A real options framework for adaptive urban design

Urban designs, and in particular urban masterplans, must deal with an inherently uncertain future. However, in practice, many urban masterplans still seem to underestimate or even ignore uncertainty. Some scholars have proposed design flexibility and adaptivity as a way to deal with uncertainties, but a formal framework has been lacking in urban design theory. Drawing upon theories of real options in finance and economics, a framework for design under conditions of uncertainty is developed. Five generic design strategies are identified, offering different flexibility options to urban design. Although such design options are currently used in practice in an intuitive way, the real options framework allows designers to cope with uncertainties in a more structured way and offers the possibility to quantify the added value of flexibility options.