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Global Cities, the Skyscaper Index & IYR

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Global Cities, the Skyscaper Index & IYR

skyscraperlg.jpg

 

Capital values on the premium upper floors of Hong Kong’s skyscrapers are 50% higher than those in Tokyo, the city ranked second.

 

RATIO : Hong Kong ($6,330) / Chicago ($950) : R: 6.66 - is this sustainable ???

Hong Kong’s commanding lead reflects three factors:

  1. A restricted geographic area, which creates the logic of building upwards, and effectively converting air into ‘land’.
  2. The famously volatile Hong Kong office rents mean that investors can reap potentially high rewards in the long-term. After a soft 2013, rents have recently started to rise again.
  3. The ‘ego’ appeal of the upper floors, with the panoramic views, delivers higher rents compared to the wider market. In Hong Kong and London, upper floor skyscraper offices can command a 15- 20% premium over typical rents.

London is the highest ranked European city, with capital values on upper floors more than double those of skyscrapers in Paris or Frankfurt.

Worth noting is that San Francisco’s towers have leapfrogged over four Asia cities, rising from ninth place last spring to rank number five today. The rapid growth of California’s technology sector is driving demand for San Francisco’s skyscrapers.

 

> see: http://www.knightfrank.com/global-cities-index-2015/specials/skyscraper-index/

 

+++ Special Features

+++++

Will "Global Cities" continue to run ahead of property prices in their home countries?

 

In the next 15 years the world is forecast to add another 1.1 billion city dwellers, nearly the equivalent of the population of India. Across the planet developing more offices, shops, homes, and distribution centres will be critical to house this urban explosion.

Premium pricing for real estate is found in cities with the most high-value knowledge workers, which attract the world’s leading corporations. These are the Global Cities, and shaping their future is:

  1. The growing centrality of knowledge workers, influencing the location and design of modern offices.
  2. Former-industrial areas transform into new districts, bringing offices, leisure & homes closer together.
  3. Investors seeking higher returns on theirmoney, offering a pool of funds to back future urban development.

Encouraging these trends is essential in order to accommodate the new workers and firms the Global Cities are expected to attract.

 

It is little surprise that cities are expanding. The workers of the Global Cities are among the most productive in the world, typically outperforming their host countries. Asia’s cities have powered ahead, with Singapore’s GDP (PPP) per capita overtaking the USA in 2005, while Hong Kong surpassed Switzerland in 2006.

 

Firms want to capitalise on this success, and governments need the tax revenue. So cities will be encouraged to achieve their potential, resulting in a new wave of development. Micro-cities will be built within cities, ranging from Barangaroo in Sydney to Nine Elms in London.

 

The Global Cities are set for further expansion, thanks to a digital revolution that is unfolding around us. Rapid technological change is an established reality, and the pace is accelerating.

==

> http://www.knightfrank.com/global-cities-index-2015/articles/global-cities

 

OTHER

Long Term Stock charts : http://www.greenenergyinvestors.com/index.php?showtopic=17618

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KF Global Cities Index vs IYR (iShares U.S. Real Estate ETF)

 

KF's Bullish prediction: "Is NOT going to happen, if stock markets crash" - DrBubb.

 

prime-office-rents_2b_zpsqeep9pz5.jpg: IYR_zpslntefmbg.gif

 

We expect the resulting surge in economic opportunities arising from ubiquitous technology to create many more jobs,

most of them in occupations that presently do not exist, and energise demand for real estate.

 

cities-outperform_zpsqlsqhvme.jpg : Larger image

 

TALENT MAGNETS

Firms today are scrambling to secure the knowledge workers who can place them ahead of these trends. The resounding message from around the world is that such workers want the lifestyle that is afforded by the big cities, which has turned them into talent magnets, and consequently multi-national corporations feel it is essential to locate in the Global Cities.

They also benefit from the critical mass and market efficiencies that arise from creating industry clusters, as shown by the tech hub in Silicon Valley, and the Lloyd’s insurance cluster in London.

 

The industry cluster that was leading the charge ten years ago was the financial district, but in recent years we have seen the rise of the ‘Creative Halo’. This has typically been a former-industrial district, on the edges of the CBD, drawing in technology and creative industries.

 

The Creative Halo has transformed edge-of-CBD areas from cheap rent backwaters into the driving force of the post-Lehman city economy. Cafés, shops, bars, and street markets have followed the offices, leading to a surge in property demand in places like London’s Shoreditch, New York’s Brooklyn, and San Francisco’s SOMA district. While the trend began in the west, it is spreading to emerging market cities, like Beijing (see page 26).

Normally a new property market cycle starts in the core areas and spreads to the fringes. However, in London since 2010, the City Core financial district has seen 9% rental growth, Shoreditch in the Creative Halo has seen rents grow by 54%, and the real estate industry has dropped the term ‘fringe’.

 

"CREATIVE-LED ECONOMY"

The switch from the Finance-led city economy to the Creative-led economy has required industries to adapt. Financial and professional firms are rethinking office layouts now they are competing with tech firms for the best graduates. Breakout areas and brainstorming rooms are migrating from trendy ad agencies to law firms and banks.

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Prime Office Rents:

 

ASIA Pac.

Top5 / Lo3 : fpa : pmm : effec. : 5sqmt : HK$:x7.75----

HongKong : 000 : 173.3 : 173.7 : 868.5 : $6,731/desk?

Singapore- : 000 : $84.5 : $96.6 : 483.0 : $3,743 :

Beijing----- : 000 : $60.5 : $88.6 :

Tokyo------ : 000 : $82.3 : $81.3 :

New Delhi- : 000 : $46.6 : $74.7 :

. . .

Taipei------- : 000 : $25.5 : $25.4 :

Benagaluru : 000 : $15.7 : $25.2 :

KualaLump. : 000 : $15.4 : $18.8 : $94.0 : $0,720 :

(pmm : US$ psm/ p.m.)

(effec. : Gross Effective Rent, incl. svc chg., taxes)

> http://content.knightfrank.com/research/511/documents/en/asia-pacific-prime-office-rental-index-q2-2015-3136.pdf

.

 

Commercial Rents:

EUROPE

Top5 / Lo3 : fpa :

London--- : 174 :

Moscow-- : $99 :

Paris------- : $95 :

Zurich----- : $78 :

Oslo-------- : $66 :

. . .

Brussels-- : $36 :

Budapest- : $30 :

Lisbon----- : $28 :

(fpa : US$ psf/ p.a.)

> http://www.knightfrank.com/global-cities-index-2015/specials/prime-office-rent/

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The Big Picture : NO PLACE to Hide ?

 

/ 1 /

"The pause before the Drop" ?

 

HK Property Sales plunge to 17-month low - SCMP, Headline story

 

Transaction volume drops 29.2 per cent as buyers stay on the sidelines amid volatility and uncertainty

 

"Volume in August hit the lowest level in 1 1/2 years... as investors opted for the sidelines"

Just 5,197 property sales transactions were done, with 3,896 (down 37.3%) in the residential market.

Developers are said to be "grappling with the problem of poor investor appetite",

and this is coming at a time when flats for sale is set to increase sharply in the months to come.

(Henderson Land has just increased its "discount" from 10% to 20% in a new launch, High Park Grand.)

 

There's a several week's lag in data collection, so these figures reflect the market situation in from July

into early August.

 

 

/ 2 /

Neowave: "S&P will drop approx. 50% during the Next 4 years!"

 

This comes from a special report about the technical situation of US stocks that I received by email.

They believe that a "fifth wave extension" completed recently, and they expect the S&P500 to fall from

its HofYr (2,134.72) to, first, the low near 1650 (-23%) reached in Fall 2013...

 

... and after that: much lower: 50% of 2,134.72 = SPX-1,067

 

=== ===

Are investors headed ... into a Black Hole?:

http://www.greenenergyinvestors.com/index.php?showtopic=20286

 

Stock Market Cycles - on the lip of a recession ?

 

A LOW in the 7-year cycle is due before end of 2016 ... Dow Jones INDU

 

Dow-1987-all_zps7tmoi2x1.gif

 

The SEVEN YEAR Cycle - note sharp drops when the cycle peak comes "late"

 

Cycle # : HighDate : ---Level-- / --LowDate----- : ---Level--- : Points-Fall : %-Drop // High-No. : Low-No. :

X-Cyc.1 : 08/25/87 : $2,722.42 / 12/04/87-frid . : $1,766.74 : 00,955.68 : - 35.1% :

X-Cyc.2 : 02/01/94 : $3,964.01 / 11/23/94-wed. : $3,674.63 : 00,289.38 : - 7.30% :

X-Cyc.3 : 01/14/00 : 11,722.98 / 10/15/02-wed. : $7,286.27 : 04,436.71 : - 37.8 % :

X-Cyc.4 : 10/09/07 : 14,164.53 / 03/09/09-mon : $6,547.05 : 07,617.48 : - 53.8 % :

X-Cyc.5 : 05/19/15 : 18,312.39 / 09/15/15-ooo. : 13,600.00 : 05,000.00 : - xx.x % :

 

>more: http://www.greenenergyinvestors.com/index.php?showtopic=17618

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Property shares ANTICIPATE falls in property prices

 

That's what we saw from 2006-2008, before the Global Financial Crisis.

Property shares traded in the UK started falling before the GFC hit...

And the Large Premium to NAV's slid, and became a discount, starting mid-2007.

 

PropStocks2008cl_zpsqixqlh4l.jpg

 

> source: FairFax-Report-July-2008

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The HK property market could be peaking here and now:
. . .

Centaline Leading Index--- :
WeekEnd: -CCLI- : -CMMI- : ParkAv: C'ribC : TaikSh. :
08/30/15 : 146.78 : 148.27 : 13,273 : 7,577 : 14,923 :
2014-yrE: 132.45 : 133.50 : 12,582 : 6,141 : 13,301 :

Change : +10.8% : +11.1%: +5.49%:+23.4%:+12.2% :

 

Peak? : (If not In September, within a few weeks, and most probably before year end.)
Here's some chart evidence that this peak may be likely:
The HK Property stock index has shown already shown a deep correction since the Peak, four months ago.

+ The Peak was - : 37,737.99 (early June 2015)
+ Closed Friday at : 28,324.25 - 9,413.74 / -24.9% below the peak !

HS Property index* ... HSP : 15-years : 5-years :

HK-Prop-15yrs_zpsgsvqp2vr.gif

The correction is already deep, but the uptrend is not broken (yet).

A break of the uptrend may preceed a 10% or deeper correction in the Centaline Index

===== =====
*HSI Property index:

Components :
Name / Symbol-- SHHK/AH : Last-- : Chg. : T'over : P/E(x) P/B(x): Yield: Market Cap
WHARF HOLDINGS : 004.HK : 40.400 -1.050 : 208.04M 3.41 0.40 4.48% 122.45B
HENDERSON LAND : 012.HK : 46.250 -0.000 : 170.23M 9.05 0.64 2.16% 152.64B
SHK PPT-------------- : 016.HK : 94.650 -0.450 : 595.83M 7.60 0.62 3.54% 272.22B
NEW WORLD DEV-- : 017.HK : $7.510 -0.170 : 157.95M 5.48 0.41 5.59% $67.55B
SINO LAND----------- : 083.HK : 11.180 +0.180 : 064.87M 7.22 0.60 4.47% $68.02B
HANG LUNG PPT---- : 101.HK : 17.420 -0.140 : 122.42M 6.67 0.59 4.36% $78.14B
CHINA OVERSEAS-- : 688.HK : 22.150 -0.150 : 519.76M 6.53 1.36 2.48% 218.41B
LINK REIT1------------ : 823.HK : 41.050 -0.300 : 309.89M 3.47 0.80 4.45% $92.64B
CHINA RES LAND--- : 1109.hk : 18.280 -0.240 : 230.87M 7.25 1.10 2.71% 126.70B
CK PROPERTY2---- : 1113.hk : 53.950 +0.900 : 601.04M N/A- N/A- 0.00% 208.23B

=====================================
HS Property Index--- : 110003 : 28,324 - 85.21 : 2.98-bn

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Dr Bubb, what do you make of Kunstlers comments re skyscrapers in the other podcast you posted? Do you think they will be uninhabitable in the future? His argument seems to be that the future economic environment will render it impossible to renovate skyscrapers let alone be able to service them with air conditioners and elevators. My own thinking is that if the future is not like the present or recent past, then they will slip into tenements like we had/ have in London. Of course this is one for the future- and there is no telling what the rest of the immediate geography will be like on the ground- but I think that a plot of land away from the cities and as kunstler suggests has a meaningful relationship to near by agricultural food productive centers would be a wise hedge.

Now might be a very unwise time to buy into the myth that living in skyscrapers is the way to go. Having said that, while Japan's population shrinks, Tokyo is slightly growing because the economies in cities are still working and providing employment, automobile less, semi walkable environments and entertainment-While this may continue. I feel we are like moths, being drawn blindly to the brightness of the lights and modern conveniences, which are simply modern myths and traps laid thus to ensnare us.

You're always welcome here if you fancy helping with the rice harvest and cooking on the charcoal brazier, fishing and taking a dip in the rivers...

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"Dr Bubb, what do you make of Kunstlers comments re skyscrapers in the other podcast you posted? Do you think they will be uninhabitable in the future? His argument seems to be that the future economic environment will render it impossible to renovate skyscrapers let alone be able to service them with air conditioners and elevators."

 

I think people will find a way to live in them.

My opinion is that the density-of-living they allow is more energy efficient than alternative ways of living.

 

But if civilization is really busted, and we have frequent power failures, they will not be a sensible place to live.

 

I once visited a building in Taiwan, for a business meeting when the power was out, and walked up 20 floor plus for my business meeting.

This was with the EVP of Evergreen Shipping lines, a highly disciplined company. And everyone was at their desk working hard.

 

So people can tolerate it occasionally, but not every day

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On the Brink (of a collapse) together : Junk bonds and property ?

 

IYR / Income-producing Real Estate - vs. HYG and TLT ... 10-years : since 1/2008

aa_zpstiepj2q3.gif

 

They may both be at a key inflection point, as in Sept. 2008.

Last time, TLT held as IYR and HYG collapsed - there was a "flight to quality" into TLT

 

Last time they collapsed together. But Real Estate may hold better this time, since it is not over-financed,

and as likely to be sold if rates go up. Whereas the cash flows and earning of many companies that use junk debt

may be highly vulnerable, as Jim Puplava has explained

 

Jim Puplava: "This Is Not 2007-2008"

 

HomeEquity_zpsr7ciiqqa.png

Household debt to income, loans outstanding, owner’s equity in real estate and debt service ratios have never been this good

The same thing holds true on the corporate side: corporate net worth, debt ratios, liquidity ratios have never been this good [and] companies are sitting...

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Skyscraper Prime Office Rents

# City Prime Rent (USD/SF/Year)
--------------------% Growth H2 2014
1. Hong Kong-- $250.50 11.3%
2. New York---- $150.00 20.0%
3. Tokyo-------- $124.00 +4.8%
4. London------ $108.75 +7.7%
5. San Francisco $97.00 +2.1%
6. Signapore--- $94.25 +6.1%
7. Sydney------- $91.75 +0.8%
8. Moscow------ $90.00 -3.0%
9. Los Angeles $73.00 10.6%
10 Shanghai--- $68.75 +2.9%
11 Beijing------- $67.50 -1.2%
12 Chicago---- $65.00 +8.3%
13 Paris (La Def) $61.00 -1.8%
14 Frankfurt--- $58.25 13.2%
15 Mumbai---- $51.50 +5.1%
16 Dubai------ $43.50 +0.0%
17 Kuala Lumpur $
- See more at: http://www.ngkf.com/home/media-center/press-releases.aspx?d=6940#sthash.t6yaWqc0.dpuf==

 

 

(A bit dated, but useful historical comparisons)
Hong Kong the World’s Leading Skyscraper City, but Rents in New York Grow Faster
New York and London (04/22/2015)

 

Skyscraper prime office rents in New York have dramatically increased by 20% to hit $150.00 per sq ft since July 2014, outperforming the leading Asian skyscraper city, Hong Kong. However, Hong Kong still boasts the world's highest skyscraper office rents at $250.50 per sq ft.

The figures were reported in the latest Skyscraper Index from Knight Frank and Newmark Grubb Knight Frank, which ranks the world's cities as centres for high rise offices and homes.

 

New York rental values have boomed as skyscraper development has increased, with towers proving popular workplaces for the expanding digital and creative firms in the city, as well as financial and professional firms.

However, Hong Kong's large lead in rents reflects a low vacancy rate and constrained CBD area.

Skyscraper Prime Office Rents

City Prime Rent (USD/SF/Year) % Growth H2 2014

1 Hong Kong $250.50 11.3%

2 New York $150.00 20.0%

3 Tokyo $124.00 4.8%

 

4 London $108.75 7.7% / 5 San Francisco $97.00 2.1% / 6 Signapore $94.25 6.1%

7 Sydney $ 91.75 0.8% / 8 Moscow $90.00 -3.0% / 9 Los Angeles $73.00 10.6%

10 Shanghai $68.75 2.9%

11 Beijing $67.50 -1.2% 12 Chicago $65.00 8.3% 13 Paris (La Defense) $61.00 -1.8% 14 Frankfurt $58.25 13.2% 15 Mumbai $51.50 5.1% 16 Dubai $43.50 0.0% 17 Kuala Lumpur $37.75 20.9% 18 Seoul $33.25 9.2%

The Skyscraper Index

City Score

1 Hong Kong 131.4

2 New York 126.6

3 Tokyo 116.8

4 London 112.3

5 San Francisco 112.2

6 Los Angeles 102.9 7 Sydney 100.2 8 Chicago 98.5 9 Shanghai 95.3 10 Singapore 94 11 Frankfurt 93.6 12 Seoul 90.1 13 Paris 84.8 14 Beijing 75.6 15 Kuala Lumpur 64.4 16 Dubai 62.6 17 Mumbai 55.2 18 Moscow 50.8

Note: The Skyscraper Index ranks cities according to a score system based on a range of criteria including skyscraper office rents and yields, the spread offered by investment yields compared to national bonds, the number of high rises built, and growth prospects for the city.

 

(Source: Knight Frank Research, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute)

. . .

James Roberts, chief economist at Knight Frank, said: "We are now seeing the western cities erode the lead of big Asian centres in tower office rents. For premium floors with views rents are rising in Hong Kong, but they are increasing much faster in New York. Similarly London is closing the gap on Tokyo."

- See more at: http://www.ngkf.com/home/media-center/press-releases.aspx?d=6940#sthash.dErCED9t.dpuf

 

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High rents inspired building - there are many similarities here:

 

Cities with the most skyscrapers

This list showcases the cities with the most skyscrapers.

 

# City / # skyscrapers

1 Hong Kong 1,268

2 New York City 683

3 Tokyo 411

4 Chicago 302

5 Dubai 251

6 Shanghai 239

7 Toronto 232

8 Guangzhou 203

9 Singapore 172

10 Shenzhen 167

==

> continues: http://www.emporis.com/statistics/most-skyscraper-cities-worldwide

 

Philadelphia - is #53 on the list with 49 skyscapers, close to London (#51, with 51 ss's)

Philly is finally seeing a building boom. Although many mid-size skyscrapers are being built around town, one exciting development on the horizon is the city's first supertall.

Comcast Innovation and Technology Center | Foster + Partners

lyrnkfthyimkunsbpfzn.jpg

Philly's tallest building, Comcast Center, has proved too small for the cable giant's needs, so they've decided to build an even taller building next door.

At 1,121 feet, the building will not only be the tallest in Philadelphia, but also the tallest in the country that's not in New York or Chicago.

 

Here's another image from the same webpage:

k6gfpatxbo9vfciojjtz.jpg

The Iceberg

==

> http://gizmodo.com/why-so-many-american-cities-are-suddenly-getting-taller-1614693798

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DATA on Retail Rents - this was in today's SCMP

 

City Rents - Prime areas - Q2-2015

 

Ciy---- : GBP /SM : -EUR- : -USD- : $ per SF
(FX Rate): x 1.000 : x1.400 : x1.540 : (/10.73)
New York : 33,785 : 47,299 : 52,029 : $4,849 :
Paris----- : 21,000 : 29,400 : 32,340 : $3,014 :
London-- : 19,740 : 27,636 : 30,400 : $2,833 :
Milan----- : L5,000 : E7,000 : $7,700 : $717.6 :
Rome---- : L4,500 : E6,300 : $6,930 : $645.9 :

========

 

Part of the reason for the rise in Europe in spending by mainland chinese tourists.

They are shifting away from Hong Kong, where retails rents are now falling

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Hong Kong the World’s Leading Skyscraper City, but Rents in New York Grow Faster
New York and London (04/22/2015)

9:00 AM

Skyscraper prime office rents in New York have dramatically increased by 20% to hit $150.00 per sq ft since July 2014, outperforming the leading Asian skyscraper city, Hong Kong. However, Hong Kong still boasts the world's highest skyscraper office rents at $250.50 per sq ft.

The figures were reported in the latest Skyscraper Index from Knight Frank and Newmark Grubb Knight Frank, which ranks the world's cities as centres for high rise offices and homes.

New York rental values have boomed as skyscraper development has increased, with towers proving popular workplaces for the expanding digital and creative firms in the city, as well as financial and professional firms.

However, Hong Kong's large lead in rents reflects a low vacancy rate and constrained CBD area.

Skyscraper Prime Office Rents

City Prime Rent (USD/SF/Year) % Growth H2 2014 1 Hong Kong $250.50 11.3% 2 New York $150.00 20.0% 3 Tokyo $124.00 4.8% 4 London $108.75 7.7% 5 San Francisco $97.00 2.1% 6 Signapore $94.25 6.1% 7 Sydney $91.75 0.8% 8 Moscow $90.00 -3.0% 9 Los Angeles $73.00 10.6% 10 Shanghai $68.75 2.9% 11 Beijing $67.50 -1.2% 12 Chicago $65.00 8.3% 13 Paris (La Defense) $61.00 -1.8% 14 Frankfurt $58.25 13.2% 15 Mumbai $51.50 5.1% 16 Dubai $43.50 0.0% 17 Kuala Lumpur $37.75 20.9% 18 Seoul $33.25 9.2%

The Skyscraper Index

City Score 1 Hong Kong 131.4 2 New York 126.6 3 Tokyo 116.8 4 London 112.3 5 San Francisco 112.2 6 Los Angeles 102.9 7 Sydney 100.2 8 Chicago 98.5 9 Shanghai 95.3 10 Singapore 94 11 Frankfurt 93.6 12 Seoul 90.1 13 Paris 84.8 14 Beijing 75.6 15 Kuala Lumpur 64.4 16 Dubai 62.6 17 Mumbai 55.2 18 Moscow 50.8

Note: The Skyscraper Index ranks cities according to a score system based on a range of criteria including skyscraper office rents and yields, the spread offered by investment yields compared to national bonds, the number of high rises built, and growth prospects for the city.

 

(Source: Knight Frank Research, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute)

William Beardmore-Gray, head of global leasing services at Knight Frank, said: "A high quality office environment is an essential part of building a business. With the economy improving, firms want offices that provide an inspiring place to work and demonstrate they value their employees."

"Today the rent paid on an office workstation is usually less than the fee paid to a head hunter to replace a person who leaves. So companies want to use their offices as a way to make staff feel they are valued and important. You achieve that when you put workers in the building that appears as the backdrop during the stock market report on the evening news."

James Roberts, chief economist at Knight Frank, said: "We are now seeing the western cities erode the lead of big Asian centres in tower office rents. For premium floors with views rents are rising in Hong Kong, but they are increasing much faster in New York. Similarly London is closing the gap on Tokyo."

- See more at: http://www.ngkf.com/home/media-center/press-releases.aspx?d=6940#sthash.dErCED9t.dpuf

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