50% of us live in a city

With the excitement of the budget 2015 out of the way attention turns back to business as usual. I was privileged to attend a breakfast event this week discussing Yorkshire prospects for property and the key take away I had was the need to do things differently, whether marketing collectively as a region, targeting specific sectors to create “hubs” or simply being more forward in how the area promotes itself. It has worked with wooing Google but surely we can bring in much much more.

If you dig below the surface though, this need to do things different is driven by underlying megatrends – the global evolutionary forces that are creating long-term shifts in demographics, cities, economics and politics. But what does this mean to property, well simply its drives a differing pattern of occupational demand, creates new sources of capital and asset classes and ultimately new avenues to profitable growth. These megatrends can be cut in many ways but the one which stands out to me is “Rapid Urbanisation”.

“Half of the world lives in cities” is frankly starting, though I do wonder how you define a city. I class myself as living in Penistone (not a city) but Penistone is arguably part of Sheffield (a city) – therefore do I live in a city? The brain starts to hurt at this point.

 

On a global scale this means there is more demand for retail and office within the largest cities. A sheer drive to provide services and employment to accommodate these individuals, with most occurring in emerging markets, provides opportunities for those willing to enter and make the investment. For smaller districts it creates challenges particularly as cities grow and infrastructure and essentials fail to keep up. Living in a country going through austerity adds more burden as the private sector need to invest into public projects otherwise it raises longer term doubts over the ability to fund them from the public purse.

 

So what are the opportunities and changes we’ll see?

• All age groups are drawn to cities from students studying, workers wanting the balance of work and play or even the elderly generation means there will be requirements for all types of housing in cities;
• People are rising in wealth; it’s not everyone but certainly is occurring and this changes peoples behaviours – buying the luxury brands, meat from a butcher etc. This creates opportunities for retail units attracting higher calibre tenants than before;
• Climate change and sustainability seems to have hit the industry hard and most conversations now include elements of it. Demonstrating a sustainable development adds a premium price to it;
• As the densities of mega cities become greater, development that embraces “liveability” – offering access to green space, good public realm and built with high standards of sustainability - will create long-term value. City dwellers will pay premiums for high-quality living and work space; and
• Sheds, warehouses and distribution centres (like I-port in Doncaster) located near big cities to feed the growing e-commerce market. Delivery within 24 hours means there needs to be a larger spread of units offering a full range of products.

 

Megatrends are certainly an interesting way to think about the future. The world is ever changing and with that there is a need to keep pace. Setting up a twitter account or implementing gardens within buildings all show that we are moving forward but you need to keep up. The great urbanisation requires private and public sector investment to be successful and over the next few years this will make or break the cities of tomorrow.

 

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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