Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1483

Last year I wrote a post called Province of Toronto , where I briefly talked about the outdated nature of how cities are organized and governed in Canada. I was effectively arguing that, in today’s global economy, our dominate economic unit needs to be the city–not the province. 

This isn’t something that gets talked about a lot, but I feel strongly that we should be looking at it. We’re unnecessarily crippling the economic, social, and cultural potential of our cities because we, to put it bluntly, haven’t gotten around to reorganizing our governance structure.

Well, this evening, I happened to stumble upon a great post by The Urbanophile called, Are States an Anachronism?  In it, he cites a book by Richard Longworth called Caught in the Middle  (that is now on my Clear reading list), which argues that states, as an economic unit in the US, are not only outdated, but hugely detrimental to the economy.

More specifically, he outlines the following concerns (taken directly from The Urbanophile blog):

1. States do not represent communities of interest.

2. Arbitrary state lines encourage senseless border wars.

3. Many state capitals are small, isolated, and cut off from knowledge about the global 21st century economy.

4. Metro areas are the engines of the modern economy, but the rules for municipal and regional governance are set by states, and often in a manner that is directly contrary to urban interests.

5. States can’t to much to help, but they can do a lot to hurt.

For a complete explanation of each of the above points, I would encourage you to check out the full blog post, here . As I said before, this isn’t a topic that’s top of mind for most people. But it’s an important one. Our global competitiveness is at stake.

Late last month it was announced that the 30 St. Mary Axe tower in London –also affectionately known as the Gherkin–had gone into receivership. The reason was a mismatch of assets and liabilities, specifically  currency losses :

A fund managed by IVG Immobilien AG, once Germany’s biggest real estate company, and London-based Evans Randall Ltd. bought the Foster + Partners-designed tower from reinsurer Swiss Re Ltd. for 600 million pounds ($1 billion) in 2007. Part of the IVG fund’s loan was in Swiss francs, which have gained about 63 percent against the pound over the last seven years, increasing the amount owed to the point that it breached rules on how much debt could be held against the property.

But what I found interesting while reading Bloomberg and Monocle , and learning about the loan default, is that there seems to be a lot of people in London that really don’t like this tower. Shaped like a giant pickle, it’s been the brunt of many lewd jokes, I’m sure.

However, within the architectural community, the Gherkin tower is generally revered as a pretty awesome piece of architecture. It’s a highly sustainable building that employs a number of natural ventilation and passive heating and cool techniques. It’s estimated to consume half the energy of a “typical” office building .

At the same time, the mixed feelings surrounding the Gherkin tower reminded me of all the controversy surrounding the Royal Ontario Museum’s Crystal addition here in Toronto. In fact, I just read somewhere that somebody rated it one of the top 10 ugliest buildings in the world .

And certainly, I hear lots of people criticize the building here in the city. Often, they mention how much wasted space the angular walls generate, which makes me wonder why we have so many people living in the suburbs when there are so many space conservationists among us.

Personally, I love the Crystal. And I also love the Gherkin. They’re big and bold and they piss a lot of people off. Good, I say.

Yesterday evening I was reading the Spring Summer Candy GPS Report put out by London-based property developer Candy & Candy. If you’ve never heard of Candy & Candy, then I guess you haven’t been in the market for a £60m apartment. Candy & Candy are the developers behind One Hyde Park in London , which is said to be the world’s most expensive residential development.

But what is interesting about a project like One Hyde Park is that it’s really only possible in a global city, like London, that attracts a massive amount of foreign investment. A project like One Hyde Park is a possibility of globalization, not a result of local employment numbers.

Which is why if you take a look at the Candy GPS report, you’ll see that their interest is in tracking the habits of ultra-high-net-worth-individuals (UHNWIs)–those with wealth exceeding US$30 million. Last year, the world was estimated to contain almost 200,000 of them, with a combined wealth of almost $28 trillion. This number is expected to rise to $40 trillion by 2020.

Now, you may not be in the market for the most expensive apartment in the world, but I thought it would be interesting to talk about where this money is coming from and which cities it’s going into–at least when it comes to real estate.

The top 3 countries for UHNWIs investing in real estate are Germany, Japan and the United States, respectively. The US has the most ultra rich people, but they have a lower propensity to invest in real estate compared to Germany. Nonetheless, these are the countries that dominate.

But who are the recipients of this money?

Well, first of all, it’s going into cities. But it’s flowing into a small number of them. Cities representing 5% of the world’s population are said to attract over 50% of the real estate investments made by the richest people on the plant. 

According to Candy GPS, the top cities are Hong Kong, London, Moscow, Singapore and New York, respectively. Hong Kong sits at the top, largely because of money flowing in from mainland China, but London is said to have the broadest investment reach.

So there you have it, a quick overview of where the ultra rich buy real estate.