Gloablisation and Real Estate Markets

Globalisation and real estatemarkets - Scope for pro-poor

developmentRamin Keivani

UK-Brazil Urban Network Sao Paulo workshop

22-25 November 2010

Globalisation: What does it entail?

• Implies that a world composed of separate national economies is being superseded by a single global economy, States by global markets - countries/cities

become junctions in flows that governments have lesscontrol

• Uneven development- Path dependent

• Macro economic effects- Deregulation, liberalisation, sectoral shifts

• New city economy as junctions of flow• Pervasive effects in the North and South

Impact on urban form and property1

• Shift from a Christaller based hierarchical system to functional synergy and networked city system,

- E.g. Ranstad, London-Cambridge, London-Oxford, Stockholm-Uppsala- Cross border corridors, e.g., HK-Guangzhou- In Brazil hw can we define the relationship between SP, Rio and BH?

• City development reoriented in line with spatial requirements of international capital- Occupier demand

• Intensified redevelopment of Central Business Districts, creation of new CBDs

- State of art office space with global connection• Globally connected industrial estates• Retail, leisure and hospitality facilities• Housing

Canary Wharf - London Docklands

Puxi, Shanghai’s old-town CBD

Pudong, Shanghai’s new-town CBD

Impact on urban form and property2

- Investment demand• Core and opportunistic investment depending on:

- Institutional risks» Property laws and regulations, professional services, contract enforcement, etc

- Market risk» Interest rates, recession, wars, political stability, economic growth, etc

• The more globally integrated the higher the risks from external market risks

Total real estate market return byregion (RREEF, 2010a)

Total investible and invested realestate by region in 2009 (RREEF, 2010a)

Global real estate cross borderinvestment (DTZ, 2010)

Non-UK ownership of City offices inLondon (Lizieri and Kutsch, 2006)

Ownership of London prime homes(DTZ, 2009)

Impact on urban form and property3

• Encroachment on cheaper peripheral land- Particularly for industrial development and upper middle class housing, e.g.,

Bangalore

• Formation of extended metropolitan regions and even larger mega urban regions- E.g., Desakota regions in SE Asia, or macro greater Sao Paulo- Blurring of rural and urban dichotomy, shifting industrial activities to peri-urban and

rural areas, agglomeration economies, etc.

• Redistribution of industries in cities and resultant spatial reconfiguration and redevelopment

• Opportunity for rapid growth of strategic nodes- E.g. Dubai

Bangalore: expansion in to peripheral areas2007)

(Sudhira et al,

Higher middle income apartments on peripheralland in Bangalore

• All of this means major investment in real estate both as a direct result of global investment diversification strategies and indirect result of (globally induced) development activities- Dubai with about 24% of GDP in 2008 (real estate and construction) as prime example

• But what about Latin America and Brazil?

Global Network Connectivity175 firms - 526 cities (Pain, 2009)

Rank GNC 20081 London 1008 Shanghai 69.7412 Seoul 63.516 Buenos Aires 61.1917 Mumbai 60.8618 Kuala Lumpur 59.7219 Warsaw 56.420 Sao Paulo 56.19

200016 Sao Paulo 54.7423 Buenos Aires 44.56

Global real estate market value in 2009(RREEF, 2010a)

Latin America 2009 commercialproperty investment activity (RREEF, 2010b)

Latin America Class A Office Market(RREEF, 2010b)

Quality of Office types in Brazil(RREEF, 2010b)

Globalisation and its urban discontents

• These impact on all sustainability spheres but we focus on urban equity:

- How can urban lower income groups engage more effectively with economic globalisation to maximise their own benefits?

School of the Built Environment

e

Looking at the problem from another perspective:

26% in Sao Paulo live in Favelas and illegal settlements

School of the Built Environment

Demographic shifts in Sao Paulo(Torres et al, 2007)

Distribution of real estate projects(Torres et al, 2007)

Rapid urban sprawl in Sao Paulo(Torres et al, 2007)

Opportunities for the low incomepopulation

• Economic readjustments in peripheral/peri-urban areas• The role of land and property as assets for income generation• Examples of peri-urban villages in Quanzhou and Hanoi• Institutional constraints- Property rights: tenure, development, use and

exchangeof the Built Environment

The role of urban governance1

• A definition:- Broader than government entailing the process of interaction between

the public sector and various actors and groups of actors in civil society

• Crucial to this are power relations and interactions between agents that determine management and

allocation of resources

School of the Built Environment

The role of urban governance2

• Devas (2001) identifies the necessity for congruence of three critical factors:

- inclusive political process- sufficient competence and capacity of city governance institutions- pressure from civil society

• Globalisation creates particular conditions that have direct and specific consequences on all of the above,

School of the Built Environment

What about the Brazilian context?

• Target of major direct and indirect globally induced property investment as a result of rapid economic growth, rising global significance and integration in to the global property market.• The statute of the City has provided the scope for greater socialisation of development benefits:

- But what has been the effect on the ground?- How have the institutional and governance arrangements impacted the implementation?- What type of institutional arrangements on property rights are best suited for enhancing low income capacity to

benefit from land development?

Related questions• Market:

- How has economic globalisation impacted/impacting the development of cities and real estate markets in Brazilian cities?• Economic restructuring, shift to higher value added functions, rising land and property prices as result of globally induced developments, higher end commercial housing developments, rising land prices in the centre and demographic shifts, urban sprawl to periphery, etc

- What are the main institutional and functional characteristics of the property market in Brazilian cities?

• Comparing with UK:- How does the Brazilian context compare with section 106 agreements

(planning gain) in the context of UK?- What lessons can be learnt for balancing market and social demands

and attain more equitable urban development?

Thank you

References

• Devas, N. (2001) Does city governance matter for the urban poor, International Planning Studies, 6(4), 393-408.

• DTZ (2010) Money into property 2010, DTZ London.• DTZ (2009) Prime, a global neighbourhood, DTZ London.• Lizieri, C and Kutsch, N (2006) Who owns the city 2006, Working Paper,

University of Reading Business School, UK.• Paine, K (2009) Londres - The place to be, Sciences Humaines, Les Grands

Dossiers, 17.• RREEF (2010a) Global real estate insights 2010, RREEF London,

www.rreef.com• RREEF (2010b) Latin American real estate markets in perspective, RREEF

San Francisco, www.rreef.com• Torres, H, Homberto, A and De Oliveira, M.A (2007) Sao APulo peri-urban

dynamics, Environment and Urbanization, 19, 207-223.