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it would be better able to negotiate its marketshaping offerings. One of the obvious considerations for property developers in determining whether there is a market for their product is: where does the demand lie? If they build, who will buy and who will lease? Developers will go to those parts of the market where hurdles to development are the least onerous and profits are optimised. The Corridors are largely an artificial intervention in a market that has not been sought out, and the critical question is how to get developers interested in parts of the city where they may not have gone before. Focused efforts to channel developers into selected locations is premised on the belief that the planning system is sufficiently influential so as to shape the market. Empirical evidence suggests this is not the case. Rather, demonstrating demand, supply and yields are most likely to have the greatest influence on developers as well as investors. These variables are important within the context of a composite and segmented set of markets each of which have their own dynamics. Although the City is using public infrastructure investment as its instrument to shape the market, its attempts to attract property developers to the Corridors will be frustrated by the reality that not only is there a strained macro-economy, but property developers tend to invest in their niche market which is often concentrated in geographical areas or sub-sectors. Adams et al (2012: 2581) summarise Beauregard’s argument pertaining to the structural characteristics of development markets: “that the strong commitment of both developers and investors to place, as well as sectors, limits their capacity to switch across either geographical areas or property sectors.” This was confirmed in many of the interviews conducted for the study. Most developers of Grade A property will not make an appearance in the Corridors, nor will those who find value in their current markets. Rather, developers already investing in similar markets will be most likely to invest in the Corridors. That said, the Corridors themselves are highly differentiated and understanding the property sector within and across the Corridors should be an important part of the City’s learning. There are several categories of developer and investor worth distinguishing when thinking through how to attract property development

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Transit corridors & the private sector

to the TOD Corridors. Each of these developers require different incentives. Smaller developers, for instance, often need support from the City with development applications and other City processes (interview with Ahmed Banoo, 30 August 2016). A generic overview of developers include: • Small-scale developers (with a small portfolio of properties); • Larger developers (with a substantial portfolio of properties); • Institutional developers and investors who are unlisted companies; • Listed developers and investors categorised as Real Estate Investment Trusts (REITs); and • Public sector developers and investors.7 Each of these categories pursues their own development strategy. The COF documents highlight a number of categories of developer namely: • Investor developer (larger institutional investors); • Landowner developer (actively supported by the City in current neighbourhoods); and • Public sector initiated development (the CoJ itself). Given the locational diversity of the Corridors, as well as general neighbourhood differentiation, it is viable that both small-scale and larger investors and developers will be interested. This is a matter of risk appetite; the size of the fund or developer; and access to finance. There were conflicting views expressed in the interviews as to which developers would be most interested in the Corridors. Some respondents suggested that the nature of the COF discounts the likelihood of large institutional investors participating. Larger institutional investors tend to favour a more established building stock in line with their overall strategic agenda. The limited erf size of many of the properties in the Louis Botha Corridor, for example, might discount institutional investors in the short term due to issues of scale. Other respondents were confident of an institutional presence on the basis of the trend in investment in low-income residential development over the past five years. In discussions with City officials, there is clearly support for the landowner developer in existing

7 R  efer to the Property Sector Charter Council diagram in Figure 1 above.

Transit corridors & the private sector

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Transit Corridors and the Private Sector: Incentives, Regulations and the Property Market  

Part of the Spatial Transformation through Transit-Oriented Development in Johannesburg research series. Published by the South African Rese...