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.

 
 
 
 

Seven climate change myths put about by big oil companies

Oil is good for you! Image: Getty.

Since the start of this year, major players within the fossil fuel industry – “big oil” – have made some big announcements regarding climate change. BP revealed plans to reduce its greenhouse gas emissions by acquiring additional renewable energy companies. Royal Dutch Shell defended its $1-$2bn green energy annual budget. Even ExxonMobil, until recently relatively dismissive of the basic science behind climate change, included a section dedicated to reducing emissions in its yearly outlook for energy report.

But this idea of a “green” oil company producing “clean” fossil fuels is one that I would call a dangerous myth. Such myths obscure the irreconcilability between burning fossil fuels and environmental protection – yet they continue to be perpetuated to the detriment of our planet.

Myth 1: Climate change can be solved with the same thinking that created it

Measures put in place now to address climate change must be sustainable in the long run. A hasty, sticking plaster approach based on quick fixes and repurposed ideas will not suffice.

Yet this is precisely what some fossil fuel companies intend to do. To address climate change, major oil and gas companies are mostly doing what they have historically excelled at – more technology, more efficiency, and producing more fossil fuels.

But like the irresponsible gambler that cannot stop doubling down during a losing streak, the industry’s bet on more, more, more only means more ecological destruction. Irrespective of how efficient fossil fuel production becomes, that the industry’s core product can be 100 per cent environmentally sustainable is an illusion.

A potential glimmer of hope is carbon capture and storage (CCS), a process that sucks carbon out of the air and sends it back underground. But despite being praised by big oil as a silver bullet solution for climate change, CCS is yet another sticking plaster approach. Even CCS advocates suggest that it cannot currently be employed on a global, mass scale.

Myth 2: Climate change won’t spell the end of the fossil fuel industry

According to a recent report, climate change is one factor among several that has resulted in the end of big oil’s golden years – a time when oil was plenty, money quick, and the men at the top celebrated as cowboy capitalists.

Now, to ensure we do not surpass the dangerous 2°C threshold, we must realise that there is simply no place for “producers” of fossil fuels. After all, as scientists, financial experts, and activists have warned, if we want to avoid dangerous climate change, the proven reserves of the world’s biggest fossil fuel companies cannot be consumed.

Myth 3: Renewables investment means oil companies are seriously tackling climate change

Compared to overall capital expenditures, oil companies renewables’ investment is a miniscule drop in the barrel. Even then, as companies such as BP have demonstrated before, they will divest from renewables as soon as market conditions change.

Big oil companies’ green investments only produce tiny reductions in their overall greenhouse gas emissions. BP calls these effects “real sustainable reductions” – but they accounted for only 0.3 per cent of their total emissions reductions in 2016, 0.1 per cent in 2015, 0.1 per cent in 2014, and so on.


Myth 4: Hard climate regulation is not an option

One of the oil industry’s biggest fears regarding climate change is regulation. It is of such importance that BP recently hinted at big oil’s exodus from the EU if climate regulation took effect. Let’s be clear, we are talking about “command-and-control” regulation here, such as pollution limits, and not business-friendly tools such as carbon pricing or market-based quota systems.

There are many commercial reasons why the fossil fuel industry would prefer the latter over the former. Notably, regulation may result in a direct impact on the bottom line of fossil fuel companies given incurred costs. But climate regulation is – in combination with market-based mechanisms – required to address climate change. This is a widely accepted proposition advocated by mainstream economists, NGOs and most governments.

Myth 5: Without cheap fossil fuels, the developing world will stop

Total’s ex-CEO, the late Christoph de Margerie, once remarked: “Without access to energy, there is no development.” Although this is probably true, that this energy must come from fossil fuels is not. Consider, for example, how for 300 days last year Costa Rica relied entirely on renewable energy for its electricity needs. Even China, the world’s biggest polluter, is simultaneously the biggest investor in domestic renewables projects.

As the World Bank has highlighted, in contrast to big oil’s claims about producing more fossil fuels to end poverty, the sad truth is that by burning even the current fossil fuel stockpile, climate change will place millions of people back into poverty. The UN concurs, signalling that climate change will result in reduced crop yields, more waterborne diseases, higher food prices and greater civil unrest in developing parts of the world.

Myth 6: Big oil must be involved in climate policy-making

Fossil fuel companies insist that their involvement in climate policy-making is necessary, so much so that they have become part of the wallpaper at international environmental conferences. This neglects that fossil fuels are, in fact, a pretty large part of the problem. Big oil attends international environmental conferences for two reasons: lobbying and self-promotion.

Some UN organisations already recognise the risk of corporations hijacking the policy-making process. The World Health Organisation, for instance, forbids the tobacco industry from attending its conferences. The UN’s climate change arm, the UNFCCC, should take note.

Myth 7: Nature can and must be “tamed” to address climate change

If you mess with mother nature, she bites back. As scientists reiterate, natural systems are complex, unpredictable, and even hostile when disrupted.

Climate change is a prime example. Small changes in the chemical makeup of the atmosphere may have drastic implications for Earth’s inhabitants.

The ConversationFossil fuel companies reject that natural systems are fragile – as evidenced by their expansive operations in ecologically vulnerable areas such as the Arctic. The “wild” aspect of nature is considered something to be controlled and dominated. This myth merely serves as a way to boost egos. As independent scientist James Lovelock wrote, “The idea that humans are yet intelligent enough to serve as stewards of the Earth is among the most hubristic ever.”

George Ferns, Lecturer in Management, Employment and Organisation, Cardiff University.

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