UK ambitions for Business Improvement Districts

Copyright: David Lawson – Dec 2001

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Ten years ago a property tax to pay for street wardens or machines to lift gum off the pavements would have been greeted with near revolution among landlords. Today they  are almost demanding it.   Not surprisingly, that came as something of a shock to Whitehall mandarins struggling to formulate yet another solution to declining town centres.

  But evidence that the private sector will put its hand in its pocket to improve conditions is scattered through more than 300 towns and cities across the UK. Great Yarmouth is typical,  drawing around £60,000 a year from  130 businesses to help pay for services like street security cameras. More than two-thirds of the £600,000 generated by the first year of Bolton’s town centre partnership came from landlords and occupiers.  Not everyone pays their way, however, as contributions are voluntary. So the government hit on the wheeze of importing US-style business improvement districts, where all commercial tenants in specific areas pay an extra levy. A series of ‘shadow BIDs’ has been launched with Single Regeneration Grant-backing to test the idea in the year or three it will take to formulate legislation for rate reforms.

  Others are emerging without any public funding. After decades of frustration, landlords and owners in Oxford Street, Regent Street and Bond Street  have linked to halt the frightening decline of visitors because of poor facilities and competition from centres like Bluewater and Brent Cross. Occupiers in Holborn have set up a management company which will enhance the area with services ranging from redevelopment around the Tube station to ‘meeters and greeters’ for visitors.

   These  high-profile experiments have already stimulated debate which has helped shift government thinking. One critical factor was overlooked in the Treasury’s enthusiasm to heal the running sore of town-centre regeneration with private money. The US has local real estate taxes, so property owners bear the cost of BIDs. In the UK, occupiers foot the bill through business rates. While many are happy to offer voluntary payments, resistance to imposed  levies could lead to votes against BIDs. Landlords like Land Securities, which is involved in dozens of management partnerships, must have taken ministers aback by lobbying for the property industry to share the burden. But the logic is simple: investors are more likely to benefit from the kind of higher property values seen as BIDs mature in the US.  

  This is the driving force behind schemes now taking off. ‘I’m not doing this for altruistic reasons,’ says Burford chairman John Anderson, a leading light in the shadow BID around the firm’s Trocadero and Pavilion holdings off Piccadilly. ‘We need to encourage visitors into the area.’   The scheme will receive £200,000 in government backing but Burford and partners such as British Land, Land Securities, Minerva, Odeon Cinemas and Starbucks will top this up to a £500,000 budget in the first year. Burford will also give space to the Metropolitan Police for a CCTV centre.  The aim is to emulate the way New York’s Times Square was rescued from filth and decay  and the partners are optimistic enough to have already reached out to add Leicester Square and Piccadilly Circus to the original scheme.

  Plans by the BBC to redevelop its Portland Place headquarters led to a similar expansion of the shadow BID around Oxford Street, Regent Street and Bond Street. Suggestions that Tottenham Court Road will also come into the reckoning appear premature, however. ‘We can only do so much at once,’ says Helen Robinson, chief executive of  the New West End Company, set up to manage the project.

    Pressure to spread outwards will increase as hard-pressed local councils look for private capital but one of the prerequisites of BIDs will be a strict business plan to tell local businesses what they will be voting for. These shadow schemes know they must  practice similar discipline if they are to qualify later on. They also have to satisfy their own investors that the budget is well-spent.

  Robinson’s bosses are landlords the Crown Estate, Grosvenor Developments, Legal and General, Land Securities and Derwent Valley, plus retailers Marks & Spencer, Selfridges, John Lewis and House of Fraser. That distinguished list would be even longer if others could elbow their way in. For the moment eight firms make up a pool of associates,  ready to join if expansion continues.

   One reason why the private sector is so keen to become involved is the growing fear that a poor environment has eroded the West End’s status as a world-class  destination. Out-of-town shopping centres are also cutting customer numbers. Investors are protecting their assets says Martin Moore, managing director of Prudential Property Managers. ‘We probably have as much investment around Oxford Street as in our largest shopping centre,’ he says.

    Not all the shadow BIDs are fighting the same battles, however.  The Holborn Business Partnership is essentially aimed at managing an office-based economy overshadowed by the City and West End on each side.  Much of the drive has come from occupiers such as Farebrother and Nabarro Nathanson.   The Circle Initiative organised by the Central London Partnership is reflecting this range of problems by seeding widely different markets with £4.6m of grants  in preparation for new legislation expected to emerge by the end of 2002.   Bankside was picked as a classic mix of old and new – covering property ranging from the Tate Modern and rebuilt Globe Theatre to major developments under way by  Land Securities and Chelsfield. Lower Marsh is a community regeneration around Waterloo Station. Paddington builds on work by 13 organisations including investors like Development Securities involved in 8m sq ft of mixed use development. The focus here is on cleaning up the area and improving transport to match the real estate.

    The fruits of these collaborations should become visible quickly. Cleaners and wardens will be on the ground by the summer in Oxford Street, for instance. But the real aim of involving private capital in public regeneration will take much longer to gauge. ‘A lot of people are looking but it is difficult to get beyond that stage until we know exactly how the funding system will work – and that must wait for detailed legislation,’ says Michael Beaman, a regeneration specialist on the RICS policy panel. The property industry is not sitting on its hands until this happens. ‘Major companies has been quietly supportive of every big initiative around the country,’ says Alan Tallentire,  Association of Town Centre Management chief executive and one of the leading influences in bringing BIDs across the Atlantic. But even he admits that the government’s new line that higher rates must be mixed with private capital will not win the votes of business communities unless they see hard evidence of success. This is why  the outcome of the Circle Initiative and less well-known schemes involving chambers of commerce in towns such as Barnsley are so critical.

  The odds look good if schemes set up without the benefit of extra rates are any measure. Booming property values in Reading are partly attributed to improvements in town centre management, while a new business plan in Stoke sparked a £170m shopping development.    BIDs should build on this to become more than a clean-up exercise, says the ATCM. They should be the heart of local and regional planning via a rolling programme of around 25 schemes throughout the UK.

  ‘There is no one-size fits-all model,’ says Tallentire.  Some, like London’s West End, will lean on the private sector because property values are so high.  In smaller towns  the public contribution - and thus private sector match funding - may be less than the suggestion for £3m per zone. And where commercial property plays little part, BIDs could become the main vehicles for national and European regeneration grants.  Most importantly, they could finally provide the ‘joined-up thinking’ that has proved so elusive in cementing cross-sector partnerships to maintain and revive failing town centres.