November 21, 2005
I WAS asked by Independent Newspaper's Business Report to look at some of the economic aspects flowing from some of the proposals for the Gauteng provincial government (GPG) precinct. The article was published on Thursday, 17 November, but for those who might not have seen it, I am including it as a Citichat special.
The controversy surrounding the Gautrain's confounding escalation in cost has taken the focus off another major project emanating from the same provincial government department.
While an escalation in cost estimates from R7-billion to R20-billion, even before construction begins, raises some tough questions regarding the Gautrain's conception and sustainability, no estimates appear to be available for the Gauteng provincial government precinct, admittedly much smaller but still substantial.
From previous statements made by the provincial government, it appears that the acquisition of buildings totalled R300-million. My "guesstimate" of additional costs is:
- R125-million for demolishing 10 buildings and the reconstruction of two of them, viz. South African Reserve Bank (SARB) House and Clegg House;
- R150-million for the Market Street underpass and the reconstruction and resurfacing of the extended square area;
- R150-million for the underground parking garage; and
- R100-million provision for indeterminate structures on the square, major traffic and service diversions, escalation costs, underpinning of foundations of existing buildings, dewatering and so forth.
Not factored into the estimate is the cost of skyways or attending to the lower flooded levels of the existing Harry Hofmeyer parking garage.
The stated objective of this being a public-private partnership will increase the overall cost to about R1-billion, taking into account financing costs and so forth. Strictly from an urban regeneration point of view, an investment of R1-billion can only be good news for the city.
Demolition versus refurbishment
But let's take a closer look at some of the components. Firstly there is the issue of the economics of demolishing buildings versus retention and refurbishment.
There is a strong argument for the retention of the Art Deco facades of two of the buildings now approved for demolition, Clegg House and the adjacent SARB House, both of which front on to Commissioner Street.
In the Inner City Heritage Survey undertaken by the arts, culture and heritage services department of the City Council, SARB House, built in 1934/5, is described as forming "an integral part of the collection of Art Deco buildings in Commissioner Street".
Clegg House, also built in 1934/5 is described as "one of the important Art Deco buildings of Commissioner Street and an excellent compatriot to SARB House".
Property developers argue that old buildings are totally unsuitable for conversion to modern office requirements, yet all over the world historic facades of buildings are retained while the old structures behind are replaced with new, more efficient configurations.
London has many such examples, Piccadilly Circus being but one. I have personally seen this technique used at scale to stunning effect in cities in less developed countries such as Mexico City and Havana. The cost? There is probably very little additional cost or, at worst, it is marginally more expensive. A premium to retain the facades would be worth it.
It is worth noting that Matlotlo House, the old Reserve Bank Building on the corner of Simmonds and Fox streets, has been beautifully restored by the provincial government while SARB House and Clegg House, buildings of the same era, are to be destroyed.
Economics and Historic Preservation, published by the influential Brookings Institution in Washington DC, states that, "Historic preservation is typically judged to be a sound investment. By most accounts, it is more efficient and profitable to preserve a historic building than to construct a new one."
The publication documents various methods - from simplistic to complex - for determining the value of historic preservation. None of these will have been used by the provincial government nor by the South African Heritage Resources Agency in assessing the worth of the other eight buildings, as these are simply to be destroyed.
They certainly would not all be economically capable of being upgraded into A-grade office space. But they can all be economically refurbished. Ground floor spaces can be turned into commercial uses, thus bringing more life to the area, while upper floors can be refurbished into residential, in the case of the New Library Hotel and Grade B or C office space in the case of the balance of the buildings.
This approach would provide substantial, reasonably priced accommodation in the heart of the CBD.
According to the Assessment Report by three independent assessors, "in environmental sustainability terms, any demolitions can be seen as necessary only when the structures are unsafe and too costly to be rendered safe. Demolition is wasteful in terms of resources, permanent and non-recoverable. The demolition of a viable structure and re-use of the components in other construction is far less sustainable and very costly, and not to be promoted as a mitigating reason for demolition."
Open space
Does the city not need open space more than office space? Absolutely, but as will be seen later, the demolition of these buildings is not going to create additional effective public space.
In addition, the provision of reasonably priced accommodation for supporting services to the provincial government, consultants, non-governmental organisations, professionals, daycare, healthcare and so on, would be beneficial to the efficient working of the provincial government itself.
The refurbished and upgraded buildings would contribute to the economic life of the city, still paying rates and service charges. Refurbishing and upgrading the buildings will provide more employment opportunities than demolishing them.
Donovan Rypkema in The Economics of Historic Preservation, among many arguments advanced for conservation, states that,
- heritage conservation creates more jobs than the same amount of new construction;
- it is an ideal economic development strategy for attracting and retaining small business;
- it is an effective response to the challenges of a multicultural community; and
- wholesale razing of buildings is demonstrably bad public policy.
Underpass
What about the economics of the underpass? The idea of the underpass is evidently merely to increase the amount of pedestrian space at ground level. However, this does not take into account the loss of space necessitated by constructing access ramps at either end.
These ramps cover one to two city blocks at each end of the underpass and negatively affect the buildings and street edges on both sides. The cost of disruption to all commercial buildings fronting on to Market Street has not been taken into account in my "guesstimate", but street-front activities in particular are going to be hugely affected.
Although the underpass will only be two lanes wide (at the current position of the two central lanes), it is likely that existing foundations to the historic buildings on the south side will have to be underpinned. This will jeopardise any use of the commercial building during the construction period.
At minimum, any street trading activities will have to be suspended and compensation paid to owners and tenants of the buildings.
To spend a probable R150-million to R200-million on merely creating limited additional public space and replacing four lanes of traffic with two with all these downsides, is nothing short of irresponsible.
Pedestrian space at ground level can be simply increased by laying the new surfacing to the square right across Market Street, as appears to be the plan along President Street. The street can then be closed off when major events require the additional space.
Apart from economic considerations, an underpass that offers two lanes replacing the four existing will have a severely negative effect on traffic flow along what is the major west to east road in the city.
The square
Finally, we turn to the open space itself. According to the Assessment Report, a best case scenario for the proposal reflects an increase of 20 percent of public space, compared with existing space.
However, in the worst case scenario - if one excludes the corners that will be created by the design - the effective space reflects a decrease of 20 percent. In other words, if one was to stage a mass rally, it is very unlikely that people would want to gather in areas where they could not see the total area.
This would mean that instead of accommodating 20 000 people (compared with the 16 000 now possible), the assessors believe that effective space would only be provided for 12 000.
In other words, we will be paying a premium for additional space but in fact receiving less usable space than at present. And the space that we are to inherit from the proposal?
The assessors describe it as having "an amorphous and indeterminate form, with awkward appendages on the northeast and southwest corners, and provides inadequate space for large gatherings. There is no proper backdrop for ceremonial occasions ... the change in orientation to north-south destroys the existing Library-Legislature axis and does not establish a successful alternative."
The project will result in the destruction of usable buildings, halving the number of traffic lanes and less effective public space. For an estimated R700-million over the cost of purchasing building stock, we are not exactly getting our money's worth.
ALSO: Inner city quietly changing face
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