Resilient real estate value

Late last year, New Economy became involved in an initiative by a burgeoning group of Dutch architects. The group is seeking radical change aimed at transforming cities. This change focuses on the construction sector and the built environment, and they have united under the name: OpenBuilding.com. While the ideas may seem far-reaching, they build on a theory that originated in the 1960s. The Dutch architects are now the Founding Partners of OpenBuilding.co.

The ideas of the Founding Partners of OpenBuilding.co are based on the legacy of Professor N. John Habraken, who promoted Open Building in the 1960s as a radical change in decision-making for mass-customized housing and a new way to harness the power of industrial production.

At the meetup At Pakhuis de Zwijger, I presented the potential benefits of building with wood materials. At the time, Marc Koehler (one of the founders of Openbuilding.co) asked if New Economy could create a business case for open cities and if he would be interested in presenting it at the World Architecture Festival.

Which drivers are important to calculate the true value of the Open Building philosophy?

In co-production with Fakton and GreenMatters, we investigated various (financial) factors and their impact on future business cases. We investigated the financial value of extending the lifespan of buildings. Other (financial) incentives were also considered, such as taxes on materials and the CO2 impact of new building principles. The findings will now be briefly explained, using the example of the various building envelopes (Brand, 1994). 

Buildings change continuously throughout their life cycle. This change is inevitable and therefore requires attention in the design, as Brand (1994) notes in his book "How Buildings Learn." Brand divides building systems into seven essential layers: Social, location, facade, skeleton, services, spatial plan, and interior. Although changes occur in each layer, the pace at which they occur varies. Some layers must anticipate change more quickly than others, and therefore it is important to find the ideal combination of flexibility, modularity, and demountability on the one hand, and longevity and reuse on the other. 

The social context is ever-changing and determines the pace at which other layers must adapt and learn. Within the Open Building philosophy, buildings must therefore be designed to adapt to this changing social context, thus developing resilient Open Cities. Open Cities originate from Open Building. The Open Building approach extends the lifespan of buildings.

Extending the lifespan of buildings

This can be achieved by creating a permanent structure separate from the (temporary) infill systems. Furthermore, components and materials are used that are designed for easy disassembly. This results in more flexible building use, as use can be adapted as needed. Maintenance, renovation, and functional costs are also reduced in the long term. Furthermore, significant material savings are achieved. Simultaneously, user-centric business models are created—models focused on services and performance rather than ownership.

In previous joint work with Metabolic, we found that €688,000,000 worth of resources are wasted annually in our building stock in the Amsterdam Metropolitan Area. Developing more dynamic buildings that prevent the waste of natural resources is therefore an effective solution. Dynamic buildings create a more open, diverse, and resilient urban model. This allows cities to better respond to social, demographic, financial, and environmental changes.

Changes in the design of buildings and systems

To radically redesign the built environment, we must also redesign our financial system. An Open Building requires approximately 10% - 20% more initial investment compared to a traditional building. However, this investment pays for itself after the initial functional transformation of traditional buildings. While traditional buildings require a new round of investment, the transformation of Open Buildings is much more cost-effective. The real societal challenge lies in realizing affordable, high-quality, social housing. To change this financial outlook, we must consider the total cost of ownership/occupancy. By doing so, it becomes possible to develop Open Cities that consider the function and use of buildings, as well as their contribution to quality of life. Furthermore, a comparison should be made between buildings that emit and those that store CO2.

Resilient capital

The IIRC (International Integrated Reporting Council) identifies six types of capital that are useful when considering the value creation of business activities. These are: natural capital, human capital, social and relationship capital, financial capital, intellectual capital, and manufactured capital. I would like to add a seventh type of capital: resilience capital. By viewing resilience as a key capital, it becomes possible to develop Open Cities. Embracing returns on these seven types of capital and incorporating them into the Open Cities model requires a reinvention of current business models focused on end-users.

Commonland has developed a scientifically sound framework for this purpose, focusing on landscape restoration. This model focuses on returns in social capital, natural capital, financial capital, and inspiration (a form of intellectual capital).

A business model isn't about making money; it's about creating holistic, long-term value within these different forms of capital. If used correctly, a business model can therefore function as an accelerator. The euro is a readily comprehensible unit of measurement we can use for this. The challenge remains defining and valuing the less tangible forms of capital. Our social and ecological systems depend on them.

Society and politics are moving towards true costing. Well-being, health, and a carbon tax will truly influence financial business cases. This will incentivize the financial system to transition to more transformative and open systems like the Open Building model. We believe the industry (both financial and the built environment) needs to change rapidly, while many legacy structures and methods require redesign. Is the construction sector ready for this change? The first changemakers are coming… Let's accelerate these initiatives while creating new systems with holistic forms of return.

Want to know more? We've started with various tools and methods to value and incorporate these seven forms of capital, integrating them into new financial perspectives. If you're interested in New Economy financial models, please contact us. We believe this is just the beginning; let's continue with new developments and opportunities!

Thank you to all the founders of Open Building! The founders are visible on  www.openbuilding.co/manifesto. Special thanks for co-production in the preparation: Pablo van der Lugt (Greenmatters), Dominique Rethans & Robert of Ypres (Facton). Marc Koehler (Marc Koehler Architects), Tom Frantzen (Tom Frantzen et al).