Real Estate - Property Matters by Afra Raymond
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Changing shape, flavour of PoS - Part II

Published Thursday 24th June, 2004

Last week we outlined some of the emerging issues in our capital city as we proceed to developed nation status.

This week we will look more closely at these trends, in particular the shift by commercial users to the western and northern fringes of the capital.

These are fundamental, long-term changes which will have implications for the shape and flavour of PoS.

The main commercial users are in western and northern fringes of PoS and there are at least six large-scale commercial schemes in the late planning/early construction stages also in those parts of the city. The trend seems likely to deepen with completion and occupation of these schemes.

Even ignoring the human factors outlined in last week’s article, there are significant obstacles to the redevelopment of downtown PoS.

Some of these include the difficult pattern into which most of the city’s land is divided and the stringent carparking requirements the town planners attach to all but retail developments.

Of course the two sets of concerns mesh in that even if one is able to put up a first-class office in the traditional core of PoS, there is the understandable reluctance of office users to make that choice, given the more attractive environment now offered by the fringes.

One of the key points in understanding the changes we are discussing is that a large part of the areas to which most of the commercial activity has been directed are in fact owned by the State with the occupiers of those lands being leaseholders. The areas in question are:

Woodbrook—with leases granted by the PoS Corporation.

St Clair—with leases granted by the State.

“Corbeau Town” or lower Woodbrook—with leases granted by the State.

These lands are the majority of the land in the “target areas”, with only the relatively small Newtown and Tranquility Estates being freehold in the western fringe of PoS.

Most of these leases restrict use to single-family residential and this gives the landlord the ability to control the character and pace of development outside of the town-planning framework.

In this situation, the landlord is not usually obliged to agree to a change of use and that bargaining power is used to change the terms of the lease in favour of the landlord in cases where a more beneficial use is being applied for.

The landlord can seek payment for their permission to change use by increasing the rent, payment of a lump-sum payment or some combination of those.

As we discussed in previous columns, there are challenging issues in both the funding of local services and the management of PoS. How can the growing pressure on these limited resources be managed to ensure the best long-term benefits for our capital?

The consideration of this issue would have to include these points:

Benefits of leasehold schemes

A leasehold scheme is the model used to sell land in an integrated development scheme and the selling point is that there will be some order in the use of the properties in that scheme.

For example, there can be restrictions on use: opening hours: quality, height and numbers of buildings and so on.

Purchasers of these leases sign up with knowledge of the restrictions with the assurance that these will preserve the value of their investment.

There is a strong feeling here among purchasers of leaseholds that they have “bought the property” and can do as they please, whatever the lease specifies.

I have to say that this is sometimes a selective sentiment since one can find the same people determined to both maintain the character of their own upscale leasehold neighbourhoods and ignore the restrictions in leases in the “target” commercial suburbs of PoS.

There can be no doubt that the establishment and proper management of a strong leasehold scheme can operate to preserve values by maintaining the intended character of a neighbourhood.

Some of the examples of this in “greater” PoS would include Westmoorings, Fairways, St Clair (north of St Clair Avenue) and of course, Woodbrook, before the current pressure developed to its present point.

Woodbrook concerns

I listened with great interest to the Power 102FM programme last week Wednesday night, which was a live broadcast of a town meeting of Woodbrook residents with their MP, the mayor and the director of town planning.

The negative impact of the rapid commercialisation of this suburb was in every voice I heard. The complaints were deep and heartfelt. People felt that their neighbourhood was under assault; they were unable to get into their driveways; there were constant parking problems in the area; prices had skyrocketed with only commercial users being able or willing to buy and so on.

The biggest question was: what are the authorities doing?

Democratic Deficit

The seminal point emerging from that tense meeting was the sense of powerlessness these residents felt in controlling the way in which their community was being reshaped around them. When we consider the falling population of PoS, and the strength of the business lobby, it is not surprising to note the diminishing influence of the residents.

Can we build a world-class city if stakeholders feel that their legitimate concerns are sidelined?

Proper public policy would give a voice to all the stakeholders.

One size fits all

As mentioned in an earlier column, the application of this kind of policy can lead to serious losses to the public purse.

For example, in Woodbrook, the City Corporation’s policy is to charge annual residential rents of about 33˘ a square foot for new leases to residential users. The rate for commercial users is $1 a square foot.

This policy has the undoubted benefit of certainty since all the players know the cost of their choices, but there can be serious losses to the public purse if possible benefits are lost.

The practical application of this means that a highly-visible lot on Wrightson Road or Ariapita Avenue is charged the same rent as one on Roberts Street or a side-street.

It is acceptable that the City Corporation would allow limited commercial use on their lands, but it is arguably a mismanagement of those public resources to allow these benefits to escape as a matter of policy.

No prudent property owner would rent shops in a mall at the same rents, there are different prices for corner spots, units with external visibility and so on. And rightly so.

The Kingston outcome

The issues raised here are pointing towards a divided PoS in the near future, with the downtown being a stark, unappealing place and the west of the city being the trendy suburb.

There is a real possibility of our capital becoming like Kingston, with the necessity to invest hugely to recapture the downtown area as an attractive destination. We still have time to avoid the possibility of the heart of our capital becoming “ghettoised.”

Next week, we will conclude by examining the broader proposals for the development of PoS.

Afra Raymond - Property Matters

The negative impact of the rapid commercialisation of Woodbrook was in every voice I heard. The complaints were deep and heartfelt. People felt that their neighbourhood was under assault; they were unable to get into their driveways; there were constant parking problems in the area; prices had skyrocketed with only commercial users being able or willing to buy and so on.