The availability of affordable creative workspace has been declining sharply in London. A 2014 study forecast a loss of 30% of artists’ workspace —up to 3,500 studios—in just a five-year period to 2019. This disheartening prediction is coming to fruition, with 67% of at-risk studios having already been lost by the end of 2017. Affordable workspaces are vital incubators for London’s creative and cultural industries, which contribute an estimated £47 billion (US$60 billion) to London’s economy each year and form an important part of the local community fabric.
The historic model of artists locating property in cheaper parts of the city, fitting it out as studios and housing vibrant artistic activity, has often resulted in a cycle of regeneration, through which these artists are priced out of the very areas they helped to regenerate. In this situation, the workspace providers and communities are left vulnerable—on short-term leases, unprotected and exposed to the broader dynamics of the property development process.
The stark reality is that in London, out of over 300 buildings housing affordable creative workspace, only 17 are owned by their occupants. The challenge we seek to address at the Creative Land Trust is to ensure that London continues to benefit from creative production in the city, which drives successful creative industries, in the context of increasing pressure on property.
The Creative Land Trust is a newly formed, innovative solution to address the vulnerability of the sector by offering a source of finance for affordable creative workspace in London. The Creative Land Trust has been developed with public and private sector partners and stakeholders, including developers, local authorities, artists and affordable workspace providers, in response to their collective needs.
The Creative Land Trust intends to stabilize the market by supporting the acquisition or long-term leasing of creative workspaces that are at risk, thereby building a network of sustainable, permanent spaces that will remain affordable for artists and creative producers in perpetuity. The Creative Land Trust ensures the provision of affordable rents in those properties it secures, embedded as a specific condition of the financing being extended (set at an average of £15 per square foot per annum but no higher than £19 square foot per year). The use of the term ‘trust’ is deliberate to denote the long-term stewardship on behalf of creatives, rather than in a specific legal sense. The Creative Land Trust has applied for charitable status, with corporate articles that further enshrine its mission and goals.
London has an effective ecosystem of studio providers, small businesses, often themselves charities, that are experienced in managing and operating creative workspaces on an affordable basis. The Creative Land Trust will engage with these partners on acquisition opportunities and appoint them to run the buildings via long-term leases. These providers can also be seen as beneficiaries of the Creative Land Trust, with the hope that they are able to stabilize their own position through leases offering greater security and the possibility of acquiring the buildings they own over time.
Research has shown that these kinds of spaces have a wider economic and social value, contributing to local business growth, attracting people and investment to an area and supporting communities. The Creative Land Trust has identified indicators associated with medium- and long-term outcomes to evaluate its ongoing impact, locally and more widely in London across creatives, workspace providers and communities.
A Blended Funding Model
The Creative Land Trust will pursue a blended capital model by leveraging grant funding to attract impact investment at scale. For the growing number of impact investors, who seek a blend of financial and social returns in areas of direct thematic or geographic alignment, vehicles that fund creative workspaces represent potential investment opportunities. The investment will be structured as debt, offering a fixed rate of return to investors over an initial term, expected to be between 5 and 7 years. The interest level will incorporate a concessionary element to reflect the social value being created.
Finding the Right Cultural Fit
No direct equivalent of the Creative Land Trust currently exists, to our knowledge. One of the challenges, operationally and culturally, has been to bridge the underlying needs of the sector, respecting the values and practice of creatives, with the idea that external public and private finance could provide a supportive new model in a way that doesn’t compromise or compete against existing workspace providers in the sector. In addition, it is clear that every opportunity has unique characteristics, which makes it hard to design common investment criteria. One issue the steering group has had to grapple with, for instance, is the proportion of commercial activity that should be permissible in a property in order to cross-subsidize affordable rents for creatives. Such issues can only be determined on a case-by-case basis, although it will be important to set a minimum baseline for affordability.
The Creative Land Trust is in the process of being established and an independent board of trustees is being recruited. Current efforts are led by a steering group comprising Outset Contemporary Art Fund, Arts Council England, the Mayor of London’s Culture & Creative Industries Unit, and leading authorities in this area Naomi Dines and Pru Robey. I, together with my colleagues at Investing for Good CIC, a dedicated impact investment practice in the UK, have supported the group by profiling the financing and operational model, and structuring the vehicle together with the law firm Dechert LLP. Shortly we will start reaching out to prospective investors.
Potential to Scale
The Creative Land Trust has the potential to transform the landscape of affordable workspace provision through an intervention at scale. By raising a scaled fund and securing a portion of the creative workspace required in London, the Creative Land Trust will raise the profile of affordable workspace provision and its benefits to the city. This will support a better understanding of the social impact of studio buildings; a better understanding of the needs of developers; and increased access to social impact investment for the creative sector. Operating at scale will facilitate better access to strategic funds, loan funding and property funds in support of this sector, and will build resilience.
The loss of creative workspace has been recognized as a global issue for large cities. The London-led World Cities Culture Forum, a network of 35 cities working to position culture as a core contributor to urban growth, has reported on the issues of creative and production space in global cities, and a number of member cities have contributed to debates, as well as developed responses to this challenge. For example, in San Francisco, the Community Arts Stabilization Trust (CAST) was set up in 2013 in partnership with the city and the Kenneth Rainin Foundation to purchase and lease space for nonprofit arts organizations. This has served as a reference point for the Creative Land Trust. CAST has now secured four buildings in perpetuity for cultural use that are home to iconic arts organizations and seeks to preserve 100,000 square feet of creative workspace by the end of 2018. Similar to CAST, the Creative Land Trust is driven by key stakeholders—city government and private sector—coming together to address a crisis which cannot be solved by one party alone.
Photo: A workshop in London’s Hatton Gardens complex. ©Philipp Ebeling.
This is an excerpt from Cornerstone Capital’s report Creativity & The Arts: An Emerging Impact Investing Theme.
Note: Certain contributors to this report may represent asset managers or specific investment opportunities. Their inclusion is not intended to be, nor should it be construed, as a recommendation or endorsement of their products or services by Cornerstone Capital Inc. The views expressed by external contributors do not necessarily reflect those of Cornerstone Capital Inc.