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Cornerstone
Construction Management of Risk
Building WELL, Building Better?
The Construction of Legacies
Germany at the Heart of European Property Investment
Life After Sport
AECOM Quarterly Property Newsletter for EuropeIssue No. 4 Q4, 2016
aecom.com
Germany at the Heart of European Property Investment
Contact
The Construction of Legacies
Building WELL, Building Better?
Life After Sport
Construction Management of Risk
Construction Management of Risk
The phrase construction management (CM) means
different things to different people, so to put the record straight, here’s a guide to how it works. At its simplest, CM is a methodology for delivering a construction project, in effect it’s a procurement strategy. The key differentiator of CM over more traditional procurement routes is that it saves the client’s time and money, and minimises risk through greater flexibility and project control.
Typical procurement route and associated characteristics are shown below:
Characteristics of Alternative Procurement Options
Characteristic Traditional D&B Mgt. Con. Con. Mgt.
Diversity of responsibility Moderate Limited Large Large
Size of market from which costs can be tested Moderate Limited Moderate Large
Timing of cost certainty Moderte Early Late Late
Need for early precise definition of client requirements No yes No No
Speed of mobilisation Slow Fast Fast Fast
Flexibility in implementing changes Rasonable Limited Reasonable Good
Availability of recognised standard documentation Yes Yes yes Yes
Ability to develop proposal progressively Reasonable Limited Reasonable Good
Cost-monitoring provision Good Poor Reasonable Good
Construction expertise input to design Moderate Good Good Good
Management of design production programme Poor Good Good Good
Influence in selection of trade contractors Limited None Good Good
Provision to monitor quality of materials & workmanship Moderate Moderate Moderate Good
Opportunity for contractor to exploit cash flow Yes yes Yes No
Propensity for confrontation High Moderate Moderate Minimal
Traditionally, construction works are procured against a defined scope (i.e. a design completed by the client’s team before tendering) and the chosen contractor is appointed to construct the works. A project management company is appointed to oversee the design process and to be the employer’s site representative to administer the construction contract.
A construction manager is engaged as a fee-earning professional to programme and co-ordinate design and construction, and to improve the buildability of a design. CM procurement is universally known as ‘fast track’, which is a means of reducing project time by overlapping design and construction. Each package of work starts as the design and specifications related to that element are completed. This provides more flexibility to focus on the proper delivery of key
elements later in the construction process, such as façade, building services and architectural finishes. A CM team works closely with the members of the design team to advise clients on all aspects of buildability which may have time and cost implications, hence leading the way to improving project delivery and viability.
Potential extensions of time under a traditional procurement route can be due to design amendments or refinements made by the client or design team. These tend to be naturally mitigated under CM because key final decisions can be made progressively as work packages are procured. Similarly, while site instructions to clarify, modify or accommodate changes can also lead to extensions of time, a CM approach offers more time to make decisions on key packages,
with the cost and time of such changes being adjusted when tenders are received to suit client expectations. Additionally, the involvement of specialist subcontractors during the design process can add value, and in some cases reduce client expenditure.
Communication between clients and package contractors using CM is also more direct than traditional routes. This enables clients to make prompt decisions and implement them quickly, anticipate site level problems more readily, and achieve greater cost certainty regarding amendments in design or delivery by working more collaboratively with all involved parties. CM offers flexibility and control that is essential for clients with fast-track projects, enabling decision making and risk management to be focused on at every stage of delivery.
Concept / Scheme Design
Traditional GCConstruction Process
Detailed DesignBill of Quantities
Tender PeriodMobilisation
Enabling / Long Lead ProcConstruction
Appoint CM or MC
CM or MCConstruction Process
Concept / Scheme DesignDetailed Design
Mobilise SiteEarly Construction Pkges
Long Lead ProcurementOther Construction Pkges
Time Savings
Schedule Comparison Tradition vs CM Construction Process
Under a traditional procurement route, using standard contract terms and conditions, a client team has little ability to influence the order and timing of the works - the main contractor’s obligation is typically to complete the works by a given date. With CM, the client team has the ability to directly influence the order and duration of activities, and can select package contractors with available resources to fast-track activities should delays in the overall programme become apparent. Unlike a traditional route, the CM team and the client have direct influence and control over the construction and procurement schedules.
The cost of emplying a CM team is more than offset against a traditional route where the main contractor will include allowances for profit, overheads and risk at an increased level. The CM provider is appointed by the client and takes on the role the general contractor would do under a traditional route, by dividing the works into separate, transparent packages. The construction manager is employed on a fee basis, on a non-adversarial form of contract. The contracts for the packages of work are signed directly with the client and the management of the packages is undertaken by the CM team, who are fully empowered by the client. Under CM, each package of works is competitively tendered by the CM to ensure best possible value for the client. The construction manager always acts in the best interests of the client, which offers transparency and flexibility to the whole delivery process.
A typical example of the contractual and senior management relationships of Construction Management.
Client
Construction Manager
Building Services
ContractorFacade
ContractorInfrastructre Contractor
Architectural Finishes
ContractorOther
ContractorsStructural Contractor
Architect
Client
Project Manager
Construction Manager
Building Services
ContractorFacade
ContractorInfrastructre Contractor
Architectural Finishes
ContractorOther
ContractorsStructural Contractor
Design Team
CM provides a management team to supervise the activities of the designers and contractors and provides an organisation to carry out control activities on behalf of the client
Construction management Organogram
Management Relationship
Contracual Relationships
Senior Management Relationship
The contract for each package contractor is signed directly with the client. The client will also have control over the selection and appointment of package contractors, with evaluations based on a wide range of benchmarks including safety, quality and experience rather than just price. Variations and associated increases in cost are minimised with CM as the design for the whole project does not have to be complete from the outset.
The project design can be further developed during construction as each package of works is procured separately; this enables quick mobilisation and commencement of works on site after the first package has been awarded. The CM team reviews drawings, thereby also reducing design team and client risk. Overall CM is more methodical, manageable, predictable and allows risk to be better managed. The correct balance of cost and quality is achieved by prudent subcontractor selection for each key element of the works; this is particularly relevant with facades and building services but applies equally to structure and finishes. Package contracts are typically entered into near to the time of commencement of the works, making fixed-price tenders possible. This methodology often delivers results significantly more competitive than those submitted several months, or even years, ahead.
For projects of several years duration, the client can also take advantage of developments in technology ensuring the latest equipment is installed rather than defining everything at the outset of the project.
Clients are often concerned that the final cost of a CM project is not known at the outset, and only becomes certain after the last package is awarded, however the flexibility of developing the design within a CM framework, having full control over the packages of works consistently returns substantial savings over traditional procurement routes.
Construction is becoming increasingly complex as projects become larger in scale and more technically challenging. Since the CM aligns the interest of the construction delivery with those of the client, the client is able to make better informed and timely decisions throughout the delivery process.
CM combines the experience, wisdom, creativity and engineering skills of the design and delivery team to drive significantly improved client value. There is complete control and alignment. Design and construction delivered in a non-adversarial, collaborative environment may mean different things to different people, however to clients it means simply one thing, project success.
Gerald Gillespie [email protected]
Client’s cost increased due to CM fees
Actual cost of work
Enabling
Client’s costs
GC O/H & profit
GC risk premium
Finishes
MEP
Superstructure
Substructure
Premium for G.C.
Actual costof work
Cost saving
General Contractor(GC) Approach
Construction Management(CM) Approach
Enabling
Client’s costs
Finishes
MEP
Superstructure
Substructure
Construction Cost Breakdown Comparison Traditional vs CM
Building WELL, Building Better?
colour temperature, making us alert when we should be winding down for the night, leaving us tired for the following day. The WELL standard requires buildings to be designed with good access to daylight and electric lighting with appropriate colour temperatures.
BreatheMechanically ventilated buildings attempt to protect us from some of the air pollutants prevalent in our cities by constantly filtering the air, but this only removes the particulates. Meanwhile, we’ve introduced a whole set of toxins into internal environments through microbial contamination of ductwork and volatile organic compounds (VOCs) found in our furniture, fittings and even cleaning products.
WELL sets standards for, and measures, the air quality in internal spaces to reduce exposure to contaminants. This is done by combining ‘source control’ – removing the contaminants from materials in the first place – and good ventilation design, to provide enough freshly filtered air into a space. For example, it shows that using underfloor displacement ventilation with ceiling extractors is a far more effective way of bringing fresh air into a space than using overhead ventilation. Displacement ventilation drives contaminated air up and out, without cross-contamination with incoming air. In one study, displacement ventilation has shown to be up to 6.6 times better than standard air conditioning.
Stressed out and inThe internal environment can cause us physiological stress by having to live with discomfort caused by glare, relentless grey, noise and cold draughts. The WELL standard encourages design features that give occupants more control over their environment, allowing them to adjust internal conditions to reduce the need to filter out distractions and put up with discomfort.
Buildings were originally created to protect us from a hostile
world. But what if the structures designed to protect us were also damaging our health?The concept of health and wellbeing was a major component in the original BREEAM 1990 New Offices scheme and has moved up the agenda since 2014, in response partly to the World Green Building Council’s 2015 Health, Wellbeing and Productivity in Offices report, which made the case for health and wellbeing and their relationship with productivity.
New kid on the blockToday, a new certification is attracting attention. Launched in 2014, the WELL Building Standard is the world’s first building certification that focuses exclusively on human health and wellness and is based on seven years of scientific, medical and architectural research.
While some of the common risks to our health today include airborne pollutants, poor diet, stress and lack of sleep, which can weaken the immune system, WELL research has found that buildings also have a profound impact on our bodily functions, ranging from our endocrine (hormone production) system through to our nervous system.
Clocking offHumans need to be connected to the natural environment to maintain their circadian rhythms, or internal clock, which helps regulate sleep patterns and other physiological processes. Workplaces with deep floor plates cut off access to daylight, corresponding sun angles and colour temperatures (the colour characteristics of light), which calibrate our body clocks. Electric light is often the wrong
Going down wellEach level of WELL certification — silver, gold or platinum — requires buildings to meet a number of minimum standards. These preconditions alone set a high standard. The apparent simplicity of the scheme, with just one page per feature, belies the consequences and implications of the design and operational measures that have to be implemented to meet the required performance standards. For example, the idea of flushing out a building before occupation, to expel VOCs from its internal finishes, is a sensible idea and already included in the Leadership in Energy and Environmental Design (LEED) certification — the US version of BREEAM.
However, this is no overnight exercise. Depending on the size of the building, it can take up to 20 days of running the ventilation system to push the required air volumes through the space. And this can only be started once all the fittings, finishes and furniture have been installed, as they are often the source of the pollutants. It is hard to see how those extra weeks are going to fit into the typical project programme.
Food for thoughtUnder WELL food standards, drinks offered for consumption in buildings must contain no more than 30 grams of sugar per container, which eliminates lots of fizzy drinks, while food should not contain any trans fats (partially-hydrogenated oil). Trans fats do not have to be declared in most jurisdictions and many manufacturers have phased them out, but they can still be found in some pies, cakes and biscuits.
Lifelong commitmentWELL has set itself apart from most other building assessment methods because certification is based on actual operational performance. After completion, the building operation is audited and everything that can be measured is measured.
The audit includes measuring water and air quality, lighting colour temperature, radiant temperature, decibel levels and sound reverberation. Design features like the installation of flexible work stations, including the provision of standing desks, are subject to spot checks by the auditor. And it doesn’t stop there — the certification has to be renewed every three years and there is an on-going commitment to provide records of post-occupancy surveys, maintenance logs and measurement of environmental parameters such as air and water quality. It’s a lifelong commitment.
Lost in translationWELL was developed in the US, so there are some notable anomalies when applying the standard across Europe. Some of these differences help. A
good example is the indoor smoking ban, which is already the case in most European countries. Equally, our high standards of water treatment and quality may help to gain some points, although recent experience shows that water filtration may still be required to meet WELL’s high standards. Some of the ideas, like mindful eating and biophilia (the affinity of humans and the natural world), may seem slightly unusual, but there is an increasing awareness of these issues, especially among enterprising companies who are competing for employees and finding that people choose companies on the quality of the workspace as much as the quality of the work.
Well balancedThe ‘mind’ section of WELL highlights the link between mental and physical health, with stress being a primary risk factor for many chronic diseases. This section includes having a balanced lifestyle that promotes healthy sleep patterns. To achieve these optional points, organisations need to have a range of policies that include allowing staff to avoid those notorious all-night flights that leave people dazed and confused. Recent experience with WELL shows that for the fit
out it is just as important to engage with the human resources team as it is with the design team.
Setting things rightThe WELL standard is currently influencing a very small percentage of buildings, meaning that only a few will be able to benefit from living, working or convalescing in healthy buildings. However, this is a new voluntary standard that is setting out how building performance could be improved, which should have an influence on what people consider to be standard practice in the future. Judging by the uptake of WELL in the US there is certainly a demand for setting higher standards for our buildings.
There seems to be sense in reducing the stresses caused by the work environment from distractions, poor posture and pollutants and by conditions that confuse our body clocks and hormones. Though currently a voluntary certificate, the ultimate aim is to turn best practice into business as usual.
Dave Cheshire [email protected]
The Construction of Legacies
Growing populations are necessitating a radical rethink of energy sources and distribution, water conservation and our approach to transportation networks. The scale of this change means that our built environment needs to work harder, more efficiently and be adaptable to different patterns of use. While this is reasonably straightforward to apply in planning new cities and conurbations, we are facing a challenge: upgrading existing buildings and infrastructure to improve capacity, flexibility and manageability while they remain in use.
Introducing innovative ways of working into historic properties is particularly challenging, especially in the commercial sector. Delivering flexibility, quality of environment and space efficiency within the constraints of a building designed to an out-of-date set of standards requires careful and collaborative thinking by all stakeholders.
Best-in-class flexible working spaces are very agile with the ability to adapt to different working styles. The number of desks with screens and keyboards is decided by work patterns, with the remainder of the spaces being breakout areas, meeting rooms, cafés, quiet corners and collaborative team spaces of various configurations. Such spaces are proven to be hugely successful and tend to generate an efficient but creative and dynamic atmosphere.
This approach will soon become the norm in the commercial world and over time will also migrate to the public sector as well as educational establishments. The connectivity of networks
within and surrounding buildings, smart networks and information superhighways, will enable data collection and the ‘internet of things’ to be our tool for improvement – technology that evolves and learns about human behaviour to improve efficiency in design. As collaborative working matures, in effect the global village becomes our immediate team.
Learning from buildings themselves how to improve design and delivery is a truly circular feed. Property kaizen. On top of this, to tackle energy shortages and climate change, we need to optimise energy usage in neighbouring developments, sharing resources via smart networks for optimum efficiency. For example, homes need more energy at night, workplaces during the day, so the solar energy harvested from any shared surfaces can be directed when and where needed.
We need to learn to manage our resources more effectively, and in terms of building design this especially means a focus on more passive methods – the organisation of spaces and creating a hard working envelope rather than introducing large energy consumers. We must deliver adaptable buildings that can be changed as needs evolve and develop.
Thriving rather than just living; and living successfully with less. An absolutely achievable aim.
Sasha Krstanovic [email protected]
Technology is having a major impact on how
we live and work in the built environment – and our buildings will need to respond. The sooner we embrace this change as designers and occupiers, the less disruptive the transition will be.
Germany at the Heart of European Property Investment
Official Name: Bundesrepublik Deutschland, BRD Population (2015): 82,175,700Capital city: BerlinSurface area (sq km) 357,168 km2 (137,847 sq mi)Chancellor (Bundeskanzlerin): Angela Merkel (since 2005)President (Bundespräsident): Joachim Gauck (sworn in on March 18, 2012)Date of next legislative election: Between 27 August 2017 and 22 October 2017Languages: GermanCurrency: Euro (EUR) GDP per capita (2016): $3.842 trillion $42,326GDP growth (2016): 1.5% 1.7%Unemployment (2016): 4.1% 4.3%Inflation (CPI) (2016) 0.8% 0.4%FDI inflows (US$ million): 31,719EUR vs. USD exchange rate: 1€ = $1.06
Germany key facts
Other*: 16%
Office: 45%
Retail: 24%
Logistic-Industrial: 9%
Mixed: 6%
Other*: 11%
Office: 41%
Retail: 31%
Logistic-Industrial: 7%
Mixed: 10%
201555.1 € bn
201652.9 € bn
The phenomenon that is the German property investment
market continues to grow unabated despite the economic pressures that are being felt more widely across the Eurozone.
With a lack of available product and hence liquidity in the important ‘core’ and ‘core-plus’ asset types in all the major seven German economic centres, non-domestic investors are especially struggling to find an edge over key local players. Local networks, know-how and a nimble approach to deal making is allowing domestic investors to continue in their portfolio-building efforts, especially non-traditional asset types and in less popular locations. The more difficult the deal, the less interested the non-German investors are.
Prices are hardening across the board, be that portfolio-type deals, stand-alone sale-and-leaseback opportunities, or more traditional product. This is certainly no surprise in the perfect storm that is a surplus of equity, inexpensive and freely available debt finance, and a scarcity of product.
With office and retail asset transactions continuing to maintain their popularity, hotel investment deals are also becoming more prevalent, primarily due to their defensive, cash generative characteristics. The German commercial investment market recorded transactions valued at €32.4 billion in the first nine months of 2016, with 4-star hotels leading the way as investments with a transaction volume of over €1bn in the first six months. Logistics transactions continue to grow at an impressive rate, primarily due to the increasing importance of
Property Transaction Volume in Germany by Type of Use
* Hotels, Land, Special Properties
e-commerce positively impacting this asset class from traditional larger regional hub properties, to smaller low-bay type product perhaps incorporating cross-docking. The logistics market is under inherent pressure due to its increasing popularity, coupled with ferocious investor appetite. New-build product is particularly hard to come by in the most popular hub locations, leading to investors becoming more and more involved with new developments earlier in the risk curve.
With significant recent expansion by the likes of Amazon and DB Schenker, Germany’s recent economic migration offers fresh opportunities for lower-skilled workers in a market where Amazon alone employs in excess of ten thousand workers and continues to grow. Recent reports indicate over €3.2bn in investments in the German industrial and logistics markets in the first three quarters of 2016, with anticipated record-breaking year-end total investments. According to an assessment by the German Logistic Association (Bundesvereinigung Logistik), logistics will play a central role in the integration and employment of Germany’s new demographic, playing a key sociological role as well as fueling country-wide economic development, not just in real estate.
At a practical level, the idea that the minimum wage is too high is seen as being of little relevance – both by the companies who say they are willing to embrace Germany’s new residents, as well as those who have no such plans. For the moment, there seems to be little barrier to the new supply of logistics product, but time will tell as to whether this new supply will lead to a softening in values, especially with secondary product, or whether the broader momentum and resilience of the German investment market will simply take this in its stride.
Looking ahead, it is difficult to find a report on Germany’s economy that does not mention the impact that the recent migration has had, and will continue to have on Germany’s strong, yet steady,
economic growth. It seems universally agreed though, that economic growth is projected to remain solid, if unspectacular. A robust labour market and low oil prices continue to strengthen private consumption, while low interest rates and a continuing need for new housing continue to spur construction.
Germany has undoubtedly undergone significant change in recent years, however the fundamentals remain the same. As Germany evolves, it steadfastly remains at Europe’s economic heart, with property playing a key part in this continued prosperity.
David Dederer [email protected]
0.0
5.0
10.0
15.0
20.0
2011 2012 2013 2014 2015 2016Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Average (2011 Q1 - 2016 Q3): € 9 bn
€ bn Transaction Volume in € bn
Six years of consecutive growth (2010-2016) and an unusually strong final spurt at the end of 2016 (involving numerous large individual and portfolio transactions)
Property Transaction Volume in Germany
Life After SportIn less than two years, Russia will host the 21st
FIFA World Cup. The event is eagerly anticipated by hundreds of thousands of Russian fans and preparations are progressing at full speed.
Construction of new stadiums and the large-scale reconstruction of existing stadiums were initiated specifically for the event and work is well underway. In addition to the stadiums, each of the 11 host cities is also making significant investments in hotel and transport infrastructure.
Usually, the outlook for an event of this scale is positive – television commercials promoting the cities, expansion of tourism and hospitality businesses, long-term benefits associated with new infrastructure and modern, flexible sports facilities. There is no doubt that the World Cup will also bring many intangible benefits to Russia and the host cities, not least the national pride associated with successfully hosting such a high-profile international event. However the evidence
from other recent World Cup competitions suggests that many Russian host cities, and especially those in the regions, will be left with significant economic challenges for many years to come.
Modern stadiums are expensive facilities to build and maintain, often remaining empty or underused for much of the year, and have become a major drain on local budgets for some previous World Cup hosts. This situation typically arises where the size of the stadiums being erected or redeveloped is based on FIFA’s capacity requirements, resulting in over supply which exceeds the city or region’s demand. Best practice is to design a stadium whose capacity will meet the long-term, local demand rather than to accommodate a one-off capacity that is unlikely to be repeated.
The development of high-capacity stadiums in capital cities is more likely to be sustainable from an economic standpoint as they will be the home stadiums for some of the best Russian Premier League teams with regular attendance of tens of thousands of fans. However, in the regions there is a much greater probability that similar stadiums will remain significantly underused. The South African, Japanese/Korean and Brazilian experience has shown that large stadiums in small or ‘’non-football’’ cities and communities are either heavily underused or become abandoned. The early signs are that Russia could be facing the same scenario in some of the regions.
Both Japan and Korea experienced problems of underuse resulting from the 2002 World Cup. The over-capacity of venues in Japan arose because they
chose to build a number of new stadiums for 2002 World Cup rather than use existing ones, which were entirely suitable and featured in their unsuccessful bid for the 2022 World Cup. The Seoul World Cup Stadium (Sangam Stadium) opened in 2001 with a capacity of 67,000 and is the home stadium for the Seoul football club and the Japanese national team, but the stadium occupancy rarely exceeds 35 per cent, even during national team games.
In South Africa, five new stadiums were built for the 2010 event with the capacity to host 45,000 visitors each. However, the average attendance in even the strongest local football league is typically less than 7,000. At the same time, it should be noted that even before the World Cup, football already had major challenges attracting big crowds given that traditionally rugby has been the most popular spectator sport in South Africa. The Moses Mabhida Stadium in Durban has diversified following the World Cup by holding fairs in the stadium precinct on a regular basis, developing a SkyCar and viewing platform and offering bungee jumping from the stadium’s arch. Despite these initiatives, the local newspapers regularly speculate that the stadium could be demolished or redeveloped for retail.
Even in Brazil, host of the 2014 World Cup and one of the leading football nations of the world, some of the stadiums are already becoming neglected. Cuiaba football team only plays in the Brazilian third division and cannot sustain the 40,000 capacity of the Arena Pantanal. It is the same case for the 43,000 seat Amazon Arena, the home for the Nacional club from Manaus which plays in the regional championship of Amazonia, similar in scale to a championship within a single Russian region.
To help evaluate the long-term outlook for the stadiums now under construction in the regions, AECOM compared the seating capacity per 1,000 residents in legacy* operation mode with those in leading European football capitals. The simple comparison shows that the capacities of some of the 2018 World Cup facilities appear to be excessive and surpass those of acknowledged football cities around the world. For example, in London and Madrid the ratio of seating capacity is 50–60 seats per 1,000 residents, and in Milan it is almost 70. By comparison in Saransk and Kaliningrad, small towns with limited football tradition, there will be more than 100 seats per 1,000 residents when including existing football stadiums.
However, the economic viability of stadiums is not just about supply, it is also heavily dependent on local demand and this is usually achieved through good, consistent attendance for domestic football games. Analysis of historical attendance figures in Russia shows that for regional teams not playing in the Russian Premier League, average attendances at local games rarely exceed 4,000. Even in the main Russian league, only Spartak and Rubin can boast attendances that exceeded 20,000 during 2014/2015 season.
On this basis, the average expected occupancy of the stadiums in Volgograd and Nizhny Novgorod following the World Cup will therefore range from between 10 per cent and 20 per cent, and is likely to reach 60 per cent only for the most popular regional clubs, such as Ural from Yekaterinburg and Krylia Sovetov from Samara. By comparison, in Spain this occupancy indicator can be as high as 70 per cent and in Germany and England, more than 90 per cent. With attendance levels below 20 per cent for Russian stadiums and some of the lowest ticket prices in Europe, generating enough income to even meet operating costs, let alone the cost of finance, is highly unlikely. Improving occupancy levels in Russia will require a serious uplift in the quality of football and the marketing of the sport, especially given the popularity of ice hockey and basketball.
Given these challenges, modern, sustainable stadiums therefore host not only football or rugby matches, but also concerts and a wide range of other entertainment events such as X Games or other extreme sports championships, monster truck shows and festivals. It takes time and expertise, however, to build a more diverse event schedule and it is hard to envisage that some of the Russian host cities will be able to develop such an intensive event programme, at least during the first few years following the World Cup. Otrkritie Arena Moscow Stadium, for example, which was completed in August 2014 and is operated to a high standard, only held its first concert in June 2015. International stars who are able to fill stadiums to capacity rarely visit regional cities, and it will take time to include Russian regional million-plus cities in concert and other event itineraries. Weather is also a significant factor in Russia where the climate prohibits hosting open-air concerts for at least five months of the year.
Based on AECOM calculations, it will cost around 600 million rubles a year to operate a typical regional stadium with 45,000 seat capacity, 50 per cent of which will be accounted for by property and land taxes, paid to the local municipality. At the same time, stadium revenue based on the attendances referred to previously is estimated to be no higher than 400 million rubles a year. The difference will have to be met either through the local budget or legislative reduction of taxes for the stadium, which is also an encumbrance on the municipal budget.
Clearly, there is good reason to be concerned about the future of many of the Russian World Cup stadiums and their long-term impact on local budgets. So what measures could be taken to avoid underused stadiums? We believe the following actions should be taken now:
– Investigate the possibility of decreasing the number of seats in legacy mode during the design and architectural concept stages through greater use of temporary overlay
– Plan a multi-functional approach – ensuring maximum flexibility for the stadium and adjacent precincts, especially for sites and territories released after the World Cup
– Establish close cooperation with an experienced stadium operator, especially during the more challenging “transitional” period 18–24 months after the World Cup
– Form a dedicated marketing and event-management team to plan, develop and implement a comprehensive event schedule and entertainment program for the stadium to maximize year-round use.
– Combine all measures listed above
Russia’s challenge for 2018 is to avoid going the same way as other previous hosts, and with an estimated construction cost per seat nearly double of that in Brazil, the pressure for sustainability post-tournament is high.
Looking to the future, although host countries have a responsibility to choose which venues will be presented in their bids, FIFA also needs to play its part in working with these countries to focus on making the right venue selection from the beginning with a much stronger emphasis on sustainability following the event. Host countries should also take greater advantage of existing venues instead of building new ones that are unlikely to play a major role in the local sporting or cultural life after the World Cup.
Andy Preece [email protected] Nina Novikova [email protected] Nikolay Tkachenko [email protected]
ContactContact us at [email protected]
The contents of Cornerstone are for general information. The opinions expressed in this publication do not necessarily reflect those of the editorial board, do not constitute advice and should not be relied upon in making (or refraining from making) any decision. The information contained within is provided on an “AS IS” basis, and all warranties, expressed or implied of any kind, regarding any matter pertaining to any information, advice or replies are disclaimed and excluded. Cornerstone, AECOM and its associates shall not be liable, at any time, for damages (including, without limitation, damages for loss of any kind) arising in contract, tort or otherwise from the Cornerstone contents, or from any action taken (or refrained from being taken) as a result of using the Cornerstone contents. ©2017 AECOM
About AECOMAECOM is built to deliver a better world. We design, build, finance and operate infrastructure assets for governments, businesses and organisations in more than 150 countries. As a fully integrated firm, we connect knowledge and experience across our global network of experts to help clients solve their most complex challenges. From high-performance buildings and infrastructure, to resilient communities and environments, to stable and secure nations, our work is transformative, differentiated and vital. A Fortune 500 firm, AECOM companies have annual revenue of approximately US$18 billion. See how we deliver what others can only imagine at aecom.com and @AECOM.
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