Avoiding a slow and painful demise

Posted by on Oct 12, 2012 in Activity centres | One Comment


I have recently had some very interesting conversations with clients and colleagues concerning the maturation of urban and regional activity centres. Often these conversations are predicated on the assumption that centres naturally become more mature over time, when in reality there is real risk of centres depreciating in terms of their economic maturity. This can be measured in terms of both hard infrastructure and value proposition. Depreciation occurs due to factors including:

  • Other centres improving their own competitive advantage;
  • User needs changing; and
  • The economic functions of both the centre and the economy as a whole evolving.

To combat this, even relatively mature centres need to match their natural depreciation with renewed investment and the ongoing development of the function and comparative advantage of the centre. Figure 1 illustrates a centres value proposition over time with and without regular renewal.

Figure 1: Centre Depreciation over Time

A mistake that many centres make, generally after a period of significant capital investment, is making the assumption that a centre has “arrived”. Often these centres have their time in the sun where they are held up as exemplars of urban development and amenity, with others actively seeking to mimic their successes. This can lull decision-makers and stakeholders into not recognising that, from the moment the ribbon is cut, their value proposition is depreciating as competitors improve and user’s needs evolve. This mistake is typified by a trend of decision-making that prioritises the defense of the existing function and form over ongoing renewal.

Many centres unfortunately only move out of this phase when a dramatic discontinuity occurs, usually through the departure of a key anchor tenant, or emergence of a strong competitor (eg. loss of a major piece of infrastructure such as a hospital, department store or sporting stadium). Centre scale and configuration of the built environment then slowly becomes less suited to a changing function and user mix.
This situation can force decision makers into fighting a rear guard action against a range of issues including increased vacancy rates and property prices, decreased productivity of local businesses, and the deterioration of urban form. It’s a battle that can be very difficult and expensive to win.


If a centre’s value proposition is already compromised due to depreciation, any new development can be perceived, in and environment where ‘defence’ is prioritised, to further undermine the performance of the rest of the centre (in particular the ‘legacy’ elements of the centre that are often sought to be protected). However, if all investment in renewal is constrained until the performance of these elements improves, the centre will likely forego valuable development opportunities and continue to depreciate. Decision makers need to revisit the fundamental function and competitive advantages of each node within the centre, understanding that each node is not only in competition with the others, but is contributing to the overall value proposition of the centre in the context of the entire urban economy. For example, the fact that the development of professional services node may result in relocation of enterprises from other parts of an activity centre, is secondary to its ability to attract investment and new tenants from the greater region.

I am not advocating a carte blanche approach to attracting and approving development, but instead cautioning against complacency. We need to actively govern and nurture our centres if they are to reach their full potential. This means clearly understanding what we are trying to achieve, and the opportunity costs associated with our decisions because stagnation equals depreciation.

1 Comment

  1. Avatar for Mike
    October 15, 2012

    A brilliant piece of analysis by the author. This is the correct point of view from which to assess the performance of activity centre. The perspective of ‘absolute’ performance is much more relevant than narrow ‘relative’ performance. In other words, worrying about the effect of new activity on existing activity runs a distant second to overall attraction of new activity and the associated evolution of centre function. The rate of evolution in centre planning has fallen well behind the rate of change in centre function. We therefore need to change our planning systems.