Side 59
Hans Thor
Andersen & Sten Engelstoft: University of
Copenhagen,
Institute of Geography, Øster Voldgade
10, DK-1350
Copenhagen K., Denmark.
Danish Journal of
Geography 95: 59-70, 1995.
The present paper examines
the relationship between developments within the built
environment and the land (sites) on which they are
situated. It has four parts: Firstly, problems related
to an urban concept as well as the concept of a "built
environment" are examined. Physical as well as economic
lifetime of urban structures are considered in relation
to urban land, and problems related to the urban land
market are discussed. It is concluded that - as urban
land is socially produced and has a fixed location which
is inseparable from the buildings located on it -
specific problems arise when the buildings decay.
Secondly, problems with respect to industrial
restructuring and the built environment, particularly in
the Copenhagen area, are reviewed. Thirdly, an idealized
model of the development cycles of the built environment
is presented and a number of individual empirical
examples are examined in relation to the model. Finally,
it is concluded that the changing relations between
property value and building value add important aspects
comprehending the dynamics of the built environment.
External relations, however, such as planning status,
development within public services, economic megatrends
etc. must necessarily be included in an analysis in
order to get the full picture.
Key words: Land
rent, built environment, life-cycles.
Dynamics of the Built Environment
The built environment
constitutes an important part of material conditions for
human activities. Though it does influence social
processes, the built environment itself is produced,
used and changed by the very same process. Modern cities
consist of great numbers of physical structures -
houses, roads, pipelines, docks, factories, schools,
hospitals, offices etc - which all are produced,
sometimes even planned, in order to serve as
infrastructure for production and consumption.
Understanding the creation and "lifecycle" of each of
these physical elements requires their incorporation in
a broader social context. The most convincing attempts
to do this so far have been by Harvey (1978): Production
and exchange of surplus value depend on increasing
productivity, which in turn relies on the labour
force and its organization
(including the division of labour) as well as the
available fixed capital (machinery, factories etc).
Harvey describes the circulation capital within the
framework of three different but interrelated circuits:
The first, or primary circuit
of capital, consists of elements involved in the
processes of production. These elements consist of
labour power and fixed capital (machinery). As a result
capital is forced to turn to more profitable - but also
more uncertain - areas of investment, often
intermediated by state or financial institutions.
Changes of capital from one circuit to another, due to
temporary over-accumulation (crisis) within a circuit,
create economic depressions, respectively booms in the
built environment.
The secondary (built
environment) and tertiary circuits (social investments
and expenses) of capital constitute such areas of
profitable investment. In an urban context, investments
in the built environment are of interest.
Capital invested in buildings
circulates slowly, and ventures are thus uncertain; i.e.
future conditions for profitability might change or even
not occur at all. While capital in the first circuit is
manifested as either equipment for the production
process or as labour and raw materials, capital in the
second circuit materializes as the built environment
(fixed capital). As an area of investment the built
environment includes several peculiarities: produced
within the normal course as a commodity, but used as an
aid both to production and consumption. A further
peculiarity of the built environment is its immobility;
once produced it is (economically) impossible to
relocate it.
Contrary to the first circuit,
the fixed capital of second circuit is not productive in
the sense of immediately increasing surplus.
Nevertheless it is necessary to produce an
infrastructure in order to facilitate the production of
commodities and services. Due to the large scale of
necessary investments and the uncertainty of
profitability, individual capitalits tend to
under-invest in the built environment.
Devaluation of the Built Environment
Investments in the built
environment may be regarded as fixed capital that
enhances labour productivity. These investments,
however, are "caught" in a particular form: If the
exchange value enclosed in a building is to be regained
(i.e. converted back to exchange value or capital), the
physical structure must keep its use value fully
employed during the expected lifetime. This is, however,
not always the case.
Side 60
Devaluation of a building
takes place in two different ways: In the first place,
exchange value declines due to diminishing use value,
i.e. decay, wear and tear, gradually destroy the
qualities of the physical structure. Hence, use value
cannot be converted to exchange value, and the invested
fixed capital is lost. This sort of devaluation may be
termed absolute (or physical) obsolescence. Absolute
obsolescence is manifested by unused and often decayed
infrastructures. However, a decline of the exchange
value embedded in the built environment does not
necessarily have to be a result of destroyed use value.
If the use value does not ensure capital a socially
average rate of profit, its exchange value is
devaluated. This relative (or economic) obsolescence is
typically the result of innovations, where a new and
more efficient infrastructure replaces the older one.
From the present paper's point
of view the relationship between land, land rent and
structures on that land is the primary concern which
must be included in any attempt to understand the
changing morphology of cities.
Building Rent versus Land Rent
In order to consider the
relationship between land and buildings further, it is
worth while to consider the assumptions made by Scott
& Roweis (1976). Their basic (and obvious) postulate
is that commodity-production "does not occur in a
wonderland of no dimensions ( )It takes place on land".
Consequently, social processes are articulated in a
geographical space. Scott and Roweis supplement the
basic contradiction of capitalism by adding a third
class: landowners. Private ownership of urban land gives
the owners a "near monopoly" position. The users of
land, firms or households, must pay for the use of this
land.
Land rent is paid out of
firms' profit or workers' wages; land rent thus
represents a reduction either in profits or in standards
of living. For the landowner, land rent is a
compensation for the (temporary) quitting of the land;
thus, the very existence of private landownership
enables the landowner to achieve a rent. Land rents are
then "the observable results of that central
socio-political conflict over the distribution of the
social surplus" (Scott & Roweis, 1976).
Land rent is paid out of
firms' profit or workers' wages; land rent thus
represents a reduction either in profits or in standards
of living. For the landowner, land rent is a
compensation for the (temporary) quitting of the land;
thus, the very existence of private landownership
enables the landowner to achieve a rent. Land rents are
then "the observable results of that central
socio-political conflict over the distribution of the
social surplus" (Scott & Roweis, 1976).
The nature of urban land
contains three main points, a) urban land is a social
product, produced by both public and private planning
and development; hence, the distribution of the benefits
is a central political question in most developed
countries, b) the very existence of private land-
ownership constitutes an important contradiction between
the individual owner and the socially optimal use of
land. Though urban land is socially produced on
non-market terms, the built environment - inseparably
tied to it - is produced, exchanged and used, under
normal market conditions.
The inseparability of urban
land and the buildings situated on it have several
consequences: First, that the existence of private
ownership under market conditions implies owner control
of land use, and thus also the requirement that a
certain level of rent has to be paid. Second, that land
and properties are fixed in space (immobile), but their
values are changing. While prices of buildings depend on
size, age, quality, the possible uses etc., land prices
reflect localization of a specific site. Thus, while
building qualities are determined by the individual
owner, the advantages of a certain location cannot be
controlled by a single landlord no matter what size of
investment made: location in space is fixed. Third,
despite the longevity of the built environment it does
not last for ever (as land does). Over the years the
physical (and economic) decay of buildings accelerates
and forces the owner to maintain or redevelop his
property in order to prevent falling rents. Thus the
relation between building rent and capitalized land
value changes (decreases). This may be seen as a direct
consequence of absolute obsolescence.
The
Economic Life of Buildings
Properties and particularly
buildings developed for specialised kinds of economic
activities loses their value as new types of economic
activities replace old ones. In an urban context the
attainable rate of return on capital in property will
(primarily) depend on the building rent. Theoretically
this makes the lifetime of a building equal to the time
building rent exceeds the rent of the cleared site. The
economic life of the building may be prolonged by
improvements or on the other hand the life may be
diminished by an increasing land (site) value (Balchain
& Kieve, 1985).
Side 61
Even if repair keeps pace
with wear and tear, and if building rent is sufficiently
high to pay an over-average interest on the invested
capital, the possibility of an alternative (more
economic) use will result in relative obsolescence.
Relative obsolescence expresses the existence of a
potential increase of building rent by redevelopment:
The greater the tension (rent gap) between return on
property in its current use and its potential use, the
more likely is a redevelopment (Smith, 1979).
A further development of
Smiths' concept of a rent gap is presented in studies by
Clark (1985 & 1987). Based on the assumption of
economic rationality i.e. to obtain the "highest and
best utility", Clark outlines a model within property
development of a growing city where the start of a new
cycle of development is triggered by increasing rent gap
associated with changes in land use. The idea of a rent
gap indeed brings the relation between building value
and land value in focus and the question really is: Do
building values only reflect construction costs or do
they include location, design and other external
qualities? This is a question which can only be answered
by confronting the theoretical approach with empirical
observations.
Internal and External Forces on the
Changing Urban Morphology
During periods of industrial
restructuring, like the deindustrialization from the
early 19705, locational preferences change fast. Most
major western cities experienced first a relative and
later an absolute decline of industrial investments in
the inner cities. Suburbanization and decentralization
of economic activity and political power jointly exposed
the inner cities. However, at least in certain cities,
this has changed significantly in the 1980s. A new
industrial structure, a growing sector of private
high-tech services and decreasing employment within
manufacturing has started a boom in demand for office
space. This boom has strongly extended the pressure on
current planning status of old derelict sites (often
former or existing manufacturing land) in the inner
cities. In many cases, derelict areas are the result of
the cycle of investments into built environment.
Consequently, a fringe belt is apparent in the urban
fabric (Whitehand, 1987).
The change of planning-status
has in many cases been successful (e.g. London
Docklands, the old industrial areas of Copenhagen);
local authorities have been easy to convince that the
most favourable reply to increasing unem
ployment and industrial
restructuring was to meet the demands from the growing
service sector. The ability to resist the "attacks" in
order to defend coherent and balanced development
according to existing town plans has not been
convincing, especially in cities with no strategy for
their future development. Within many cities, legal
planning status has been changed from an extensive use
(e.g. warehousing & manufacturing) to intensive use
(typically offices).
Changing legal status, or even
the mere expectation of it, has within a few years
multiplied land prices and strongly increased
investments in redevelopment. Thus, altered legal status
itself strongly increases the potential land rent and
thereby the rent gap; As current land use often offers a
low return compared to the potential exploitation, the
probability of redevelopment is further amplified. The
changed planning status could then become an example of
a planning gain, i.e. economic benefits due to altered
town plans that reinforce obsolescence (physical and
economic) of existing built environments.
To summarize, studies
concerned with economic relations of the built
environment cover only a (minor) part of the link
between the social and geographical spheres. Though
major parts of the research on this question have
concentrated on land values, planning, markets,
speculation etc., only a small part has been extended to
encompass the relationship between land and the
buildings on it.
The changing urban morphology
can only be explained by incorporating political,
economic and social relations in the analysis of the
built environment. An adequate analysis must thus
consider both internal and external incentives for urban
restructuring.
In this paper the internal
incentive is, grossly simplified, constrained to the
economic interests of the property owner (i.e. the
return on property). The external incentive stems from
industrial restructuring, relocation of population and
capital, changing geographical centres of gravity of
public services and infrastructure, and finally planning
initiatives. In practice the two are inseparable; a
study for future alterations of the built environment
must consider the relation between return from the
property in current use and return from the "highest and
best utility".
The relationship between
current and potential return, the rent gap, expresses
the possibility for redevelopment. In principle, a
growing rent gap emerges as: a) the difference between
returns from current use and potential use increases due
to alterations of legal status (planning gain), b) wear
Side 62
Figure 1:
Structural outline of the Greater Copenhagen region, a:
build up areas, b: primary roads, c: commuting railways,
d: regional railways, e: areas investigated; (for
further explanation see text).
Side 63
and tear diminish building
values, while land value remains constant, c) increasing
land values and declining building values are due to
changing demands, e.g. as a result of industrial
restructuring.
However, the opposite
development, a declining rent gap does occur; e.g. in
case of lack of demand (cf land for manufacturing
purposes in inner cities), planning loss (typically
marginal edges of the cities) and if existing
legislation implies a reduction of building density.
Restructuring the Built Environment
The
Case of Copenhagen
The relationship between the
built environment and social development is very
pronounced within cities, and Copenhagen is no
exception. Fig 1 provides a brief outline of Greater
Copenhagen, its built-up areas and urban structure. The
CBD is the original medieval and renaissance town,
originally surrounded and restricted by the
fortification (area marked 1). After the abolition of
the fortifications in 1852, a rapid development of high
density mixed areas, containing working class housing
and manufacturing industry took place; a development,
primarily within the limits of what could be called a
"pedestrian city" (area marked 2). The introduction of
the first really efficient collective transport took
place at the turn of the century. At that time, built-up
areas had reached approximately 5 kilometres from the
city centre, all within the boundaries of the "tram
city" (area marked 3), where a number of large
industrial areas had been established. From 1938
physical planning of industrial areas took place on the
basis of The Urban Planning Act of 1938. After the
Second World War, growth changed from a massive urban
structure to a planned suburban growth. A growth along
the (since 1934) developing commuter railways, according
to the so called "Finger plan" and its successors (area
marked 4): the "commuter city".
Two distinctly different
periods of functional and geographical changes may be
identified within Greater Copenhagen in the post-war
period. The first took place in the 1950s and 19605. It
was a period characterized by economic expansion, a
large growth of consumption, an increasing public sector
and an increase in the export orientation of
manufacturing industries. The city was marked by
increasing geographical and functional differentiation
and a growing demographic and social segregation,
amplified bya simultaneous re-localization of the
population to the suburbs (sub- urbanisation). After a
period of recession in the late 70s Copenhagen is again
experiencing a period of rapid restructuring.
Figure 2:
Distribution of employment in Copenhagen 1890-1980 - 1:
Services, 2: Manufacturing, 3: Retail & wholesale,
4: Transport & communication (due to incomparability
of data absolute figures are not available).
While the structural changes
of the late 50s and the 60s were dominated by
consumption and public services, the structural changes
of the 80s have been concentrated within production and
the private sector. It has been a restructuring
involving new demands for qualifications within the
labour force, and has consequently led to considerable
structural unemployment. During the later period
employment within the manufacturing industry has
declined rapidly, and at the same time the number of
jobs within services has been growing. Thus, while the
size of the economically active population has been
relatively stable, the employment figures reveal
significant structural changes (cf. fig 2). The loss of
jobs within manufacturing industry has primarily taken
place in the parts of the city built before this century
(area 2), even though job losses within manufacturing
are found all over the region.
Old industrial areas,
established at the turn of the century, are
characterized by their high density and polluting
industries, an inexpedient mixture of housing and
manufacturing, insufficient infrastructure and to some
extent empty and deteriorating buildings. These areas
constitute "industrial slums" and are an important
spatial reserve for urban development.
Obsolescence of
the old industrial areas is partly physical
and
partly economic. It is related to a geographical- as
well
Side 64
as a temporal perspective on
the formation of capital. Investments in individual
areas have been constrained within specific periods and
areas, and time-related phenomena have been the result.
Each individual area is marked by the rationality of a
certain epoch. Because of a misfit between, on the one
hand the longevity and "fixity" (immobility and
immutability) of the built environment and on the other,
the rapid social restructuring of production, the two
kinds of decay mentioned earlier in this paper are
found. Contrary to physical (or absolute) decay,
economic (or relative) decay is not directly observable.
Sometimes of course, it is quite obvious that a certain
economic activity is economically "inefficient".
However, a study of the economic relations between the
potential possibilities of a given site and the value of
the actual buildings on it should give a more precise
answer.
Development Cycles of the Built
Environment, a Model
Fig 3 attempts to incorporate
the general ideas described in the previous parts of
this paper in a simple model: The cost of any urban
property is comprised by the sum of land (site) and
building values. These values and the relationship
between them may change in time. The two hypothetical
examples of the figure attempt to illustrate this: Line
A indicates the land value (Iv), line B the building
value (bv) and line C the property value (pv) i.e. the
sum of land and building values (left y-axis). Finally
the line D (right y-axis) indicates the building value
as a percentage of the total property value (bv /pv* 100
= bvp). In urban use it is assumed that it is
the building(s) on a site that provides the source of
income, and bvp is thus particularly interesting as the
value signifies quality of the building(s). This
indicates to what extent the capital invested in the
property as such can provide an acceptable rate of
return. For instance, if the buildings on a specific
site are deteriorating (physical decay), their value
will decrease and so will their share of the total
property value. On the other hand if the building value
is constant but the land value is increasing,
bvp will likewise decrease (economic decay).
This will happen not only if the building value is
constant but also if it is increasing at a lesser rate
than the land value.
Example A (fig 3) anticipates
a constant land value and a gradual decrease in building
value throughout the lifespan of the building. In this
case the decrease of bvp will accelerate
until the building is unable to ensure the necessary
rate of return of the invested capital (pv) and the
building will eventually be replaced. Example B assumes
similar conditions concerning the building (bv), but
furthermore it is presumed that land value is
increasing; this might for instance happen because of
increased accessibility due to infrastructure
investments. In this case two important points have to
be made: (1) The economic decay arising due to the
increase in land value accelerates the decrease of
bvp i.e. the decay of the building is
economic as well as physical. (2) The new building
required to achieve a rate of return similar to the
original (as expressed through bvp) is much more costly
than the old one. This might for instance be a
multi-storey office building replacing old industrial
structures.
Figure 3: Value
ratio, property- and land-values. A model. For further
explanation cf. text.
Side 65
Data
Collection
To implement the above
concepts in an empirical analysis of possible changes
within the built environment, it is necessary to
understand the Danish property taxation system (Andersen
1987). Taxation of property involves land (site)
taxation as well as property taxation (i.e. a taxation
oi value of site and buildings). Up to 1981 the
valuation was carried out every fourth year. Since then
each year valuation is automatically computed as a "cash
value", based on actual sales prices within the area in
question.
At the time of the valuation
the value of each individual property is estimated as
the capitalized value of the land, Iv (land value or
grundværdi) as well as the total property pv (property
value or ejendomsværdi) i.e. including the buildings.
The difference between the two is thus an expression of
the value of the buildings presently situated on the
land in question, i.e. pv-lv=bv (building value). Within
the valuations this value is termed the differential
value (forskelsværdi), as the value of buildings as such
is not evaluated.
The property value is
estimated on the basis of assessed sales prices on an
open market at the time of the valuation. The property
value thus seeks to account for all conditions relevant
not to the present, but to a probable future use of the
property. This, of course, includes legal restrictions,
including possible planning decisions. If, for instance,
for obvious economic reasons, it would be expected that
a future owner would develop the property into several
individual properties, this will influence the sale
price and hence the property value. Similar principles
appear in the valuation of the land itself, however,
with the important modification that the site value for
non-residential purposes (not including agriculture and
forestry), depends on the actual type of use (e.g.
offices, warehouses or manufacturing). Site value is
consequently assessed as the probable "cash" price of
the land on an open market, even if the economical best
use might be demolition of the present buildings, this
is not taken into account at the time of the valuation.
As a consequence of these
principles for the valuation of land (site) and
property, the changing relationship over time between
the differential value and the site value should provide
the answer to the question of economic decay on a
specific property. If the relationship (percentage) is
high,it might be assumed that the buildings on the site
are able to pay the value of the property i.e. no
economic decay is found, on the contrary, if the
relationship is low,
an inefficient use is present
and economic decay is likely The relationship might even
be negative, a fact which is often found when buildings
are totally worn out (but nol necessarily out of use!);
it thus indicates that the building is an economic
burden to redevelopment as the site has tc be cleared
first.
The data to be presented in
the following originates from a study carried out for
the (now abolished) Greater Copenhagen Council. The
primary aim of the project was tc evaluate the potential
spatial capacity within existing buildup areas in an
attempt to build selected scenarios for the future
industrial development within the city (Andersen &
Engelstoft 1987 & 1989).
Nine selected areas were
examined (the location of the areas in question appears
in fig 1). A total amount of approximately 4.5 mio. m2
taxable land (close to 2000 properties) containing 4.4
mio. m2m2 floor space has been investigated.
The average plot ratio of the areas is 98%, varying
between 160-200% (in the old mixed areas from the end of
the former century), to 50% (in an industrial area from
the 19305.) The actual value-ratio between buildings and
property (bvp) in the old industrial areas is
often as low as 30-50% (in one of the areas,
bvp was less than 0% in 33% of the
properties). The newer area typically has a bv of
60-90%, indicating a comparatively efficient land use.
Within the total 2000
properties, almost 400 have been analyzed further; i.e.
a time series of the development of site and property
values have been investigated and building
(differential) values and bvp have been computed
according to the model described earlier. Furthermore
building registers have been examined in order to
establish actual physical changes in the building stock
that have taken place on each property. All values and
sales prices have been deflated according to an index of
consumer prices.
In the following paragraph six
selected examples of individual properties are examined
in relation to the model. This is done in order to
illustrate some typical stages of development during the
lifetime of fixed capital "trapped" in the built
environment. Finally the validity of bvp as
indicator of potential changes within the built
environment is discussed.
Development Cycles, Empirical Evidence
With few
exceptions, all properties investigated show a
remarkably similar pattern: During the postwar
period both
Side 66
building and site values
increased until the late 19605. Thereafter building
values generally declined (80 % of all properties),
while the remaining properties experienced a growing
building value mostly as a consequence of investments in
the built environment (improvement and redevelopment).
The six properties described in the following are, with
the exception of one, located in the inner city. In this
connection it is worth noting that all premises with
growing site values in the 1980s are located in the
inner cities. They represent various examples of
build-up properties which are in different stages of
development. Related to the building cycles, two type
groups appear: those where buildings have passed through
a single development phase and those where several
building cycles can be identified (due to data problems,
only the period after 1900 is considered here).
(1) The area of Nørrebro is a
typical example of a mixed urban area from the end of
the former century. Fig 4 illustrates a typical example.
The first buildings on the property were originally
developed in 1896 when the bread factory "Schulstad
& Ludvigsen" made a "two-storey workshop". During
the next 50 years numerous additions were made:
"extension of stables" (1924), a "two-storey production
building" (1926), "grain-silo, garages and
storage-facilities" (1934), "two-storey addition to the
bakery, tree storey store-room, boiler and transformer
station" (1935), "garages and four- storey production
building" (1936) and "four-storey office-building"
(1940). Further additions to the storage and production
facilities were made during the 50s and 60s. After the
closure of the factory in the late 60s the property was
in use for auto repair and storage for several years. It
was finally demolished in the early 1980s and the site
is now in use for a modern cooperative housing scheme.
During the lifetime of the factory, the continuous
investments in the buildings made building value (bv)
keep up with increasing land values until the mid 60s
(bvp is almost constant at approximately
80%). Finally, however, the increasing land values have
forced an economic decay on the property (bvp
decreased to 20% in 1973 and later - as physical decay
accelerates the obsolescence - bvp reached 0%
in 1981). Since the closing down of the original
economic activities and until the demolishment of the
buildings (1983), the economic lifetime of the building
has been ended. This is indicated by the fact that land
value exceeded building value (lv>bv).(2) Fig 5
exemplifies an inner city property located in a
predominantly industrial area at Utterslev. It has a
total floor space after redevelopment (1986/87) of
approximately 21300 m2m2 on 18640 m2 land.
The property was originally developed at the turn of the
century for "housing" and a "dye works". Few years
later, the building density was raised by construction
of a "five storey tenement house". In 1911 two new
industrial
Figure 4: Matr.
n °2454 Nørrebro (Matrikel = cadastre). Building value
computed as the difference between property and land
value. Value ratio computed as building value in
relation to property value (scale to the right).
Figure 5: Matr.
n ° 6kz, 6kt, sap & si, Utterslev (legend: cffig 4)
Side 67
Figure 6:
Matr.n ° 183, Ullerslev (legend: cffig 4)
buildings were erected,
followed by expansion of existing buildings in 1918,
1919 and 1921. During the 1920s a number of new
buildings were constructed for manufacturing purposes
(soap and cosmetics). In 1966 the last expansion of
building took place; during the 1970s some buildings
were demolished. First after the buildings were totally
devalued, the property was sold at a price just below
property value (but above site value). The site was
finally cleared in 1983/84 and redeveloped in 1986/87
for professional services and car sales.
(3) The property illustrated
in fig 6 is also located in Utterslev. It belongs to the
dairy "Enigheden", comprising some 23800 m2m2
with 13560 m2of floor space. The first part
of the factory was constructed in 1888, extended in 1911
("new stables, housing and buildings for production
purposes"). The floor space was further enlarged in
1922, 1923, 1925, 1926, 1929 and a number of times in
the 1930s in order to serve as the major dairy for the
northern inner city. A few improvements during the 1940s
and 1950s enabled the firm to keep pace with
obsolescence. However, from the late 1960s the only
changes on the property have been the demolition of
derelict buildings. Hence, bv has declined during the
19705; the decline has accelerated rapidly in the 1980s.
Today the bv is even lower than the site value (Iv),
i.e. the economic life of the building is over and
redevelopment in the near future is likely to happen.
(4) The property which is
illustrated in fig 7 is located in the industrial area
of Amager East. The property was originally acquired as
a vacant site by a bread factory (1938). The first
buildings were completed in 1940 and several additions
were made in the years to come: A "one-storey laboratory
building" (1951), "garages" (1953), a "onestorey
extension" (1954), a "two-storey factory building"
(1960) and "diesel-tanks" (1973). Through several
additions, changes and improvements the buildings
increased their value and thus the value of the
property. Until 1970 bvp did not show any sign of
decline, however, in the following period lack of
maintenance dramatically reduced the value of the
buildings. By the mid 70s the value of the buildings
more or less equalled the land value and by early 80s bv
was virtually reduced to 0. The property is now ripe for
redevelopment. Several sales (1976, 1980 & 1983)
demonstrate the potential interest in a possible
planning gain by developers.
Figure 7: Malr.
n ° 3824 AmagerE., (legend: cffig 4)
(5) The property in Valby fig
8 was in use as a cooperage until 1962 after which it
was developed for a suspension factory. During the
latter period, several production and storage buildings
were erected. The relative extensive use and lack of
flexibility of use, has, however, made the building
value decline rapidly and by 1977 it reached 0. Since
then the buildings have been in use for various auto
repair and storage activities. The property has been
sold four times since 1983 at continuously increasing
prices. This trade is an example of the speculative
transactions that may take place in order to capitalise
a possible planning gain as the area is proposed for
office development.^) Fig 9 shows a smaller suburban
property in the suburban area of Gladsakse. The property
includes a total 806 m2m2 floor space on 1661
m2m2 land, which has passed
Side 68
Figure 8: Matr.
n ° 1986, Valby, (legend: cfßg 4)
through two development
cycles. The property was originally - in the late 1940s
- used for weekend recreation, but this was altered in
1950 by the construction of a warehouse. The misfit
between the urban development (increasing Iv) and
declining bv, led to a demolition of the warehouse
(1967). In 1971 a new production building was
constructed. Since then, physical decay has gone on and
slightly reduced the building value and the production
building has been used for retail sales by the same firm
(an intensification of its use).
A single convincing
explanation of the examples shown does not exist; each
property must be carefully studied in order to
understand its specific development and present status.
However, the examples do show some general patterns:
First, most property values increased until mid/late
1960s and hereafter declined, though in the 1980s
property values in the inner city increased. Second, two
of the selected cases show clear examples of planning
gain. Third, an important difference in building cycles
is identified; buildings of the inner cities are
devalued due to physical decay, while in the suburbs
this is due to economic decline (absolute versus
relative decline). Fourth, most properties seem to be
sensitive to owner and user shift: As long as the
existing use of the property is profitable, the ability
to keep pace with physical decay is good. Fifth, an
important - but unfortunately yet uninvestigated factor
- is the interaction of rent gap (potential return
compared with current return), planning gain and
speculation.
Figure 9: Matr.
n ° 13ax, Gladsakse (legend: cffig 4)
Table 1: Demolishments and
Redevelopments (1965-86) distributed according to
building (differential) values (bvj; 378 investigated
properties "
Side 69
A further illustration of some
general trends is provided in the table below and in fig
10: In the table the total number of 378 properties has
been grouped according to the size of bvp in
1965; by studying the building registers actual
demolishments and redevelopments during the period
1965-1986 a relationship between bvpand
changes in the built environment has been established.
Several
conclusions may be drawn from the analysis of
the
building registers:
It seems obvious that a
distinct relationship between the relative value of a
building and the property to which it belongs can be
established, i.e. the smaller bvp the larger
tendency to demolition and renewal (cf. fig 10). But
this relationship is of course not necessary in nature;
other factors will influence the dynamics of buildings.
Nevertheless, the figures clearly demonstrate that
• More than 1/3 of all
properties with a building value of less than 40% of the
property value in 1965 (bvp <40%) had been
either demolished or redeveloped by 1986
• More than 4/5 off all
properties with a building value of less than 0% of the
property value in 1965 (bvp <0%) had been
either demolished or redeveloped by 1986
Figure 10:
Changes in the built environment related to the size of
bvp 1965- 1986 (ref. text).
• More than half
of the demolished buildings have been
redeveloped
within the period in question
• The relative decrease in
building value for buildings with a value of less than
40% of the property value in 1965 (bvp
<40%) may be estimated to 2-2.5% /year where the
value of buildings with a value higher than 80%
(bvp >80%) only decreases approximately 1%
/year; i.e. once the deterioration has commenced it
seems to accelerate
Concluding Remarks
The physical changes in our
cities reflect a soical- geographical restructuring of
society. However, the cities and their material
expression, the built environment, are more than just a
reflection. The built environment is an essential part
of society as it both structures and facilitates
socioeconomic relations and processes. The development
and use of the built environment thus has widespread
social and economic consequences - and therefore
constitutes an important political question. The built
environment, as a physical manifestation of fixed
capital, has, however, a number of peculiarities: First,
the built environment is often used jointly for
production and consumption. Second, the built
environment contains inertia due to its immobility and
longevity; once produced it exists for a relatively long
period. Third, as necessary infrastructure requires
largescale investments, it is partly used collectively,
and its profitability is uncertain, the development of
infrastructure is difficult without state-intervention.
Fourth, the very existence of private ownership of land
gives rise to a special class (landlords) and hence a
contradiction between the social optimal land use and
the interests of individual landlords. Fifth, it is
necessary to distinguish between land and the physical
structures on that land. While land is collectively
produced on non-market terms, building space is produced
on usual capitalist terms. Sixth, while land values, in
real terms, are relatively constant over time, building
values are not. Physical structures decline either due
to wear and tear or to the appearance of new and better
infrastructure. The first type of decay is physical
obsolescence leading to absolute decline, while the
second is relative obsolescence leading to economic
decline. Seventh, while the individual owners of
buildings are able to keep pace with physical decay,
they are unable to prevent economic decline (which is
due to urban and social development).
Side 70
The dynamics of the built
environment thus consists of the tension between current
and potential return on properties. The extent of this
tension depends on both internal and external
incentives. The first mostly on the intentions of the
property owner, the second on social relations such as
industrial restructuring and alterations of planning
status.
The future changes of already
developed urban areas are thus an extremely complicated
matter. An understanding of urban dynamics must include
major parts of social, economic and political processes
and relations. The economic approach used in this paper
is therefore an over simplification. Studies of the
interaction between internal and external incentives,
especially government land and planning policy, are
needed.