Working on future-proof inner cities requires system breakthroughs, also in major cities. Partners of the recently started ‘City Deal Dynamic Inner Cities; Directing transformation’ will get to work on it. ‘Perhaps the biggest challenge is to unlock the hidden potential of inner cities through transformation.’
‘Physical shopping street less popular than online variant’, headlined Stadszaken last summer. Source was a survey from a well-known online payment service. 32 percent of respondents indicated that they preferred online shopping, compared to 30 percent for physical shopping.
Reliable research or not: the function of the physical shopping street is under pressure. In the first 8 months of 2023 alone, 1,400 stores disappeared from shopping streets, according to a new exploration of the retail market by Stec Group.
Retail rents fell by 2.5 percent. Only one in ten centers has a ‘healthy’ vacancy rate of 4 to 5 percent.
“This is the shopping street from a retail and investor perspective,” emphasizes Jos Sentel, program coordinator of the City Deal. ‘For others, this offers an opportunity to give the transformation a boost.’
But before these new opportunities are capitalized on, the decline in physical shopping in Rotterdam, as in other cities, will lead to food shortages in the city center, says Esther Roth, project leader at the municipality of Rotterdam. ‘We don’t yet have a very good answer to the question of what should replace it.
Fast food restaurants in empty buildings
The market already knows what to do with it. Empty shop premises in, for example, the Nieuwe Binnenweg or the Zwart Janstraat are quickly filled with takeaway restaurants.
Roth: ‘The question is whether you should want that. It is good to put our heads together in a City Deal context and try to achieve breakthroughs through experiments or other types of innovations that increase cities’ options for action.’
The City Deal Dynamic City Centers is a City Deal of mainly large(r) cities. The entire G4 is participating. The real estate industry is also involved, although in the second ring.
‘We will keep them informed. When we start running pilots, we will need real estate parties. The starting point is that the transformation is mainly achieved through real estate,’ says Sentel.
Impulse approach Shopping areas (IW)
This commitment from the G4 appears to be partly a response to the subsidy scheme for the Impulse Approach to Shopping Areas (IW) of the national Retail Agenda. G4 cities cannot currently claim this.
“During the Covid crisis, the thinking was that big cities were more resilient and their inner cities would recover more quickly from lockdowns,” says Roth.
Large cities are also not exempt from the consequences of major transitions, Roth emphasizes, of which the digital transition has the greatest direct impact on the city center economy.
Large chains collapse. According to her, many smaller companies will also not be able to keep their heads above water. “We have to look ahead to prevent the city from ending up in a situation where the city can slide.”
‘It is a perfect storm in which inner cities have ended up.’
Inner cities are complex areas where different stakeholders and a multitude of owners live alongside each other to a certain extent. ‘That went well until about ten years ago. Inner cities were organisms with a certain self-healing character. “If something changed, the city center would adapt,” says Sentel.
He continues: ‘The latter is no longer the case. So many things have happened. Covid, digitalization, climate change, the mobility transition. It is a perfect storm in which inner cities have ended up. The self-regulating capacity of the organism is put to the test.’
The City Deal therefore looks beyond retail alone. ‘The city center can provide answers to current questions regarding space scarcity. The City Deal is about the city center as a place to live and work, about the energy transition, the mobility transition, etc.’
Four development themes
Sentel also sees former shop premises falling prey to cheap catering, fast food chains and takeaway restaurants. ‘It is now very difficult to counter this, because the cities’ perspective for action is still limited. This must change.’
In the City Deal Dynamic Inner Cities, the partners are working on experiments and pilots around four development themes that can provide a direct or indirect answer:
- Property;
- Content/branching;
- Financing/fund formation;
- Undermining crime.
Real estate is the basis for every theme, Sentel emphasizes. ‘For each of the themes it is necessary to understand what the role of real estate is and how the parties involved deal with it. Civil servants and stakeholders with real estate interests must understand each other better.’
‘If you have the attitude that the real estate sector is by definition playing tricks on you, or that officials at city hall have no idea about it, then it is difficult to look for solutions constructively.’
The idea behind the City Deal is that cities and the real estate sector must work together better in the transformation of inner cities. And that this requires ‘system breakthroughs’. ‘Especially in the closed setting of a City Deal, experiments can be conducted with a limited number of parties and new knowledge can be gained.’
Hidden potential
Sentel continues: ‘Perhaps the biggest challenge is to unlock the hidden potential of inner cities through transformation. Many cities want to work on living above shops. You don’t want to know how much space is unused.’
The latter was often the result of a simple calculation. Shops on the ground floor generated so much rental income that owners were actually not interested in the rest. ‘Now that income from shop rental is under pressure, it becomes interesting to think about changing functions, and therefore also using the floors.’
‘We need to position the city center much more as a place to live and a place to work.’
Sentel also points to the possibility of introducing new work functions into the city center. ‘We need to position the city center much more as a place to live and a place to work, of course in addition to a place to stay and shop.’
He emphasizes that retail is not the solution, but part of the city center problem. ‘If we want to make the city center future-proof, we have to look at the programming options much more broadly. Retail is then ‘only’ one of the options. We must especially start thinking about how cultural and work functions are also given a place here.’
Regulations bottleneck
This work function is a spearhead for Rotterdam. The city wants to focus on more productive activity in and around the city center and in community centers. The question remains how this can be put into practice, says Roth.
These are activities that generate a lower return for the property owner. They therefore do not simply decide to invest in this.
While social housing is legally enforceable, this does not apply to ‘social business space’. According to Sentel, it is still difficult to do anything about this. ‘There is little point in calling owners to account for their responsibility. Investors often engage intermediaries such as real estate agents. The incentives are wrong. Or there aren’t.’
Regulations are the main bottleneck that currently prevents local governments from achieving system breakthroughs, say Sentel and Roth. The City Deal offers room to experiment with solutions that do not yet have a legal basis.
Awareness and vision
When asked whether owners are sufficiently aware of the urgency of the task in inner cities, Sentel answers that they are sometimes still in the denial phase, hoping that the retail market will pick up again. Investors and developers also often lack a clear vision of the future for the city center, other than for their own retail real estate.
Sentel does notice a trend that investors are showing more interest in so-called social investments based on their ESG objectives. ‘The social challenges in inner cities are major. Also the social profit to be achieved. This offers opportunities for investors to look at options and opportunities in inner cities from this perspective.’ According to Sentel, it may even create opportunities for fund formation.
The challenges surrounding subversive crime were not discussed during the interview. A parallel real estate universe is emerging in some city centers. Undermining crime mainly occurs in approach streets, but is also advancing towards core shopping areas.
“It’s difficult for us to put our finger on it,” says Sentel. He points out that there is also a City Deal on Undermining. ‘We will also focus the resulting knowledge and experience on inner cities.’
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In the City Deal, the Ministries of BKZ, EZK and Justice and Security are working together with the cities of Amsterdam, The Hague, Utrecht, Rotterdam, Groningen, Eindhoven, Nijmegen, Dordrecht, Roosendaal, Hilversum, INretail (on behalf of non-food retail, but also various other user groups in inner cities), the Retail Innovation Platform with various knowledge institutions and knowledge organization Platform31 on system breakthroughs for dynamic inner cities. The City Deal was set up by quartermaster Arno Ruigrok on behalf of the Ministry of the Interior and Kingdom Relations. It is Sentel’s responsibility to be a ‘driving force’ and to ensure that parties actually ‘deliver’. |