Development risk and unit size within the UK property market


Purpose
This paper aims to explore the relationship between market pricing and design quality within the development industry. Currently, there is a lack of research that examines real estate at the property level. Development quality is widely believed to have diminished over the past decades, while many investors seem uninterested in the design process. The study aims to address these issues through a pricing model that integrates design attributes. It is hoped that empirical findings will invite broader stakeholder interest in the design process.


Design/methodology/approach
The research establishes a framework for assessing spatial compliance across residential developments within London. Compliance is assessed across ten boroughs, with technical space guidelines used as a proxy for design quality. Transaction prices and spatial assessments are aligned within a hedonic pricing model. Empirical findings are used to establish whether undermining spatial standards presents a significant development risk.


Findings
Findings suggest a relationship between sale time and unit size, with “compliant” units typically transacting earlier than “non-compliant” units. Almost half of the 1,600 apartments surveyed appear to undermine technical guidelines.


Research limitations/implications
It is suggested that an array of design attributes be explored that extend beyond unit size. Additionally, future studies may consider the long-term implications of design quality via secondary transaction prices.


Practical implications
Practical implications include the development of a more scientific approach to design valuation. This may enhance the position of product design management within the development industry and architectural services.


Social implications
Social implications may include improvement in residential design.


Originality/value
An innovative approach combines a thorough understanding of both design and economic principles.
