GLOBAL CITIES ARE INVIGORATING THEIR MILLENNIAL APPEAL, RECALIBRATING THEIR RESIDENTIAL, WORKPLACE AND AMENITY OFFERINGS
BY KATE MAY
THE common message coming from the 34 global cities surveyed in Knight Frank’s Global Cities 2017 Report is the urban economy is increasingly people-centric.
Whether a city is driven by finance, aerospace, commodities, defence or manufacturing, the most important asset is a large pool of educated and creative workers.
Consequently, real estate is increasingly a business that seeks to build an environment that attracts and retain such people, according to Knight Frank’s head of commercial John Snow and Newmark Grubb Knight Frank’s president James D. Kuhn in the report on the future of real estate in the world’s leading cities.
They said the global cities are achieving rapid growth by attracting the talented, high value workers that all companies across industries want to recruit.
They shared that these figures highlight three key trends that are shaping our times: Over 490 million around the world reside in countries with negative interest rates, over 60 per cent of the citizens own a smart phone, and an estimated four billion people live in cities, up by 23 per cent on ten years ago.
Global cities are strengthening their appeal to millennials and reinvigorating their residential markets, said Knight Frank’s chief economist James Roberts.
“For too long, the issue of bringing more young people into the economic mainstream via homeownership has been ignored, and now we are even seeing the fallout in the polls. It is time to build more homes,” he stressed.
According to him, the best way to defend globalisation is to integrate more people into the global cities network.
The political consensus across the world that supported the spread of globalisation finds itself under attack from populist figures who have won support by challenging the political mainstream.
Younger voters felt shutout from the economic mainstream. Large college debts, temporary work contracts and high house prices have left millennials railing against the establishment. Thus, they rallied to candidates opposing globalisation.
Roberts said elections in 2017 in France, Germany and the Netherlands could uncover further evidence that the populists are gaining political ground.
Integrating the disaffected into the economic network of the global cities will be central to the process of building a new political consensus with a wider support base.
The global economy is now seen adapting to match these protests and the change process will bring in more of the dissatisfied into the mainstream by sharing the benefits of globalisation and ultimately strengthening the trends driving the global cities over the long term.
Critical to winning back disaffected millennials will be improving their job security and quality of life.
On jobs, Roberts said the pendulum of the market economy is moving in the millennials’ favour. The question of how to attract and retain this demographic is rising up the corporate agenda.
“Moreover, as we enter the age of self-driving vehicles, drones and artificial intelligence, the younger generation will become central to the economy thanks to the ease with which they interact with technology. Time is on their side,” Roberts said.
He noted that for quality of life, housing is a major issue. Many millennials feel excluded from the globalised economy because a basic step towards joining the propertied classes, namely homeownership, continues to move further out of reach for them in many of the global cities.
This requires a public policy response to accelerate the planning process, incentivise development of affordable inner city homes and speed up the recycling of former industrial sites as mixed-use districts.
The demand is there for new city homes as is the capital to fund the process; it is a matter of removing the barriers, Roberts added.
How cities attract young creatives
Meanwhile, Newmark Grubb Knight Frank’s director of research (Americas) Robert Bach noted the global economy constantly evolves as each new generation adds a layer of new knowledge, skills and wealth to the legacy of previous generations.
“This evolution has accelerated with every technological innovation, from the printing press through the industrial revolution to the latest new mobile app, to the point where change seems instantaneous.”
He said nowhere is this process more visible than in the world’s major cities where growing tech companies are transforming old industrial districts into cutting-edge mixed-use neighbourhoods, drawing highly educated millennials to build their careers and their lives.
Among these are America’s San Francisco and Boston. The former is increasingly the headquarters city of choice for the technology sector while the latter has leveraged its success in academia to establish a centre of excellence for biotech and life sciences.
According to Bach, a San Francisco address gives technology companies an edge in recruiting. As a result, it has had a rebirth as a HQ city. Salesforce, Twitter, Fitbit and Square have expanded their corporate HQ here to nearly four million square feet combined.
Berlin is buzzing, too. Once blighted by high unemployment and slow growth, the German capital is now Europe’s coolest tech hub.
Affordable rents, a bustling nightlife, an evolving food scene and an explosive start-up sector are just some of the city’s defining elements.
Bach said Berlin’s international appeal is evident in its demographic trends. Over 174,000 people moved to the city in 2014 of whom 55 per cent were young foreigners. Its open minded culture and laidback vibe have been magnets with artists and creatives who have played a role in the city’s regeneration.
In the process, isolated areas have been revitalised, modern and quirky buildings have been cropping up in the cityscape while older abandoned factories have been restored and converted into entertainment venues.
The Knight Frank report also noted that Dubai in the United Arab Emirates and Miami in the US are strengthening their millennial appeal by focusing on innovation and creativity.
With a rebranding strategy to shake off its negative image following the market downturn, including measures to help deflate a potential real estate bubble, Dubai – known for being the leading financial hub in the Middle East – has positioned itself as the frontrunner of creativity and innovation in the Middle East and North Africa (MENA) region.
Government funding encouraged a favourable environment for artists and entrepreneurs.
Specially designed art hubs and fashion venues that offer exhibition spaces and learning opportunities (such as short course programmes from the University of Arts London) are aimed at attracting a young and creative population.
Other efforts include launch of the Dubai Digital Entrepreneurship Hub to support technology start-ups and AstroLabs Dubai, the only Google tech hub in MENA.
The report added that as Dubai draws young, innovative and tech savvy individuals, developers realise the need to develop real estate that caters for a range of consumer income levels.
A comparable review of the current market supply of residential product versus upcoming projects shows the developers are reducing the size of apartments to make them more affordable.
On Miami which is reinventing itself as a creative and technology industries hub, the report said perhaps the biggest driver of its transformation from sunny vacation spot to the cultural and liveable city it is today is Art Basel.
Unveiled in 2002, the premier arts and culture event has established Miami as a key destination for ultra high net worth individuals every December, encouraging many to take up residence for longer stretches of the year.
As a result, art districts, new restaurants and galleries opened, and that helped to transform the city into an international centre for art and design.
Residential development led the charge in Miami’s recovery and retail is just now coming to fruition. The Brickell City Centre supermall, Miami Design district shopping area and Wynwood Arts District are top retail destinations.
The arts, culture and sophistication that Miami offers have attracted a younger generation.
Today, elite private schools from New York are looking to develop in Miami as well as appealing to affluent families.
The report also said Miami’s housing market recovery was largely driven by foreign capital as international investors took advantage of soft prices coming out of the recession and advantageous currency rates.
Since 2013, as the market recovered, most of the residential developments in Miami have focused on the ultra luxury market of larger units and technology packages are commonplace.
Developers have also recalibrated their amenity offerings post-recovery. Gone are the small gyms and billiard rooms. In their place are art studios, yoga studios and smart home technology.
Elsewhere, Knight Frank The Netherlands’ research associate Matthew Colbourne said Amsterdam is consistently ranked as one of Europe’s most liveable cities.
It is host to a large international community and offers a rich cultural lifestyle suited to young tech professionals.
Amsterdam has also attracted some of the world’s most innovative companies such as Uber, Netflix and Tesla to set up their European headquarters thanks to its favourable fiscal climate, well educated English-speaking workforce and some of the fastest internet speeds around.
In Asia Pacific, Knight Frank Singapore’s director and head of consultancy and research Alice Tan discerned more companies are seeking prime locations in the city centre with better quality office specifications, enabling them to create more conducive office interiors.
Concepts such as the agile activity-based working are gaining in popularity as part of companies’ recruitment and retention strategies for aspiring young professionals.
She reckoned Singapore’s commercial real estate stock will need to expand to support its long-term objectives of creating a diversified and sustainable economy targeting areas such as healthcare, education, logistics, aerospace, petrochemicals and biotechnology.
Additionally, Singapore’s plans to build a smart nation will support the evolution of future workplaces that could weave commercial and industrial spaces in new formats that might be better created in new precincts beyond the city centre, she said.
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