Ørestad Development Scheme, Copenhagen Metro, Denmark

Project Context:

Authority: Ørestad Development Corporation
Area: Copenhagen, Denmark
Project: 21km metro link to central Copenhagen
Mode: Light Metro Line
Cost: 1.6 Billion EUR (2004)
Value Capture: Direct payment, Land Sales, and Real Estate Taxes

Overview

In 1992, the City of Copenhagen and Ministry of Commerce formed the Ørestad Development Corporation (ORC). The ORC was empowered to develop 310ha of vacant land within 10 km of Copenhagen City Centre. The area is very narrow, and forms part of the link to Malmo, Sweden. A core part of this land development was the construction of a 3 stage mini metro system, 21 km in length, with 22 stations 1. The ORC was also responsible for the construction of all public spaces.

Impacts of development

Regulations enabled up to 3.1 million m2 of floor space to be built. The mix of development was planned as: 60% commercial, 20% residential, and 20% dedicated to cultural facilities, retail, and educational institutions 2. To date, just over half of all available land for sale has been sold. Initial sale of land was strong, but building development has been slow 3. Some of the early buildings have been heavily criticised and still only 8,000 people live there and relatively few jobs have eventuated. Over time, it is expected that construction will increase and the number of residents should rise to 20,000, and the number of jobs to 80,000 4.

Value Capture Mechanism

To fund the construction of the public spaces and the metro, the ODC used government backed loans. These debts were repaid through the money raised from the sale of land and subsequent development rights. These sales leveraged the value gain that occurred through the development process, and the rise in value that the metro connection to central Copenhagen created. 55% of the initial investment of land came from the city of Copenhagen, with the remaining 45% from the state of Denmark. No further public funds were used aside from sovereign backing of debts.

Lessons learned

Several slowdowns in the property market affected the project, with the GFC having a severe impact. The crisis that ensued resulted in land devaluation of 30%, slow land sales for four years, and the disestablishment of the ODC. The remaining land, debt, and assets were transferred into a new agency more able to negotiate additional lending. The payback period for debt changed from a planned 15 years, to an expected 76. The key failing was a lack of good risk management, with poor foresight of market realities 5, 6.

References

  1. Stevens, B., & Schieb, P. (2007). Infrastructure to 2030 volume 2: Mapping policy for electricity, water and transport. OECD.
  2. Stevens, B., & Schieb, P. (2007). Infrastructure to 2030 volume 2: Mapping policy for electricity, water and transport. OECD.
  3. Ten Group. (2010). Learnings from Copenhagen and Malmö. London, United Kingdom: URBED/TEN Group 2010.
  4. By & Havn. (N.D.). Orestad.
  5. Majoor, S. (2005). Contested governance innovation: the case of Orestad. Vienna, Austria: Aesop.
  6. Flyvbjerg, B. (2007) Cost Overruns and Demand Shortfalls in Urban Rail and Other Infrastructure. Transportation Planning and Technology, 30.1, pp. 9–30.