ZOHO – Development with a hundred investors

ZOHO or the Zomerhofkwartier near Rotterdam’s Central Station has witnessed a significant revival in the past years. The area is composed of office buildings constructed after the war, and gradually witnessing a loss of attractiveness as well as tenants over the past few decades. Although a housing corporation had purchased many properties in the area with the plan of demolishing them and building new housing, the crisis brought this plan to a halt. These were the conditions inherited by Stipo, an Amsterdam/Rotterdam-based urban regeneration office. Cooperating with the area’s owner and various creative and social companies, Stipo and their partners redeveloped the area step-by-step, through rethinking its empty buildings and public spaces.

“The most sustainable model is making tenants responsible for the building.”

How did you get engaged in the ZOHO area?

Zomerhofkwartier or ZOHO is a former inner city business area in Rotterdam, right next to the Central Station, at the border of the WWII bombardment area: most of the buildings in the area were built in the decades following the war. By the time we started working there, it had gradually become a dead zone with a lot of vacancy; about 12,000 square meters of empty, lifeless ground floors, with real safety problems. People did not dare to cycle through. Havensteder, the housing corporation that bought most of the buildings in the area as well as the surrounding neighbourhood, believed that the area should be demolished, that it was out of date, old-fashioned, and that there was no use for it anymore. But then came the crisis and demolition never happened. For us, the crisis provided a great opportunity to reinvent what should be happening in this area. When the housing corporation decided to not demolish the area but rather create some sort of change over the next 10 years, they called for ‘slow urbanism’, inviting us to help them with our ideas. We accepted the invitation on the condition that we could help determine who would come there. Together, we decided that it should be a makers’ area: it is not only about the creative economy, we should not only have people who think, but also people who work with their hands, who make noise, who create objects. It is a wonderful area for this because it is right in the heart of the city, but there are very few people living there. We set ourselves to revive the place, create a new economy, create spaces for makers, and open the ground floor places to bring more life to the streets. Havensteder gave us the opportunity – together with some of the other first tenants – to select other tenants moving into the building.

How did you find tenants for the buildings?

There was not a big queue of people who wanted to move in the building, but people were vaguely interested. We were looking for tenants who wanted to move to ZOHO because they wanted to be part of the area, and because the community was there. We were very selective about who can rent here. We invented a system of pitches: people had to come in front of a jury, pitch their idea and explain why they wanted to rent here. We said “no” to half of the candidates, which sounds like a crazy idea in Rotterdam, full of vacant offices. But we wanted to create a community, not only a renter here and a renter there.

The Yellow Building. Photo (cc) Eutropian
How did you make the buildings attractive for prospective tenants?

Part of being a tenant means that you are also a member of the Association of the Yellow Building, which has financial consequences because you pay five euros per square meter that you rent each year. So for 3500 square meters, we can get close to 20,000 euros if the building is relatively full. And this money is used by the whole building to help programme it. So we invite people for lectures, improve the internet connection in the building, we write articles about it, so we have a working budget to tell the world about the things that are happening in the building. That was really important for the success of the Yellow Building. It creates really active tenants. This is the most sustainable model we have in the area, as you keep feeling responsible for the building.
We also made sure that some of the rent we collect from our tenants is reinvested in the buildings. For example, when we moved in, the Yellow Building looked really bad, carrying traces of 20 years of pollution. We thought, as tenants, that if this were a financially successful building, the owner would be more than happy to invest in this building because it would make it financially more sustainable. In our case the owner never did that because it was a building in an empty area, so we went to the owner and asked them: “Can we make a deal that you invest part of the rent back in the building?” Havensteder said yes and they put 25% of the rent we collected in the building back into the building, into any construction work that we would find appropriate. So the first 25,000 euros we invested into opening up the plinths on ground floor, which gave us the opportunity to attract a café there, something that is really important for the area. That café gives another meaning to the ZOHO district.
The area quickly increased in notoriety. For instance, we got an upcoming artists’ platform here, and on their opening night they had 2000 people standing in the ZOHO streets. From that moment on, we did not have to do a lot of marketing anymore. It all developed slowly and organically, following our shared vision, but without any master plan or design. After half a year of working with people from the government and active groups in the area, as well as people who wanted to be in the area, it felt like we had 100 owners. We like to think of this area as a place with 100 investors, rather than one central investor: it is a networked idea. After a year, all the 12,000 square meters were full. We never anticipated this; it went much faster than we thought.

Event in the Yellow Building. Photo (cc) Eutropian
What is the economic rationale of your involvement in ZOHO?

We did all this with many “passion hours”: we learned this expression at a government meeting. We took on the whole process because we wanted to invest in the area. As the housing corporation could not just hire us for all of our hours, we agreed on getting entering the concept of ‘the economics of sharing’ with them. We suggested they rent some of their vacant property to us, so that we can sublet them and make money through this process, to finance our work. Our building, for instance, a 3000 square meter building, is completely full now. We were actually so successful that the owner reinvests 25% in the area from the rent we collected for him. Except that we never made a deal that we would get paid for making the owner financially sustainable. The challenge we have now is to develop a model where we still invest in the area while benefitting and being rewarded.

How did the success of your experiment change the status of the buildings?
Interventions in the ZOHO area. Image (c) Stipo

Our mistake is that we made the area so successful that the housing corporation will have to sell the buildings: they were basically forced by the national government to start thinking about selling the area. The government’s view is that housing corporations are semi-public-private organisations and their job is to provide housing, or sell their non-housing properties to private organisations. We began to think about buying the building and started talking about it with Havensteder. Then we discovered that we should have done this two years ago. The value of the property is not only calculated by the amount of rent that it collects (the rule is that a building’s value equals 6 times the annual rent of the building). If there are more renters in the building, the building becomes more expensive. But there is a double effect: as the building is occupied even more, this multiplier goes up as well, and it becomes 8 or 9 times the value of the annual rent. We should have said two years ago, “Ok, we will do this, but we will measure the value of the property and we will measure it again 3 years from now, and let’s agree that we split the value gain in half.” One of the problems is that many building owners bought their properties for high prices when times were really good, and have these prices in their books, which is not always a realistic market value anymore. A housing corporation would always tell us that “you can buy the building, but you have to buy it for the price we bought it for.”
Our quest now, is to find a way to keep on doing what we are doing. That can be by buying the area ourselves, or by finding investors who want to buy the area, or we can build such as strong coalition that whoever wants to come in would be crazy to kick us out. Maybe this is an unrealistic plan. But we were very successful at getting powerful people to come over here, and we now have a strong coalition in the city who say it would be crazy to destroy this space in ZOHO. This place allows financiers, building coalitions, a mixture of systems with rules and unofficial systems to work together.

How did your work impact the neighbourhood?

We are very proud that within all this voluntary work, we managed to get a start in the area for small businesses. We managed to give a business case to people living around ZOHO, an opportunity for the people who were formally unemployed and are now making money by being here. For example, we had small companies in ZOHO that started a bar, which is difficult in a deprived area, but since all the people made themselves responsible for this bar, we managed to speed up this process and make it work. Combining the top down and bottom up, and making yourself responsible for the area makes really interesting things happen.

How do you see the role of this kind of development process in today’s urban planning?

For decades after the war, we were all brought up with this idea that urban development means that we are building houses in a green field area, that we buy cheap land from farmers and we develop it. This is what urban development was called, something that is done by people on the physical side of the planning spectrum, without social or economic competences, because they complicate the process. This is what we had been doing for 40 years after the war. When reinventing areas like ZOHO, you cannot work like this anymore. It is so networked, so split up between different property owners and existing parties, that you are not dealing with five people, but with a hundred people. Because it is so networked, there is no one party that has a big enough role to be the leader of change. This is why many of these areas remain untouched. We need a new role, what we call the ‘public developer’, the role we decided to take on: the person who takes the initiative, who manages to mobilise the network and start actual change, combining different interests in the area. In ZOHO, we can really work fast because we do not have one public developer, but we have three: the housing corporation and the city district both have the attitude of public developers.

How do you see ZOHO in an international context?

We see that the experience of ZOHO can also be found in other cities in Europe. It is good to know that it is not just an incident, not something we invented, but it is happening everywhere. For me, city makers are those who mediate between top-down and bottom-up, and make it work both for the small innovative parties who work at the ground level (they have to have business case), as well as for the people working on the governmental level, who are desperate to make these exceptions work and are looking for ways to change the system. If you can change the system in a way that you can also give small businesses a chance, then something is happening.
With Stipo, it is important for us to be part of this international network of people who do similar things. Not only to exchange knowledge but more, because we feel that we are inventing a new profession. We make a lot of mistakes, and we meet a lot of people who make exactly the same mistakes. These are mistakes like when you start a project, you make something successful and you establish the financial model too late. You are never part of the financial success you achieved yourself. Or you created a community but the community is still too much centred around the first people who were active there. And so how can you move onto the next phase? It is very important to share questions like these and look for solutions together. This is why we are trying to bring these initiatives together with the Re:Kreators network and also presented them at the occasion of the Dutch presidency of the EU in 2016. All cities should begin to consider this the new way of urban development.

Interview with Hans Karssenberg and Jeroen Laven on 12 February 2015 and 7 April 2016