Who owns the city? How urban real estate became the corporate asset class of choice

New York City is still the world's most popular land bank. Image: Getty.

The term “gentrification” does not quite capture the massive changes that have been happening in a growing number of cities worldwide in the last few years. In mid-2014 to 2015 alone, more than a trillion dollars was invested in real estate in just 100 cities across North America, Europe and Asia; this is excluding properties priced under $5m and sites available for development.

Something else is happening. Urban land – not just buildings, but also undeveloped lots – is considered a good investment at a time when financial markets are shaky. As a result, worldwide investment in urban land is increasing rapidly.

There are diverse indications of this, which I explore in depth in my book, Expulsions. For one, the top 100 cities – as ranked by level of property investment – account for 10 per cent of the world population, but 30 per cent of the world’s GDP (its overall economic output) and 76 per cent of the world’s property investment. So wealth is clearly being concentrated into a select group of urban areas.

Another disturbing sign is that worldwide real estate assets amount to $217trn, according to Savill (one of the leading expert firms on real estate). This represents 60 per cent of the value of all global assets, including equities, bonds and gold. And let’s not forget that when a piece of real estate becomes an asset, it has been financialised – which opens up all kinds of possibilities to raise the property’s value.

That said, it’s important to keep things in perspective. Although the world’s GDP is about $270trn, this is dwarfed by the value of finance: measured by outstanding derivatives (the basic measure for finance), it is worth over a quadrillion dollars.

Home, sweet home?

There are a couple of signals that this trend has something to do with investment, rather than, say, more people moving to these cities to buy a house and start a family. Let’s focus on some of the most desirable luxury buildings in Manhattan in New York – though we could have taken any of 25 or even 50 major cities in the world.

The trends I describe capture something about the desirability of investing not only in property but, perhaps especially, in urban land. This is significant in a world where much land is dying – due to desertification, floods, mining, plantation agriculture, deforestation or poisoning from mining operations.

In 2014, 54 per cent of sales of real estate priced over $5m in Manhattan were made to shell companies – companies used as a front for other operations. If we break it down into specific buildings, and take the most famous and highly-valued Manhattan buildings we find similar numbers.

Bloomberg Tower. Image: Jaroslavd/Flickr/creative commons.

Here are some relevant cases for the last few years. In the Warner Center in Manhattan, 122 of the 192 condos are owned by people who used shell companies, which hide their identities. In the Bloomberg Tower, 57 per cent of condos are owned by shell companies. And in The Plaza, 69 per cent of condos are owned by shell companies. We can observe the same trend in other cities, such as London, where 22,000 properties had been left empty for more than six months, as of February 2016.


Several major US cities saw rising investments (both national and foreign) in urban properties, from offices to high-rise apartment buildings, hotels and retail. New York led, with $70bn from mid-2014 to -15, followed by Los Angeles Metro and San Francisco Metro. These top recipient cities were followed by Chicago, Washington DC, Dallas and several others.

We see similar trends abroad, with London, Paris and Tokyo among the major recipients. In some cities, it was mostly foreign investment: for example, in London, Dublin, and Amsterdam-Randstadt. In others, it was primarily domestic investment, such as New York, Moscow and Beijing. And in many it was 50:50, as a result of the growth of foreign investment – notably in Paris, Sydney, and Vienna.

Who owns the city?

Periods of high levels of foreign investment have recurred in cities such as New York, London and Hong Kong over the decades. When I was doing my research for The Global City in the 1980s, I found multiple nationalities in the ownership of much of the City of London. In New York and Los Angeles, the acquisitions by Japanese and Middle Eastern investors had become more prominent, alongside the long-standing European investments.

But what marked these investments in the 1980s was utility. The buyers wanted and needed to be in New York or London. Today, the high incidence of shell companies is more about storing money and hiding it, than actually using the buildings.

Building big in central London. Image: lucyrfisher/Flickr/creative commons.

These days, I would argue that whether the investment is foreign or national may matter less than the fact that it is corporate. Corporate investment tends toward large-scale projects; either in large developments, or in smaller urban plots that are assembled into one larger plot. Often, existing properties are torn down to build entire new mega-projects – taller, larger, fancier than what went before.

This kind of large-scale urban development entails significant shifts in ownership; from small or medium businesses to large corporations, or from public to private. Some of the most noxious “site assembly” developments happen when a single owner buys one or two city blocks, and the city authorities cave in to their requirements by eliminating little streets and parks, and privatising everything.

We are witnessing a deep history in the making: a systematic transformation in the pattern of land ownership in some of our major cities. Whether it’s national or foreign, large-scale corporate investment absorbs much of the public tissue of streets and squares, and street-level commerce. It shrinks the texture and scale of spaces that are accessible to the public, and ultimately changes the very character of the city. If we’re to safeguard equity, democracy and rights in urban areas, we must first ask ourselves: who owns the city?The Conversation

Saskia Sassen is Robert S. Lynd Professor of Sociology at Columbia University.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

Green roofs improve cities – so why don’t all buildings have them?

The green roof at the Kennedy Centre, Washington DC. Image: Getty.

Rooftops covered with grass, vegetable gardens and lush foliage are now a common sight in many cities around the world. More and more private companies and city authorities are investing in green roofs, drawn to their wide-ranging benefits which include savings on energy costs, mitigating the risk from floods, creating habitats for urban wildlife, tackling air pollution and urban heat and even producing food.

A recent report in the UK suggested that the green roof market there is expanding at a rate of 17 per cent each year. The world’s largest rooftop farm will open in Paris in 2020, superseding similar schemes in New York City and Chicago. Stuttgart, in Germany, is thought of as “the green roof capital of Europe”, while Singapore is even installing green roofs on buses.

These increasingly radical urban designs can help cities adapt to the monumental challenges they face, such as access to resources and a lack of green space due to development. But buy-in from city authorities, businesses and other institutions is crucial to ensuring their success – as is research investigating different options to suit the variety of rooftop spaces found in cities.

A growing trend

The UK is relatively new to developing green roofs, and governments and institutions are playing a major role in spreading the practice. London is home to much of the UK’s green roof market, mainly due to forward-thinking policies such as the 2008 London Plan, which paved the way to more than double the area of green roofs in the capital.

Although London has led the way, there are now “living labs” at the Universities of Sheffield and Salford which are helping to establish the precedent elsewhere. The IGNITION project – led by the Greater Manchester Combined Authority – involves the development of a living lab at the University of Salford, with the aim of uncovering ways to convince developers and investors to adopt green roofs.

Ongoing research is showcasing how green roofs can integrate with living walls and sustainable drainage systems on the ground, such as street trees, to better manage water and make the built environment more sustainable.

Research is also demonstrating the social value of green roofs. Doctors are increasingly prescribing time spent gardening outdoors for patients dealiong with anxiety and depression. And research has found that access to even the most basic green spaces can provide a better quality of life for dementia sufferers and help prevent obesity.

An edible roof at Fenway Park, stadium of the Boston Red Sox. Image: Michael Hardman/author provided.

In North America, green roofs have become mainstream, with a wide array of expansive, accessible and food-producing roofs installed in buildings. Again, city leaders and authorities have helped push the movement forward – only recently, San Francisco created a policy requiring new buildings to have green roofs. Toronto has policies dating from the 1990s, encouraging the development of urban farms on rooftops.

These countries also benefit from having newer buildings, which make it easier to install green roofs. Being able to store and distribute water right across the rooftop is crucial to maintaining the plants on any green roof – especially on “edible roofs” which farm fruit and vegetables. And it’s much easier to create this capacity in newer buildings, which can typically hold greater weight, than retro-fit old ones. Having a stronger roof also makes it easier to grow a greater variety of plants, since the soil can be deeper.


The new normal?

For green roofs to become the norm for new developments, there needs to be buy-in from public authorities and private actors. Those responsible for maintaining buildings may have to acquire new skills, such as landscaping, and in some cases volunteers may be needed to help out. Other considerations include installing drainage paths, meeting health and safety requirements and perhaps allowing access for the public, as well as planning restrictions and disruption from regular ativities in and around the buildings during installation.

To convince investors and developers that installing green roofs is worthwhile, economic arguments are still the most important. The term “natural capital” has been developed to explain the economic value of nature; for example, measuring the money saved by installing natural solutions to protect against flood damage, adapt to climate change or help people lead healthier and happier lives.

As the expertise about green roofs grows, official standards have been developed to ensure that they are designed, built and maintained properly, and function well. Improvements in the science and technology underpinning green roof development have also led to new variations on the concept.

For example, “blue roofs” increase the capacity of buildings to hold water over longer periods of time, rather than drain away quickly – crucial in times of heavier rainfall. There are also combinations of green roofs with solar panels, and “brown roofs” which are wilder in nature and maximise biodiversity.

If the trend continues, it could create new jobs and a more vibrant and sustainable local food economy – alongside many other benefits. There are still barriers to overcome, but the evidence so far indicates that green roofs have the potential to transform cities and help them function sustainably long into the future. The success stories need to be studied and replicated elsewhere, to make green, blue, brown and food-producing roofs the norm in cities around the world.

Michael Hardman, Senior Lecturer in Urban Geography, University of Salford and Nick Davies, Research Fellow, University of Salford.

This article is republished from The Conversation under a Creative Commons license. Read the original article.