Across the world, the development of transport-based infrastructure hubs such as a rail stations, airports, ports or major road interchanges offers a unique opportunity for the wider ‘ripple effect’ of economic stimulants and the subsequent creation of a sense of place in the surrounding area.

What did you study and how was it made possible?

The study we conducted is an international analysis of the decision making processes in the planning and delivery of mega rail infrastructure projects in the UK, China and India with a focus on railway transport hub development and their surrounding environments. The study involved three mega-rail infrastructure hubs: King’s Cross St Pancras Railway Station (London, UK), Guangzhou Railway Station (Guangzhou, Pearl River Delta (PDR), China) and Karkardooma Railway Station (Delhi, India). The study was funded by the Royal Institute of Chartered Surveyors (RICS) and I had the great opportunity to work as part of an interdisciplinary and international research team including my colleagues Dr Stephen Pryke, Dr Illona Kusuma, and Dr Mark Page from UCL, and architects Supriya Thyagarajan and Chhavi Lal from Perkins Eastman, Mumbai, India.

What did you find?

We have learnt a lot by working on this project. Most importantly, we observed the key ingredients necessary for infrastructure investment to enable wider economic and social benefits out from the ‘Hub’ to the ‘Place’. A good example of these benefits is the significant impact we can see through the redevelopment of King’s Cross St Pancras station into a major international rail station, a strategic hub for rail services and a centre of urban renewal and transformation within central London in the form of the 67-acre King’s Cross Central project, labelled as ‘the biggest inner city redevelopment in Europe’ which transformed the railway lands from a ‘Cinderella’ district rejected by large businesses into a premium retail destination and an extensive mixed use development complex with a unique array of offices, shops, bars, restaurants and housing.

We observed that the successful realisation of this ‘ripple effect’ is largely driven by effective interaction among multiple actors including investors, developers, landowners, planning officers, politicians and community groups. These actors have diverse objectives (social, political, environmental and economic) and hence their active involvement was critical in the successful delivery of the megaprojects. For example, the role of the local authorities and Argent (the property developer) are most evident in Kings Cross. In China’s PRD, the powers of state institutions such as the Ministry of Railways (MOR) cannot be overlooked. In India, the role of the state as well as government agencies such as the Delhi Metro Rail Corporation (DMRC) was paramount. Relationships between project actors were found to be mostly dynamic and took several forms with the best results achieved when interactions are ‘communicative’ in which governmental agencies have blended their strategy with those of multiple non-governmental actors.

The timeliness of decision-making was also critical and the developments were driven by ‘having the right project in the right place at the right time’. For example, the development at King’s Cross Central was facilitated by timely decision making at the intersection between land-use planning and the wider infrastructure system planning. In the case of Guangzhou Railway Station and the wider PRD development, the project was energised by the involvement of actors who are empowered in such an environment to influence the process positively in their favour.

You mentioned the political and economic circumstances. Were those the most important factors driving the ripple effect?

A supporting political environment is certainly critical. In the case of King’s Cross, the decision to relocate Britain’s first high speed railway, the Channel Tunnel Rail Link (CTRL), from London Waterloo rail station to St. Pancras has played a key role is driving the project. In the PRD, city officials used their Guanxi network to bargain for influence to add benefits for their cities in the proposals and were able to push for their desired rail routes to be put forward. In Karkardooma, the construction of the Delhi metro infrastructure has received unequivocal support from all parts of the government which was instrumental in driving the project forward, against the multitude of challenges often experienced by public sector projects in India.

A favourable economic context is also paramount and we have observed an unprecedented interest in infrastructure as an investment opportunity for the private sector which can immensely help drive the megaproject. In King’s Cross, the involvement of private investors in creating representative public spaces in the urban core was encouraged by the office market recovery since the early 1990s with office space assuming the largest share of the development. The Delhi Metro and its Land Value Capture (LVC) funding mechanism which includes private sector actors and international finance also signals the significant institutional change underway in India.

What are the effects on the surrounding properties and have you observed any social implications of this?

The ripple effect could be seen most clearly in the positive correlation between the redevelopment of a transport hub and the value of land surrounding it. In fact, the effect on residential land values could spread over a range of up to 3 miles from the station location. The effect on commercial property is even greater but more narrowed and often confined within walking distance or possibly half a mile of the station. For instance, the development impacts at St Pancras have been significant with retail rent increasing by 53% in Camden and 38% in adjacent Islington between April 2001 and January 2006. In 2014, Camden experienced the strongest growth amongst all London’s boroughs, with an outstanding 42% year-on-year increase in average house prices. Islington saw a 26% annual price change.

This may not be without its drawbacks. In fact, a recent survey showed that 85% of users of St Pancras station have managerial, administrative or professional occupation. This apparent specialisation in St Pancras station may signal a form of ‘gentrification’ in the use of large railway stations with potential significant impacts on the evolution of their surrounding neighbourhoods. Gentrification is basically the purchase and renovation of property in declined urban neighbourhoods by more affluent individuals, which subsequently results in the increase of property values in the area although also the displacement of low-income households and small businesses. Local authorities should play a major role in remedying such effects by putting in place polices to protect local communities.

The research was published by the Royal Institute of Chartered Surveyors (RICS) and can be downloaded here.