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1、Issue 6.2023Climate resilienceWhich cities are best prepared to weather climate change?p18InvestmentThe business case for investing in clean energy infrastructure p26PeopleAccommodating the needs of a blooming Generation Z p06Property with purposeThe views expressed in this publication are not neces
2、sarily those of Savills or the publishers.The information contained in this publication is correct at time of going to press.All rights reserved.No material may be used in whole or in part without the permission of Savills.While every care is taken in compiling content,Savills does not assume respon
3、sibility for effects arising from this publication.Oliver SalmonDirector,World RMarie HickeyDirector,Commercial RCharlotte RushtonWorld Research AMeet the authorsEri MitsostergiouDirector,World RLucy PalkWorld Research AClare BaileyDirector,Commercial RRichard Valentine-SelseyDirector,European Livin
4、g RLydia BrissyDirector,European Researchlbrissysavills.frTom WhittingtonDirector,Retail&Leisure RPaul TostevinDirector,World RKelcie SellersAssociate,World RIssue 6 202306301404 WelcomeSavills CEO Mark Ridley explains why property needs to have purpose06 Demographic shifts How is real estate respon
5、ding to Generation Z coming of age and new,post-pandemic living modes?14 A new baseline Interest rates will soon stop rising.Where they settle will determine how real estate investors act18 Climate resilience How prepared are major cities for the effects of climate change?Our new index has the answe
6、rs26 Invest in our future Clean energy infrastructure is buoyant,with room to grow30 Urban affordability How can cities remain viable for young businesses and talent?34 Out of the officeCovid-19 changed our concept of the workplace.What comes next?38 The age of ageing Affluent over 50s will shape pr
7、ime residential real estate markets for many years to come 42 Retail returns Online still rules,but physical shops are back on the radar48 University truths Does having a top university boost a citys real estate value?54 An alternative view Why care homes,data centres and student housing are growth
8、areas58 Supply chains Nearshoring and onshoring are the new cornerstones of resilience62 Revitalising rents Vacant premises need to be repurposed to meet new needs66 The last word Why social value in real estate is a vital investment,not a cost Impacts The fuTure of global real esTaTe4 inTroducTion
9、Welcome to the 2023 edition of Impacts.It comes at what feels like a defining moment in history.Global instability is affecting all world markets and calls for action on the climate crisis are becoming more urgent.Meanwhile,the world has not returned fully to pre-pandemic norms and arguably is strug
10、gling to reach a consensus on how todays society should live and work.So our theme this year is“purpose”,because now,more than ever,not just the environmental but the social impact of how we use real estate is very relevant.Property has always had purpose,of course.Its where we make our homes,earn o
11、ur livings and spend our time.It brings comfort,protection and inspiration.Good property is essential to a life well lived.But the world is changing in fundamental ways and what we need from property is changing with it.Real estate plays a central role in shaping our lives.Its a major challenge and
12、opportunity for our industry.In 2023property needs purpose WORDS By MARK RIDLEY GROuP anD GlOBal CEOThe world is changing quickly and real estate with it.Mark Ridley looks at the challenges and opportunities that come with the quest for communityinTroducTion Adapting for climate changeThe world is g
13、etting warmer.The contradictions of climate change mean that its getting wetter in some places and dryer in others.Were experiencing more floods and more droughts.Real estate has to adapt.We need it to be resilient in the face of extreme weather events and mitigate their impact.Sustainable cities hu
14、gely reduce global carbon emissions.Resilient neighbourhoods keep us cooler or dryer,or help us to use less water.Property investment has a huge part to play in building these environments.demographic upheaval Generation Z has become the largest generation on Earth.That has profound implications for
15、 real estate.young people demand sustainability.They want to live in cities that pulse with life and also offer flexibility.But while many cities are getting younger,thats by no means true of them all,or of every neighbourhood.In many urban areas property demand is being driven by older,more affluen
16、t people who are today moving towards city centres rather than away from them.This 50-plus demographic is diverse,but it has both accumulated wealth and a sense of purpose.It wants green space,healthcare and culture,and many of its members still want an easy commute.Most of all,it craves community.H
17、ere,the similarities between Generation Z and the baby boomer generation are more pronounced than their differences.Together,they are driving the 15-minute city concept,demanding amenities close at hand.They make property choices that feel purposeful,in terms of community and sustainability.A safe h
18、avenThe confluence of these trends has important consequences.To take one example,physical retail is seeing a revival.Vacancies are falling in prime retail hotspots.Mixed-use developments that blend retail with other uses commercial,residential,hospitality and healthcare satisfy the requirements for
19、 amenity and community.Retail is regaining its purpose.It is also generating returns.The regenerative nature of real estate will ensure it remains an attractive asset class as city environments evolve and opportunities to repurpose or reposition buildings come forward.Of course,higher prevailing int
20、erest rates,as well as the pricing recalibration that many markets are undergoing,has naturally made investors cautious in the short term.It is difficult to predict with total accuracy how long this recalibration will take or when there will be a clear horizon on the direction of interest rates,but
21、as this focus returns,it will provide the backdrop to improved investor sentiment with volumes normalising.The recovery will be sector specific,but with a reduced development supply and selective rental growth,this will again provide investors with steady returns,compensating for the higher cost of
22、leverage.In a post-pandemic,ESG-focused world,real estate will drive change.This issue of Impacts shows that property with purpose creates sustainable neighbourhoods alongside sustainable returns.I hope you enjoy the edition.noW,more thAn ever,not just the envIronmentAl but the socIAl ImpAct of hoW
23、We use reAl estAte Is very relevAntillustration:Kari MoDn Impacts the future of global real estateGlobal demoGraphic shifts:what are the implications for real estate?WORDS Paul TosTeviNAs Generation Z comes of age and a growing global population embraces new ways of living and working,demand for rea
24、l estate is changing and the mix of uses is becoming more fluidglobal DeMographic shifts 7savills.coM/iMpacts In November 2022,the global population reached eight billion.This milestone was described by UN Secretary-General Antnio Guterres as“an occasion to celebrate diversity and advancements while
25、 considering humanitys shared responsibility for the planet”.In the same year,India,with 1.4 billion people,overtook China as the worlds most populous country.Over the next 10 years,Indias population is set to be the fastest growing in the world,adding 100 million people.Meanwhile,Chinas population
26、is expected to tip into long-term decline,having fallen last year for the first time in 60 years.Indias growing population will spur domestic and outbound demand in all sectors of its already burgeoning real estate market.“It is important to understand India from the viewpoint of rising urbanisation
27、,as well as its changing age-group mix,”says Arvind Nandan,Managing Director of Research and Consultancy,at Savills India.“Indias urban population is growing rapidly,and is expected to pass 600 million people by 2030 putting pressure on existing infrastructure and housing.The task ahead is not merel
28、y to improve infrastructure but also to add more towns and cities to the existing 4,400.In this respect,two key government initiatives,Make in India and Smart Cities Mission,for manufacturing and urban development respectively,now gain unique significance.”an ageing worldThis epoch-defining shift is
29、 emblematic of wider demographic changes around the globe.The developed world is ageing,as are China and many countries in South America and the Middle East.This means the balance of population growth is shifting to Asia and Africa.At the same time,Generation Z those born between 1997 and 2012 is co
30、ming of age and has become the largest generation on Earth.This has profound implications for real estate and cities.The most in-demand hubs are changing,as the mix of uses for real estate evolves and becomes more fluid.All of this is happening in a post-pandemic context.Covid-19 changed our world,c
31、atalysing trends towards hybrid working,online retail and digital communication.As well as creating a need for large data centres,these trends are altering workplaces,homes and city centres.At the same time,the pandemic has compounded the growing emphasis on environmental,social and governance(ESG)f
32、actors among investors and the general public.Urbanisation and populationThe worlds changing demographics go hand in hand with urbanisation.Today,about 55 per cent of the worlds population live in towns and cities,and urbanisation is expected to reach 68 per cent by 2050.8 global DeMographic shifts
33、Impacts the future of global real estateThis is a profound change until 2009,more people lived in rural areas than urban ones and one that must be carefully managed if we are to protect our imperilled planet.While occupying less than two per cent of the worlds total land area,cities produce 80 per c
34、ent of gross domestic product but also 70 per cent of carbon emissions.Much new and future urbanisation is occurring in developing markets.Nine countries will be responsible for half of population growth in the period to 2050 and only one of these,the US,is in the developed world.India,Nigeria,Pakis
35、tan,the Democratic Republic of Congo,Ethiopia,Tanzania,Indonesia and Egypt will lead the population growth that will drive urbanisation.At the city level,however,demographics depend on much more than national population growth.One of the youngest cities in our analysis,Dubai 54 per cent of whose pop
36、ulation will be aged 15 to 39 by 2033 is in the ageing Middle East.Although Chinas population is in decline,the country has a number of youthful cities,notably the tech centres of Shenzhen(53 per cent aged 15-39)and Guangzhou(41 per cent).The US will have both some of the oldest cities in the world
37、in North Port and Fort Myers,and younger mid-sized cities,such as Austin and Denver.Like Bristol in the UK,which also covid-19 chanGed oUr world,catalysinG trends towards hybrid workinG,online retail and diGital commUnicationglobal DeMographic shifts 9Demographic changes are transforming the housing
38、 sector across Europe.In the last two decades,the European population has grown by 34 million.At the same time,Europeans are having fewer children and starting families later in life,resulting in a lower birth rate and a 30%growth in single-person households.This has led to increased demand for smal
39、ler apartments.In response to this,our schemes combine more green spaces,high-end work-from-home amenities,integrated technology and a focus on ESG.From a macroeconomic standpoint,while unemployment rates in Europe have reached a record low since 2008,the cost of buying a home has increased by 45%si
40、nce 2013.In combination with the rising cost of living,it has meant the average age for a first-time buyer has shifted from 31 in 2013 to 34 today,further increasing the demand for rental products.As such,we are incorporating a substantial component of attainable housing,such as Il Trotto,a mixed-us
41、e scheme in a consolidated residential area in Milan.Furthermore,Generation Z tends to prioritise travel,convenience and city living,with 1.2 million digital nomads in Europe today.Students,particularly internationals,are following suit,as academic enrolment is countercyclical and tends to increase
42、during economic uncertainty.At the other end of the age spectrum,rental demand is also being driven by the senior population.Life expectancy has significantly increased,with people over 65 expected to account for 30%of the population in the next 25 years.To continue to meet modern-day and future ren
43、tal needs,we are proactively focused on investing,developing and managing intergenerational schemes across Europe,including student housing and hybrid forms of short-to medium-term stays.pavlos GennImatasMAnAGInG DIrEcTor,EuropEAn LIvInG,HInES EuropEsavills.coM/iMpacts Generation Z is cominG of aGe
44、and has become the larGest Generation on earthGlobal demoGraphics in 2033DoMinant age group anD top youthful anD ageD cities by share of population Impacts the future of global real estate10 global DeMographic shiftsTop 100 aged cities(by share of population aged 65+in 2033)Top 100 youthful cities(b
45、y share of population aged 15-39 in 2033)Denver(36%)BrISTOL(36%)nOrTh pOrT(42%)hALLe(33%)GenOA(33%)venICe(33%)0-9 years10-19 years20-29 years30-39 years40-49 years50-59 years60-69 yearsno dataDominant age group by country in 2033fOrT myerS(37%)AUSTIn(37%)global DeMographic shifts 11has a comparative
46、ly youthful profile,these smaller,vibrant cities attract younger populations through their strong knowledge economies and high quality of life ratings.At the other end of the spectrum,some big,dynamic cities are sucking population away from smaller ones.In Japan,for example,the population of Tokyo c
47、ontinues to rise while those of smaller cities such as Kitakyushu and Kagoshima fall and age.As a result,the Japanese government is now offering parents Yen 1 million($7,500)per child to move out of Tokyo.the digital generationGeneration Z,half of whom are now aged over 18 and beginning to enter the
48、 workplace,are driving many of these trends.This generation comprises the majority of the population in Africa.With their digital savviness,they are able to leapfrog the legacy infrastructure found in continents with older populations.Generation Z are also more mobile than previous generations and l
49、ess likely to be rooted in one national identity.In the European Union,nearly 13.9 per cent of those aged 14 and younger in 2019 were born in another member state,while 6.6 per cent were born outside the EU.Many of these connected,global citizens want to study abroad,fuelling demand for student hous
50、ing in the most popular education markets of the US,the UK and Australia,as well as rising international student hubs in mainland Europe and elsewhere.Between 2000 and 2020,the number of international students in the world more than tripled from two million to 6.3 million.Post-pandemic,with the majo
51、rity of Generation Z residing in developing markets,the numbers are likely to increase further,creating huge potential in this sector.Drawn to cities and less inclined to drive a car out of concerns for the source:Savills research using oxford Economicsnote:top 100 cities based on those forecast to
52、have GDp per capita greater than$25,000 in 2033.Selected top 100 cities labelled.ShenZhen(53%)GUAnGZhOU(41%)meLBOUrne(37%)nIIGATA(34%)mATSUyAmA(34%)kITAkyUShU(36%)kAGOShImA(34%)OkAyAmA(34%)DUBAI(54%)DOhA(47%)ABU DhABI (41%)rIyADh(36%)savills.coM/iMpacts environment,Generation Z may provide the tippi
53、ng point for 15-minute cities.To appeal to this cohort,property managers need to be environmentally aware and offer seamless app-based or online services that are personalised.new working hybridConflicting forces are at play in the workplace as well.Generation Z seeks a good work-life balance and em
54、ployment with purpose,but that is not always within reach.A 2023 Oliver Wyman survey of this generation in the UK and US found that 85 per cent prefer hybrid or remote working.However,Savills research shows such working arrangements are more typically offered for higher-level roles than entry-level
55、jobs.At the same time,Generation Z prizes the sense of community that comes from being in the workplace.That feeling has intensified since the pandemic,with almost 80 per cent of this age group appreciating the workplace community in 2022 compared with under 70 per cent in 2013,according toLeesman.I
56、mpacts the future of global real estatesource:Savills research using LinkedIn12 global DeMographic shiftsGeneration Z priZes the sense of commUnity that comes from beinG in the workplace20%30%40%50%0%10%proportion of hybrid or remote roles advertised by seniorityneW yOrk49%25%Share of jobs advertise
57、d as hybrid or remote LOnDOn45%14%DUBAI28%14%26%10%SInGApOrehOnG kOnG25%16%entry levelDirector/executive levelStarting their careers,Generation Z also benefits from learning and mentoring in the workplace though,ironically,community is less important to the older generations who might provide that k
58、nowledge.“It is the younger employees and those with fewer years in service where the workplace really contributes to their sense of belonging through socialising and interacting with others and physically being in a space that provides them with a sense of identity,”says Kirsty Toye,Associate Direc
59、tor,Senior Workplace Strategist and Change Manager at KKS Savills.“Trainees and junior staff need to absorb knowledge by osmosis and have easy access to others for guidance,but the more experienced,older generations will often favour working in their study at home without the distractions of the off
60、ice.”Generation Z may think they want hybrid working,but older generations really do want it.This is not the only overlap between younger and older generations.Larger,older populations mean more single-person households.This creates a need for smaller homes a trend compounded by younger households g
61、etting married and having children later.Sometimes,however,there is a clash between the needs of different generations.“Sweden is facing a demographic change where the number of older residents in relation to younger ones is increasing rapidly,”says Maryrose David,Head of Research at Savills Sweden.
62、“Furthermore,Swedens housing market has been stalled by the expense of moving and a lack of suitable housing for the elderly.”Flexible rental models and new types of housing such as unassisted senior living can free up real estate for younger generations,while mitigating loneliness among the elderly
63、.In 2007,Sweden introduced an investment subsidy for reconstruction and new construction of housing for the elderly,which has stimulated this sector.Global demographic shifts mean it is important to involve all age groups in the workplace.Recent research from the IMF showed that labour force partici
64、pation is rising fastest in countries with higher rates of working from home.This is especially important in ageing societies with shrinking workforces flexible working can help keep older people in the workforce when they may have caring responsibilities for parents or grandchildren,or declining he
65、alth.future trendsAccording to the WHO,healthy life expectancy,which rose from 58.3 in 2000 to 63.7 in 2019,is not keeping pace with total life expectancy,which rose from 66.8 to 73.4 over the same period.The health and wellness sector is experiencing considerable growth and this will inform the rea
66、l estate market.Healthcare clinics are likely to become fixtures in the high street,and both public and private spaces will need to adapt to the needs of ageing populations.Technology can play a vital role in helping people to stay in their homes for longer if they wish,even if they are less fit,and
67、 in improving healthcare,senior care and senior living.Extensive childcare may also boost labour market participation.Sweden established a childcare programme in the early 1970s to help parents combine parenthood and employment.Parents are entitled to 480 days of paid parental leave and children are
68、 entitled to childcare from their first birthday.According to Statistics Sweden,there were 9,450 preschool units in Sweden in 2021.Around 86 per cent of children in Sweden between the ages of one and five were enrolled in preschool in 2021.The worlds next billion people are going to be slower to arr
69、ive than the last.The global population took 12 years to grow from seven to eight billion,but it will take 14 years to reach nine billion.Its a sign that the population growth rate is slowing,which is good for the planet,but poses a number of challenges that will be reflected in the real estate mark
70、et.The watchword will be flexibility.As the millennial and Z generations move further into positions of power,green cities and mobility will become standard.At the same time,spending will shift to older age groups.In Japan,half of consumer spending already comes from those aged 60 and over.Tomorrows
71、 older consumer will be digitally savvy and this will drive societal shifts.Online and hybrid retail will thrive,while digital and real-world experiences will become entwined and offices and homes less firmly demarcated.As ever,it is the purpose of property to respond to these changing and sometimes
72、 contradictory trends in a way thatsatisfies our basic human needs for shelter,comfort andfunctionality.global DeMographic shifts 1314 INTEREST RATESEyEingrEturnsSHUTTERSTOCKWORDS Oliver SalmOnMost major economies,with the exception of China and Japan,have seen interest rates rise sharply over the p
73、ast 18 months after more than adecade of being at rock bottom.This has had a knock-on effect on the pricing of many financial assets,including commercial real estate.This current cycle of monetary tightening and interest rate rises appears to becoming to an end.However,the question now for property
74、investors isnt how high interest rates may go in the short term,but where rates will settle in the longer term.risk-free returns and the cap rateThe pricing of many financial assets is underpinned by the notional“risk-free”rate ofreturn that investors would get if they held long-term government bond
75、s.These are deemed risk-free because most governments wont default on this debt,so investors can be confident of getting the promised return.There Interest rate rises may be nearing their peak,but where they settle will have long-term implications for real estate investors across the worldis clearly
76、 more risk investing in other assets,suchas commercial property,which means investors will want a higher return to compensate them for the risk they are taking.As interest rates increase and government bond yields rise with them,riskier assets can begin to look less attractive to investors.Commercia
77、l property prices are typically expressed in terms of a capitalisation rate,or cap rate the net income divided by the market value of the asset.The historical correlation between interest rates and this cap rate has focused real estate investors minds.They are keeping a keen eye on the potential fut
78、ure direction of interest rates as an indication of expected yields on property holdings.Where next for interest rates?In the past four decades,interest rates across advanced economies have been trending lower,as the graph overleaf shows.These reductions have been driven by a IMpacts THE fUTURE Of g
79、lObAl REAl ESTATEINTEREST RATES 15 in an uncErtain intErEst ratE EnvironmEntSAvIllS.COm/ImPACTS 16 INTEREST RATESUSCanadaJapanUKcEntral bank avEragE policy ratEs This longer-term downward trend was exacerbated by the 2008 global financial crisis and the subsequent quantitative easing(QE)by central b
80、anks,which resulted in interest rates close to zero.More recently,interest rates havebeen rising as central banks have responded to the specific inflationary pressures caused by increased demand post-Covid-19 and a sustained,ongoing energy crisis.So will central banks start cutting rates sooner rath
81、er than later?Or will rates need to stay higher?Here is a summary of the main arguments.decline in potential economic growth,underpinned by weak productivity increases and a labour force growing at a slower pace due to falling birth rates.This has led to declining demand for investment,relative to t
82、he supply of savings,putting downward pressure on interest rates.However,other structural issues have also contributed,including ageing populations(leading to increased savings for retirement),the globalisation of trade and capital flows,and the transition to service-based economies that are less ca
83、pital-intensive than goods-based economies.source:Savills Research using Macrobond1980-19899.3%11.7%11.5%4.7%1990-19994.9%7.8%6.5%2.2%2000-20092.7%0.3%3.4%4.3%in thE past four dEcadEs,intErEst ratEs across advancEd EconomiEs havE bEEn trEnding loWEr2010-20190.3%0.5%0.8%1.2%IMpacts THE fUTURE Of glOb
84、Al REAl ESTATEINTEREST RATES 17secular stagnationLooking at these arguments,we believe that demographic change is likely to be the most dominant factor,suggesting a lower“neutral”interest rate and return to a period of“secular stagnation”.However,some arguments for higher rates hold water.The end of
85、 QE and the transition towards net zero are likely to act as counterweights,for example,meaning the neutral rate is not as low as it has been for much of the past decade.However,this return to the“normal”is unlikely to happen quickly.While there are some positive signs that inflation has peaked,cent
86、ral banks continue to err on the side of caution with concerns about a return to the“Great Inflation”of the 1970s.Normally,it can take up to two years for the full effects of a change in monetary policy rates to feed through to economic growth.But there is an argument that the economy is less intere
87、st rate sensitive than it was in the past,with far more borrowed on fixed-rate mortgages and loans,for example.As a result,we expect a very gradual transition.What does this mean for property investors?Cap rates have to a degree mirrored therise in interest rates over the past 18months.But this move
88、 has been relatively small in comparison and has made most commercial property a less attractive asset class for investors,relative to risk-free assets like government bonds.In the short term,the longer interest rates remain above the neutral rate,the more likely it is that property yields will cont
89、inue to rise.But if rates come down relatively quickly,prices may stabilise.In the longer term,a permanently higher interest rate will force many investors to deleverage.There has been a lot of talk about refinancing risk in commercial property following the sharp rise in interest rates over the pas
90、t 18 months.In practice,the level of distress that some anticipated hasnt yetmaterialised.Instead,many investors can temporarily withstand high interest rates,either because they were already on a fixed deal or because lenders anticipating a return of the low-rate environment have found creative sol
91、utions to avoid short-term defaults.But if rates now settle at a much higher level than weve seen for the past decade,debt servicing costs will remain permanently high.This will mean higher refinancing costs,or selling unprofitable buildings,potentially at discounts.A return to a low interest rate e
92、nvironment,even if it is not as low as before the Covid-19 pandemic,will alleviate some of these concerns.But investors may need to revise their expectations on the returns available through commercial real estate nevertheless,as there is an expectation that risk premiums are likely to be lower in t
93、he future than over the past decade.Real estate has become a more“vanilla”asset class:institutions are allocating more money to it and thereismore liquidity/transparency intrading.Therefore,investors will needto generate income growth to counter low-entry yields and tight riskpremiums.In turn,strong
94、 income growth is going to be more difficult in a low-growth secular stagnation scenario.source:Savills Research using MSCIEuropeUSUKAustraliaCanadaJapanpropErty yiElds in diffErEnt countriEs and rEgionsProperty yield200223%4%5%6%arguments for lowerinterest rates A continued shrinking in
95、the labour force,coupled with weak productivity growth.No significant change to supply issues around savings,given an ageing global population,rising household incomes(particularly in emerging markets)and diminishing risk appetite.arguments for higher rates Stronger productivity growth emerging from
96、 greater use of technology.This could lead to increased demand for investment.The transition to net zero.Addressing climate change will require significant new investment.Higher public debt.This implies an increase in demand for capital from governments that want to spend more.QE is now unwinding,an
97、d many households and private businesses are in a much healthier financial position now than they were back in 2008,which could support future demand.SAvIllS.COm/ImPACTS Impacts The fuTure of global real esTaTeillusTraTion:Kari MoDnOur new index Of Climate resilienCe shOws hOw Cities are preparing f
98、Or the COming stOrms Climate resilienCe in CitiesWORDS Paul TosTevin anD lucy PalkCliMaTe resilienCe in CiTies 19savills.CoM/iMPaCTs DroughtExtreme temperatureExtreme weatherFloodLandslideWildfireDry mass movementsource:Savills Research using Our World in Data0001990
99、2000201020200numBer Of Climate-related disasters glOBallY sinCe 190020 CliMaTe resilienCe in CiTiessinCe 2000,extreme Climaterelated events have Been happening with alarming regularitYcity policymakers increasingly understand that,in the face of a changing climate,doing nothing isnt an option.Thats
100、the overarching message from our Climate Resilient Cities Index,which looks at the preparedness of major urban centres around the world for the climate-related challenges they face today and those theyre likely to face in future.The background is well known.Since 2000,extreme climate-related events
101、have been happening with alarming regularity.Weve seen wildfires in California and floods in Dubai.Extreme climate events have become five times more common since the 1970s.Our Index focuses on how 23 of the worlds largest,wealthiest and most populous cities are fortifying themselves against climate
102、-related events.These cities attract huge sums in real estate investment;their ability to do so in future may depend on their resilience to climate-related risks.Climate change adaptation requires awarenessSo what did we find?The good news is that nearly every city in our survey is aware of the risk
103、s they face,and nearly all have plans in place to mitigate these challenges.This is important.Climate-related risks are not going away.Number of natural disasters per annum5000 Impacts The fuTure of global real esTaTeCliMaTe resilienCe in CiTies 21a high percentage of current building sto
104、ck was not designed with such threats in mind.In the near future,a citys appeal as a destination for investment will depend to some degree on the extent and effectiveness of its climate-mitigation strategy.The bad news is the breadth of the threats our cities face.When we talk about water,for instan
105、ce,we could be talking about river flooding,rising sea levels or access to drinking water.Climate change is a multi-headed monster.It drives extreme rainfall and severe drought sometimes in the same location.Wildfires,landslides and hurricanes have always been a threat to some cities,but climate cha
106、nge is making them more frequent and more severe.Some cities are built to withstand extreme heat,but others are having to adapt to it,as scorching summers become the norm.Climate risks in real estate to 2050Our index looks at all these climate-related events and projects into the future,to reveal th
107、e threats cities will be exposed to by 2050.We also look specifically at real estate resilience,including the share of building stock that is resilient,the proportion vulnerable to climate-related hazards and the degree of likely damage escalation up to 2050.The future view is important because we k
108、now that cities can be especially good at dealing with threats they are used to.Tokyos world-leading building codes have been refined by a history of earthquakes and tsunamis.Cape Towns“Day Zero”water conservation scheme followed years of declining rainfall.Cities are often good at dealing with the
109、now,but less good at preempting what might be around the corner.In a rapidly changing world,they have to do both.To that end,the index is,to some extent,an educational tool a disseminator of best practice for the real estate industry.If a city is getting hotter,wetter or stormier over the next 20 ye
110、ars,heres how others have introduced policies and modified their built environments to mitigate that threat.all to play for When the index takes all factors into account,Berlin comes out on top,followed by Toronto,Paris and Madrid.all face serious climate threats,but a mix of geographical good fortu
111、ne(they are all inland with no risk from coastal flooding)and planning mean they are at the lowest risk overall.But there are no winners and losers here,and the index shouldnt be used as a league table.If anything,we hope its a call to action.all cities face real challenges and most policymakers hav
112、e acknowledged the threat and begun to address it.real estate resilience and carbonThere is an elephant in the room.While cities should prepare for the consequences of climate change,they cant ignore their The increasing occurrences of wildfires,floods and other climate-related events demonstrate th
113、e dire consequences of inaction.These escalating threats emphasise the need for investment not only in the decarbonisation and resilience of the built environment but also in the natural capital that sustains life.As we strive to create cities capable of withstanding climate change,we must remember
114、that the health and robustness of thriving human communities are reliant on ecosystem services.These services,such as the provision of clean air,water purification and climate regulation,are fundamental to the vitality of our urban environments.Climate change,biodiversity loss and the resilience of
115、cities are intrinsically interconnected;we cannot address one without considering the others.Our approach to addressing these challenges must therefore be holistic,integrating both.RobeRt GodfReyDiReCTOR,SAvillS inveSTmenT mAnAgemenTsavills.CoM/iMPaCTs 22 CliMaTe resilienCe in CiTiesClimate riskReal
116、 estate resilience070605040302010Climate resilient Cities indexBERLINTORONTOPARISMADRIDSTOCKHOLMSYDNEYCAPE TOWNSINGAPORESEOULLONDONLOS ANGELESNEW YORKDELHIAMSTERDAMBEjINGSO PAULOTOKYODUBAIHONG KONGMIAMIjAKARTASHANGHAICAIROsource:Savills Research using climate data,UneSCO,UCCRn,ThinkHazard,CDP,2023 X
117、Di gross Domestic Climate RiskIndex score Impacts The fuTure of global real esTaTeCliMaTe resilienCe in CiTies 23part in causing it.Cities account for 70 per cent of global carbon emissions.Put another way,the best way for cities to protect people from a warming world is to play a leading role in st
118、opping it from warming too much.a huge challenge but there are solutionsThats much easier said than done,of course:restricting global warming while maintaining familiar comforts is a difficult circle to square.Governments can lead by example.They could retrofit their buildings to reduce carbon emiss
119、ions and establish carbon-zero rules for new developments.sustainable building and planningWhile these measures are a start,theyre clearly not enough.So what more should cities be doing to reduce carbon emissions?It depends first on where theyre starting from.Industrial cities are more polluting tha
120、n those with service-based economies.Older cities tend to host more carbon-intensive infrastructure.More populous cities simply produce more carbon.These factors may help prioritise initiatives,but there are things that all cities can do to lower their carbon footprints.For example,many of the citie
121、s in our index have plans to reduce operational carbon.new Yorks Local Law 97 aims to reduce the emissions from large properties(over 25,000 sq ft)to 40 per cent below 2005 levels by 2030.Significant inroads into carbon emissions can also be made with more sustainable city planning.That includes pri
122、oritising renewable energy sources for heating and lighting,and encouraging a shift towards public transport.Many cities are expanding rail and light rail services and discouraging car use through emissions penalties.the era of carbon pricingOne interesting development in the real estate world is ca
123、rbon pricing,which offers financial incentives for building users to reduce their carbon emissions.Singapore is a leader in this,introducing Southeast asias first carbon pricing scheme in 2019.South africa also introduced a carbon tax in 2019,while the EU is establishing a“polluter pays”principle.In
124、 Singapore,carbon taxes apply to commercial establishments that emit at least 25,000/t CO2 annually.To avoid shocking the economy,the rates will progressively increase over time.The objective is to reach a range of S$50 to S$80/t CO2 by 2030.“The additional cost to a premium office space,though sign
125、ificant,is not too burdensome,”says alan Cheong,Executive Director of Research and Consultancy at Savills Singapore.“The positive impact will outweigh the additional cost because green-compliant tenants will increasingly find Our index compares 23 of the worlds largest,wealthiest and most populous c
126、ities that are particularly important for global real estate investment.It measures each citys climate risk and the resilience of its real estate to those risks.There are two pillars:Climate risk considers a citys current and future climate risk.Current risk measures changes in rainfall and temperat
127、ure over the past decade,average elevation above sea level and availability of groundwater.Current risk is also assessed by physical disasters that are exacerbated by climate change;future risks are predicted exposure to extreme heat,sea level rise,coastal flooding and freshwater availability by 205
128、0.real estate resilience looks at whether the city,and the country its in,has assessed its climate risk,whether it has a plan in place to combat it,and the extent to which the citys real estate is vulnerable to climate risk.It also measures the citys share of green certified building stock.methodolo
129、gy:Climate resilient Cities indexsavills.CoM/iMPaCTs 24 CliMaTe resilienCe in CiTieslOnger periOds Of drOught,as well as mOre frequent and mOre severe stOrms and heavY rain events,alreadY pOse Challenges fOr the CitYthemselves with fewer options when relocating,creating a demand that could offset th
130、e drag caused by the tax.”Carbon pricing could significantly impact both residential and commercial real estate markets.The pandemic accelerated a flight to quality,with grade-a buildings commanding premium rents and lower-tier properties seeing lower demand.Rewards for sustainability(or penalties f
131、or its absence)may accelerate this trend and nudge landlords and occupiers towards greener properties.Collaboration in the fight against carbonIn all of these areas,education will be key.City governments need to take businesses and residents along with them,and convince them of the need for change.T
132、o that end,many are prioritising collaboration.In Madrid,the“Green Office”is a tool to promote sustainability in residential building stock and point citizens towards sources of public funding for refurbishment projects.new Yorks Retrofit accelerator provides free and bespoke advice to building owne
133、rs looking for energy-efficient solutions.Together this represents a carrot and stick approach to real estate sustainability.When it comes to carbon reduction,city authorities can only do so much on their own.a mix of penalties,rewards and resources encouraged by infrastructure improvements is persu
134、ading private individuals and businesses to make a difference in their own homes and offices.Impacts The fuTure of global real esTaTeresilience planning for the city.The concentration of a vast amount of capital,infrastructure and people means it has the rare combination of urgency,motivation and re
135、sources to act.The Brooklyn Bridge-Montgomery Coastal Resilience project,which will protect Lower Manhattan from both sea-level rises and storm surges,is due to start construction this year.The construction of a further$52 billion of flood protections will begin in 2030 if the funding is approved.To
136、kyo and new York are acting retrospectively.They are reacting to threats that are already apparent.This is necessary,but is it enough?Part of the purpose of the Climate Resilient Cities Index is to help real estate investors,developers and occupiers of cities understand and prepare for climate impac
137、ts to come.Berlin plans aheadas an inland city without a history of extreme climate-related events,Berlin is luckier than many.at the moment,the city faces challenges rather than specific emergencies.nevertheless,there is significant support for climate-mitigation action among its population.“Longer
138、 periods of drought,as well as more frequent andmore severe storms and heavy rain events,already pose challenges for the city,”explains Matti Schenk,associate Director of Research at Savills Germany.“Berlins state government is trying to address these issues through urban planning instruments and gu
139、idelines,such as more green roofs.”It is also investigating“sponge city”concepts.“The Urban Tech Republic at the former Tegel airport is being designed as a sponge city,”says Schenk.“This will provide impetus for further projects.”Schenk says that some climate-adaptation schemes have been delayed,bu
140、t Berlin is at least being proactive.The city is at the top of our Climate Resilient Cities index,partly because of its acceptance of the need to act early.a global transition from reactive to proactive climate mitigation will be crucial as impacts increase.Cities at the sharp endIf cities can learn
141、 from each other,they can become future-proof,or at least future-prepared.So what examples should they follow right now?Which cities are leading the way in the fight to protect people and property from climate impacts?many cities are already taking positive,practical steps towards climate mitigation
142、.In many cases,they are doing so in the face of a clear and present threat.“Real estate investor awareness of climate issues has risen significantly in the last five years,and major institutional investors already factor in climate risk in their decision making,”explains David Jackson,Head of Savill
143、s Earth.“Thishas implications for certain locations,but also for theassets themselves how well will they perform in extreme temperatures?are they built to withstand future natural hazards?”The key to future resilience will be to build upon these efforts to combat threats that are not yet so obvious.
144、In that,forewarned is to be forearmed.Due to quirks of geography,some cities are facing climate emergencies earlier than others.Everyone can learn from what they do.tOkYO:an example Of resilienCeTokyo faces a number of threats,most notably typhoons and earthquakes.But it is facing them head on.Its w
145、orld-leading construction codes mean that 87%of the citys buildings meet the most stringent anti-seismic criteria.as a huge and densely populated coastal city,Tokyo is especially vulnerable to flooding.“Tokyo is forward-thinking in utilising underground reservoirs to drain excess water in the case o
146、f floods and typhoons,”says Tetsuya Kaneko,Head of Research and Consultancy at Savills Japan.Tokyo boasts the worlds largest underground storm drain,the Metropolitan area Outer Underground Discharge Channel.Just over 20 years ago,it cost$2.1 billion to build,but is projected to save the city at leas
147、t three times that amount in mitigated flood damage over a 50-year period.new YOrk gets seriOusWhile Tokyo has a long history of natural disasters,new Yorks wake-up call came from a single event.The devastation Hurricane Sandy brought in 2012,through flooding,extended power outages and loss of life
148、and livelihoods,was a defining moment for CliMaTe resilienCe in CiTies 25geTTY iMagespostdamer platz in berlinsavills.CoM/iMPaCTs WORDs Eri MitsostErgiouopportunities in renewable energy infrastructureMore private funds are investing in clean energy projects,but this needs to grow significantly to m
149、eet global net-zero targetspowerfulinvestmentThere has been a significant increase in investment in clean energy infrastructure in recent years,with countries around the world looking to reduce their dependence on fossil fuels.The bulk of this money has been used to further renewables projects those
150、 that use no finite resources although nuclear power projects,which have no carbon emissions and are therefore classified as clean,have also attracted a small chunk of investment.While many of these projects are funded by government and public money,private investment is being sought for others.The
151、shift away from fossil fuels is being driven by environmental factors and the urgent need to reduce carbon emissions to meet the net-zero targets set out in the 2016 Paris Agreement on climate change.All this is deeply connected to property and cities.Get it right and urban areas and the built envir
152、onment will become more resilient and flourish.Get it wrong and decline is likely,with the attendant loss in values.Renewables are therefore at the heart of real estates purpose.The longer-term push to renewables has been accelerated by more recent geopolitical and economic factors.The war in Ukrain
153、e and subsequent international sanctions against Russia have caused wholesale gas and oil prices to spike,creating demand for alternative energy supplies that are more cost-effective.At the same time,political uncertainty has underlined the importance of the security of energy supply.In a bid to ach
154、ieve domestic energy“sovereignty”,more countries are looking to increase onshore production and storage of renewables to limit their reliance on imports from less stable parts of the world.These three factors carbon reduction,security of supply and rising energy costs have led to a significant incre
155、ase in the development of renewable infrastructure globally,creating new opportunities for institutional investors.ImpacTs The fuTure of global real esTaTepowerful invesTmenT 27clean energy:a growing market that will grow furtherGlobal energy consumption continues to grow and an increasing slice of
156、this is coming from carbon-free renewable sources.Figures from BloombergNEF point to the energy sector being at a tipping point,with investment in low-carbon technologies now reaching parity with the capital being deployed into traditional fossil-fuel extraction and supply.The majority of new invest
157、ment in the energy industry is now going towards these greener technologies.International Energy Agency(IEA)data shows that investment in clean or renewable energy now accounts for almost three-quarters of the growth in overall energy investment.In total,the IEA estimates that more than$1.4 trillion
158、 was invested in clean energy projects last year a record high with the biggest swathe in China and the Asia Pacific region,followed by the EU and then North America,as shown in the graph overleaf.Much of this new investment is going into more“established”renewable sources,such as wind and solar ene
159、rgy projects.This is partly because these are now the cheapest option for new power generation in many countries.Figures show that of this new investment:42%went into solar photovoltaic infrastructure35%was in onshore wind infrastructure12%went into offshore wind infrastructureThis money isnt just f
160、unding renewable infrastructure,such as wind turbines or large-scale solar farms.significant investment is also going into the tertiary market building and upgrading the infrastructure needed to store and distribute power.Clean energy also encompasses other infrastructure initiatives,such as retro-f
161、itting existing buildings to make them more energy efficient,as well as smart technologies and building infrastructure to support more widespread adoption of electric vehicles.But is this level of investment enough?According to the International Renewable Energy Agency(IRENA),investment levels are l
162、anguishing at less than 40 per cent of that required each year between 2021 and 2030 to meet net-zero targets.The IEA estimates that investment in clean energy needs to triple by 2030 to$4 trillion to achieve a global net-zero target by 2050.solving the investment challenge Despite the clear magnitu
163、de of the problem and the sectors fantastic growth prospects,investors can be reluctant to commit.One reason is that some renewable energy generation from sources such as solar or wind is by its nature intermittent and more variable than from fossil fuels,which makes it difficult to match demand wit
164、h supply consistently.This means the infrastructure behind it needs to be more flexible,in relation to weather for example.Energy storage therefore becomes a critical supporting technology to solar and wind,as do smart technologies that allow for load shifting.financial hurdlesOn top of the technolo
165、gical and engineering challenges relating to renewable energy infrastructure,there are specific financial hurdles that can impact potential returns on investment.The major issue for many investors is the long lead time involved in such projects.Getting planning permission for large infrastructure pr
166、ojects can take years,particularly in more developed economies.Figures show the average design and build time for wind farms in the UK is between seven and 11 years.such protracted delays are more likely on the larger projects needed to provide renewable energy at scale,as these will also require a
167、build-out of transmission lines,connections and upgrades to national or international grids,flexible systems and storage solutions.The complexity of planning requirements for such projects can cause supply-chain bottlenecks and skills gaps.This can be a major issue for investors,who are asked to tie
168、 up capital for many years before seeing a return.smart technologies and solutions such as heat pumps,battery storage,smart meters,vehicle-to-grid technology and solar panels dont have this planning risk.As a result,they offer an alternative investment option that is more akin to the technology sect
169、or rather than the infrastructure sector.Building costs are another growing challenge for investors.In recent years,prices of aluminium,copper and steel essential for cables,turbines and photovoltaic(PV)panels have the iea estimates that more than$1.4 trillion was invested in clean energy projects l
170、ast 0.6%2.1%5.4%4.0%5.9%-0.2%-0.7%EuROPEUS$250bnUS$365bn20152022NORTH AMERICAUS$190bnUS$248bn20152022AFRICAUS$25bnUS$28bn20152022CENTRAL AND SOuTH AMERICAUS$52bnUS$53bn20152022EuRASIAUS$18bnUS$18bn20152022MIDDLE EASTUS$23bnUS$21bn20152022ASIAPACIFIC20152022US$454bnUS$654bnclean energy investment2015
171、-2022 AvERAgE ANNuAL CHANgETOTAL INvESTMENT PER REgIONsource:Savills Research using International Energy Agency(IEA)ImpacTs The fuTure of global real esTaTeincreased significantly,driving up overheads for projects in both developed and developing economies.Rising labour costs only add to the expense
172、,potentially weighing on overall returns for investors.Government subsidies and the way in which different energy sources are taxed can help or hinder matters.Although China and India have been investing heavily in renewables,most developing countries tax fossil fuels at anoticeably lower rate,makin
173、g investment into renewables less attractive.Financing for projects in developing markets is often expensive,due to its scarcity and there being less regulatory protection.This is one reason why the Just Energy Transition called for more innovative funding models at COP26,with developed countries he
174、lping to support infrastructure in less developed economies.opportunities for private investors These factors mean that there have to date been limited opportunities for private and,in particular,institutional investors in this sector.Figures from IRENA show that total funds from institutional inves
175、tors accounted for only 1 per cent of private investment in renewables at$2.5 billion.Most of this private money has been to fund more established technologies,such as solar PV and onshore wind,which accounted for 84 per cent of these funds in 2020.In addition,there has been more of a weighting towa
176、rds renewable projects in North America and Europe,accounting for 31 per cent and 29 per cent of these investments respectively.In contrast,just 14 per cent of this institutional investment money went into renewable projects in the East Asia Pacific region.Thomas McMillan,Director and Head of Energy
177、 and Consultancy at savills,says that despite these challenges there remain exciting opportunities for investors in this sector,particularly with regard to technologies that support renewables deployment,such as energy storage and smart technologies.“The transition to renewable energy sources is gai
178、ning momentum globally,but the rate of growth is insufficient to meet international climate goals.However,the growth we have seen recently may very much be the tip of the iceberg.With developments in the pipeline,we expect to see far more renewable infrastructure projects and smart technologies comi
179、ng through in the next few years,”he says.“Real estate companies should look at these as an opportunity to diversify risk.But they should also look at their existing portfolios,and how energy efficiency,renewables and smart technologies can be integrated into assets.This will help determine if there
180、 are assets that should be disposed of or repurposed over the coming decade.“There are infrastructure investment opportunities across different global regions and it is clear that countries that can modernise their grid infrastructure,shorten planning issues and offer opportunities to invest in tert
181、iary infrastructure present more attractive options for investors.“This can be further supported by government policies,particularly those that create a long-term framework to encourage institutional investment into these important strategic areas.“Investment in smart technologies is likely to be dr
182、iven more by customer needs than government regulations,where customers seek to reduce running costs or address security of supply concerns,”adds McMillan.A collective effort,from governments,the private sector and local communities,is essential if we are to successfully transition towards a greener
183、,cleaner energy future.looking aheadRenewable energy infrastructure is a sector that looks set to be increasingly important for many private and institutional investors.But barriers to investment,such as the inherent complexity and long timelines of such projects,remain,which may make investment int
184、o supporting technologies more attractive to some investors.When entering the renewables market,investors should not overlook how energy underpins our day-to-day lives.Technology cannot be powered without it.Transport stops without it.Commercial and residential real estate cannot flourish without it
185、.investors should not overlook how energy underpins our day-to-day livespowerful invesTmenT Urbanaffordability challenges and solUtionsWORDS Eri MitsostErgiou,richard ValEntinE-sElsEyanD clarE BailEy30 AFFORDABILITY Impacts The FuTuRe OF gLOBAL ReAL esTATeAFFORDABILITY 31Rising costs are impacting a
186、ll aspects of life in 2023 and the real estate sector is no exception.Its a troubling scenario for both commercial and residential occupants.High inflation rates have clear knock-on implications for businesses smaller firms and startups especially.as their operating costs rise,they are likely to fin
187、d it harder to afford the commercial spaces they seek in the locations they want,which may limit their ability to grow.These businesses most important asset is their workforce,which faces an acute shortage of affordable accommodation local to their workplace.This could pose challenges for recruiting
188、 and retaining talent.at the same time,competition has been rising for high-quality office space over recent years,pushing up rents.Demand continues to increase as businesses of all sizes seek energy-efficient,How can cities foster innovation and attract talent when costs and inflation are pushing y
189、oung businesses to the margins?and how are cities addressing residential affordability and quality of life to draw such talent?flexible,imaginatively designed units in well-connected locations that will attract top talent.Covid-19 lockdowns generally reduced completions,setting back construction sch
190、edules and causing supply-side material shortages.Savills Research shows that between 2019 and 2022,prime office rents increased across most major global city centres,despite the disruption caused by the pandemic.Dubai tops the ranking,with rents up 25 per cent,followed by Berlin(23 per cent),downto
191、wn new York(17 per cent)and the West End of London(13 per cent).Small and medium-sized enterprises(SMEs)are again being hit hardest by this upward trend.In many cities,rising rents have rippled outwards from the historical central business districts,pushing up prices in the more affordable fringe ar
192、eas.SMEs are being forced farther out into more remote districts and less attractive buildings.source:Savills Research using NumbeoCity centreOutside city centreone-bed rent as share of average salary70%80%90%60%50%40%30%20%10%0Hong KongshanghaiLondonsingaporeNew YorkLisbonsan Franciscoparisstockhol
193、mamsterdamsydneyBerlintokyochicagoShare of average net salaryILLusTRATIOn:JAKe ReADsAvILLs.cOm/ImPAcTs 32 AFFORDABILITYThe issue here is partly one of how to protect and nurture small businesses.according to the World Bank,SMEs account for about 90 per cent of businesses and more than 50 per cent of
194、 employment worldwide.off-the-shelf solutions Potential solutions are emerging.One is the rise of commercial co-working spaces,which offer all-in packages without restrictive long leases.Given the costs of setting up and maintaining an office,these deals can work out simpler and cheaper over time.To
195、 compare the cost of a co-working arrangement relative to the net effective cost of a conventional prime office,Savills Research assumed a 10-person business,operating across 16 key global markets.The study found that a co-working space is 40 per cent cheaper on average,although there is considerabl
196、e variation between locations.While co-working costs 63 per cent less than renting a prime office in Mumbai,the differential is just 14 per cent in Sydney.The cheapest cities for co-working include Mumbai,Madrid,Shanghai,amsterdam and Los angeles.new York and London are the most expensive.Cal Lee,Gl
197、obal Head of Workthere and Savills Flex Co-Head in the UK,notes that for companies starting out,any savings made on premises and channelled into the business could prove the difference between success and failure.“For any mature office market hoping to have a strong base of start-up and scale-up bus
198、inesses,it is imperative there is a diverse range of space available from a price perspective.Co-working can be a very affordable route for a young business and it is vital for any start-up ecosystem within a city,”Lee says.nurturing the start-up ecosystemnonetheless,even co-working arrangements may
199、 be too expensive for the smallest start-ups.In these cases,public-sector funds are being used alongside private investment in the creation of start-up hubs.These offer cheap rents and share resources among similarly small-scale enterprises in convenient locations.Beyond affordable rent,co-working a
200、rrangements also bring people together to foster collaboration across communities,locally and within their industry sectors.The Factory Berlin project is a great example of how public and private-sector funding can make such communities viable.Members can choose from a variety of membership plans,ra
201、nging from part-time desks to full-time private offices.It means that they only pay for the space they need and can afford,and are not burdened by lengthy leases or high upfront costs.incubators and acceleratorsSimilarly,university incubators support enterprises and start-ups driven by the universit
202、y community,helping to retain academic talent.Corporate accelerators provide mentorship,resources and funding toearly-stage businesses.For the corporates supporting these initiatives,its a valuable chance to engage with innovative start-ups and the talent theyattract.The 4,400 sq m JLaBS Shanghai is
203、 the first Johnson&Johnson innovation hub to be established in asia.It can cost difference between traditional and co-working spacesource:Savills Research and WorkthereMonthly co-working cost for 10 peopleMonthly net effective cost in traditional prime office for 10 peopleDifference between co-worki
204、ng and prime officeOffice cost for 10 peopleDifference in cost between co-working and prime office space-40%-20%0$25,000$20,000$15,000$10,000$5,000-70%-60%0-10%-30%-50%MuMbaihOng kOnglOS angeleSMaDriDShanghaitOkyOlOnDOn WeSt enDneW yOrkfrankfurtberlinlOnDOn CitypariSaMSterDaMSingapOreSyDney-63%-60%-
205、57%-56%-56%-55%-52%-43%-41%-38%-36%-27%-27%-19%-14%Impacts The FuTuRe OF gLOBAL ReAL esTATeAFFORDABILITY 33accommodate more than 50 life-science and healthcare start-ups and larger companies,and provides lab facilities,equipment and mentor support.pushed up and priced outOn the residential real esta
206、te front,too,affordability pressures are acute.Many city dwellers,especially younger people,students,and essential workers and their families,are affected.ageing populations and a rise in single households mean intensifying competition for a limited supply of affordable city housing.Both capital and
207、 rental values have been pushed up,with demand for rental accommodation exacerbated by recent hikes in mortgage rates that have thwarted prospective buyers in many big cities.Historically,an affordable rent would cost less than 40 per cent of net income.These days,tenants in most city centre locatio
208、ns can expect to pay more.Yet existing social housing stock is failing to keep up with the growing demand for affordable accommodation.new Yorks City Housing authority has just 178,000 such units;London has almost 800,000,but supply has shrunk over the past five years;in Hong Kong,you can expect to
209、wait five years for a public rental home.Frustrated and outpriced,renters are having to look further afield,live at home for longer,move to cheaper cities or“hutch up”by taking a room in a shared flat.That pressure has refocused attention on the need to deliver genuinely affordable social housing,us
210、ually through some form of public-sector support.as Helen Collins,Head of affordable Housing Consultancy at Savills,observes:“To increase supply,nations and regions need to put in place clear strategies,targets and delivery models underpinned by state funding,land supply and policy support.Continuit
211、y,consistency and certainty provide developers,investors and providers with the confidence to invest.”Such models can take many forms.For instance,in Spain and other EU countries,Covid-19 recovery funds are being used to subsidise affordable housing.The UK provides housing associations with direct g
212、rant funding,while in the US investors are incentivised by tax credits to fund affordable accommodation.Singapore and Hong Kong,meanwhile,run extensive and heavily subsidised public housing schemes for local residents,although they are among the most expensive places in the world for expatriates to
213、buy or rent privately.repurposing old commercial stockOther potential opportunities to boost the availability of affordable stock in city centres include the repurposing of old commercial stock into new housing and the regeneration of deprived neighbourhoods through a mix of affordable and market ho
214、using alongside commercial properties.One example of repurposing in action is Les Grand Voisins located in Pariss former Saint Vincent de Paul Hospital which was developed as a temporary but very successful meanwhile mixed-use space for the local community to connect with society and work.For entrep
215、reneurs,rentable workspaces are available.a relatively recent financial development has been the expansion in the UK and Europe of closed-ended ESG-focused social housing funds from the likes of Man Group and Civitas,among others.These bring private capital to support publicly-funded social housing
216、schemes,with investors accepting a lower financial return than those of full-blown commercially focused funds.Clearly,theres a pressing need to reimagine city-centre living and working in many big cities,and to make it more affordable in a 21st-century context.The most successful schemes are likely
217、to be those that focus on delivering wider social and environmental benefits,too.geTTY ImAgesbarcelonabarcelona:space to innovateBarcelona policymakers are on a mission to attract talent and make the city a European hub for start-ups.Barcelona Activa,the local development agency,offers incubation sp
218、aces and added services to new start-ups.Three of Barcelona Activas incubators are located in 22,the citys innovation district.Small spaces at its four incubators are 30 per cent cheaper than the market rate,while its Technology Park,which is specifically aimed at companies scaling up,offers up to 2
219、00 sq m at between 15 per cent and 25 per cent less than in the rest of the area.“Bringing economic activity in an urban,dense area generates interactions that foster innovation and boost the entrepreneurship ecosystem,says Mario Rubert,Director of City Promotion at Barcelona City Council.“At the sa
220、me time it produces a transformation toward a better balance between working and living.”sAvILLs.cOm/ImPAcTs Out Of Officeadapting tO new ways Of wOrking WORDS Kelcie SellerS The working habits formed over the past three years may prove longer-lasting than many initially anticipated.In the US,56 per
221、 cent of full-time employees thats 70 million people say their jobs can be done remotely.In Germany,51per cent of people work remotely at least one day a week.In the UK,its 42per cent.1As a result,many firms are downsizing or“right-sizing”their office spaces;others are still taking the equivalent am
222、ount of floorspace but upgrading in terms of quality or layout to give workers a better experience.The picture,however,is far from uniform worldwide,as the Savills Future Office Availability Index reveals.It Covid-19 changed office-based working almost overnight.Technology stepped up to keep us conn
223、ected while working from home.How are offices now evolving to meet the generational and geographical demands of the workforce?34 officescertainly doesnt spell the end of the office either.We have created an index of the top-tier office markets globally to understand how current office environments i
224、n terms of cost and availability,pipelines and hybrid working trends,as well as future office needs could all come together to result in an increase in office availability in some markets.time for a rethinkOur analysis suggests we need to rethink the number and nature of the offices we are building
225、and reposition existing offices to suit new ways of working.By identifying the factors leading to rising availability levels in different cities,we can pinpoint the key drivers for office market resilience in each location.offices 35Factors include existing vacancy rates,quality of stock,ESG conside
226、rations,and the prevalence of hybrid working.Booming finance and business services sectors in certain cities notably Mumbai,Delhi and HoChi Minh City are also driving demand.Each of these cities is forecast to see the Gross Value Add from their finance and business services sectors increase by 50 pe
227、r cent or more in the next five years,and employment in the sector is also forecast to increase by more than 10 per cent over the same period.Demographics are also crucial in this conversation;growing populations,especially increasing numbers of younger people in some locations,are likely to help su
228、pport office usage in the near to mid-term.Over the next five years,the populations of Mumbai,Shenzhen,andHo Chi Minh City are forecast to increase by 8 per cent or more.Office allureOffice life may help the younger demographic feel more involved in company culture.It also provides an alternative to
229、 working from their homes,which are likely smaller and without dedicated office space compared to older colleagues.This is not only driving demand for offices;its also shifting the nature of those offices to more flexible and collaborative environments than in pre-Covid times.Cultural factors can al
230、so drive our attitudes to office life and hybrid working.Businesses in Tokyo and Paris tend to encourage cultures of mentorship in the office.They prize the informal training opportunities that face-to-face interaction with experienced colleagues brings and this is reflected in their higher utilisat
231、ion rates 80 per cent in Tokyo and 66 per cent in Paris as of March 2023.Pariss central business district(CBD)has one of the lowest vacancy rates in Europe,at 2.3 per cent.Tokyo has one of the lowest vacancy rates in Asia Pacific,with approximately 4 per cent of stock available for rent;only Seoul a
232、nd Ho Chi Minh City have lower vacancies at 3 per cent.Commutability is another key part ofthe office/hybrid working equation.American cities with significant urban sprawl are more likely to have greater numbers of workers commuting by car,which carries time,cost and environmental implications.Their
233、 more compact European equivalents are better placed to embrace the“15-minute city”concept of mixed-use neighbourhoods designed for living,working and playing.future of offices:newbuilds and refurbs Also topping priority lists is the green factor:the need to build or retrofit office space that fulfi
234、ls companies ESG responsibilities,in turn providing the calibre of sustainable stock that occupiers seek.We are seeing a growing chasm between the best and the rest,with best-in-class,sustainable,people-focused office space in highest demand and achieving the highest prices.In Europe,for example,the
235、 average rent for prime office stock is 142 per cent higher than 1 Practices and representations associated with teleworking in Europe Fondation Jean-Jaurs(jean-jaures.org)Note:Index is colour ranked from markets most likely to see an increase in office availability(dark blue),to those least likely(
236、burnt orange).Each category is individually colour-scaled.Utilisation trends is given a half weighting.Demand trends and supply trends are equally weighted.Source:Savills Research using Oxford Economics,Kastle Systems,and local sources future Office availability indexSan FranciscoNew YorkLos Angeles
237、ChicagoHoustonWashington DCLondonBerlinMadridHong KongAmsterdamFrankfurtDubaiTokyoParisSydneyShanghaiBeijingKuala LumpurDelhiMumbaiSeoulGuangzhouHo Chi Minh CityShenzhenSingaporeDemand trendsSupply trendsUtilisationtrendsTotalillustration:JaKe reaD 36 officesthe average rental price for secondary st
238、ock.Even if the pandemic hadnt disrupted work practices,much of the older stock was overdue for modernisation.In most cities studied for the Savills Future Office Availability Index,the majority of stock(an average of 69 per cent)was built before 2010 meaning there was already an oversupply of non-g
239、reen office stock.This stock does not meet the growing demand and preference for sustainable office spaces,as large numbers of occupiers seek out spaces that support their ESG commitments.east meets westBy piecing it all together,we have drawn a new map of the office environment based on hybrid work
240、ing.Broadly it shows an East-West divide between countries that have largely returned to pre-Covid-19 office practices and those in which hybrid working is much more normalised.This is reflected in office utilisation rates the share of workers going to the office on a daily basis.Across Asia Pacific
241、 markets,the average office utilisation stands at 86 per cent,as at March 2023.This stands in contrast to the averages across EMEA and Americas markets,which average 61 per cent and 48 per cent respectively.US markets particularly key cities such as San Francisco,New York and Los Angeles have higher
242、 potential to see increased office availability in the future.Of examples,San Francisco is among the strongest.Pre-Covid-19,it had one of the lowest office availability rates in the US,at 9.5 per cent.In the current climate,30 per cent of its office space is vacant or due to return to the market in
243、the next year,representing a 30-year high in availability rate.San Franciscos status as a tech hub cannot be overlooked in this either;post-pandemic,many tech companies and workers alike have reassessed their needs for in-person working.In the current economic climate,too,we are seeing some tech fir
244、ms examine their space and staffing needs,with reports oftech redundancies also characterising this shift.Asia-Pacific markets including Chinese cities,Singapore,Seoul and Mumbai are likely to have a lower surplus of space over the next decade.Their expanding economies are drivers for office demand
245、and hybrid working trends have not taken root in the same way as in the West.Europe sits somewhere in the middle.The average vacancy rate is 13.7 per cent,which while lower than the availability rates in the US markets(which accounts for vacancy as well as space listed as available for lease in the
246、next 12 months),has increased in recent months with the rise in hybrid working and the changing office environment.Berlin,London and Madrid are in the middle of the table where demand for high-quality offices is expected to persist,meaning that availability will likely be concentrated inolder office
247、 stock.adapt and evolve The question now is how to retrofit and repurpose excess and vacant office stock to suit todays needs.Where there is the potential for higher availability levels,there are opportunities for repurposing.In central locations,there is often both the demand and potential for conv
248、erting offices into residential property.The boom in on-demand delivery culture in some locations is driving the need for last-mile logistics,which may lead to some spaces in suburbs and more fringe urban locations being turned into delivery depots,fulfilment centres or retail outlets.Regardless of
249、the end-use of the repurposed office,cities becoming more mixed-use will provide opportunities for new uses and revitalisation.New locations for residential,education,health,retail,and culture will increase the social and environmental sustainability of cities,supporting the livability,walkability,a
250、nd diversity of the social fabric across these areas.Given the sheer amount of embodied carbon in buildings,interest in finding new uses for existing properties is only increasing,and we expect to see this trend towards thoughtful repurposing continue.there appears tO be a grOwing east-west divide b
251、etween cOuntries that have largely returned tO pre-cOvid-19 Office practices and thOse in which hybrid wOrking is much mOre nOrmalised ImpacTS the future of global real estateoffices 37san franciscomichael mccandless corPorate managing Director,savills san franciscoMarkets across North America could
252、 see increased availability over the coming years,with San Francisco leading in terms of both rising availability and opportunities.Even before the pandemic,the market was beginning to embrace remote work.As a result,the city is still trending below 45%office utilisation,according to Kastle Systems,
253、giving the city the lowest utilisation rate of all the Tier One markets in the US.The situation is less than optimal for landlords.Availability rates are nearing 30%,which is an all-time high for San Francisco,above even the highs that followed the 2001 dotcom crash and the 2008 financial crisis.Cou
254、ple the high availability and low daily utilisation rates and most office buildings are running at sub 30%capacity.On top of this,most San Francisco renewals have reductions in floorspace of anywhere from 20 per cent to 50 per cent.We are also seeing very little growth or even stability in new squar
255、e footage leased from existing companies that did not put space on the sublease market.Occupiers,notably tech tenants,have begun implementing“return to office”mandates in 2023,so a greater share of employees returning to the office would likely help office demand increase over time and begin to chip
256、 away at the oversupply of space.Looking ahead,there are opportunities to be found for tenants in San Francisco and beyond.Increased interest rates,reduced building valuations,and growing vacancy have resulted in a strong tenants market.Prospective tenants will have a lot of options,and aggressive l
257、andlords are offering big concession packages to lure tenants into relocating or staying in theirbuildings.San Francisco also remains a hub for innovation,with a highly educated workforce.This will help it recover from current market volatility overtime.paris serge vayer,heaD of occuPier services,sa
258、vills franceThe French capital is Europes outlier when it comes to office vacancy levels.The vacancy rate currently 2.3percent in the CBD has fallen drastically over the past decade.The supply pipeline is limited and swamped by demand for Grade A spaces.Demand is partly driven by a culture of workin
259、g in the office and in-person interaction.Some managers still believe work can only be done in the office.It is both cultural and generational,and that is changing slowly with younger generations and the tech industry.But most managers still like to have their team around them in the office.Most com
260、panies prioritise having a central Paris address over a more modern office,such as in La Dfense business district on the outskirts,where vacancy is at 16 per cent.A city-centre location is a way to attract new talent,attract people back to the office and offer a good office experience compared to wo
261、rking from home.Although companies are keen to occupy Grade A,ESG-certified office space in the centre,most of the CBD stock is Grade B and there is little land available for new-build,as the Town Hall favours residential over offices.chinaJames macdOnald senior Director anD heaD of research,savills
262、 chinaThe majority of Chinese workers are now back in the office,after nationwide lockdowns,marking a return to company culture which prizes in-person working.While employees had to work remotely during these lockdowns,generally speaking,remote work has not really caught on that much.When travel gia
263、nt T implemented its policy of two days working from home aweek in February 2022,it was the first large tech company in China to give employees a hybrid working option.Chinese cities efficient and inexpensive public transport is one incentive for workers to go into the office along with the desire t
264、o escape typically cramped,multi-generational home environments.However,the threat of oversupply is constant.There is a concept of constructing an office building to attract a company and grow your economy and tax base.But even leading cities such as Shanghai are seeing multi-year high vacancy rates
265、.Its the result of overbuilding and weak demand because of slower economic growth,especially in 2022 and business uncertainties,especially surrounding zero-Covid-19 policies.The percentage of people aged 50 and above is forecast to reach 28.4 per cent globally by 2033.For some countries,it will be m
266、ore.In 47 of 165 countries we analysed for our Savills Prime of Life Residential Index,the figure will be at least 40 per cent.The global trend is towards lower birth rates and increasing life expectancy.Health and educational improvements are driving demographic change.As nations advance,older peop
267、le tend to accumulate wealth.Theres a correlation between better health,fewer children and rising incomes.Populations that are getting older also tend to be getting wealthier.In other words,many countries are seeing significant growth in the number of affluent,mature people,many of whom are seeking
268、more from their homes.What do affluent,mature homebuyers want?This is not a homogenous group.The 50-plus category includes everyone from busy working parents to carefree retirees.WORDS Lucy PaLkPeople of 50 and older many with accumulated wealth will drive prime residential markets around the world
269、over the next decade38 PRIME RESIDENTIALand the upscale homes to go With itWelcome to the age of ageing ImpacTs ThE fuTuRE of gLobAL REAL ESTATEsource:Savills Research using Oxford Economicscountries With the largest and fastest-groWing shares of Wealthy over-50s,2033Country 50+share of total popula
270、tion in 2033 10-year growth in 50+population(2023-2033)luxembourgsouth koreasPaINsINgaPorekuwaItswItzerlaNdChINaNorwayCaNadaIrelaNdNew zealaNdaustralIaargeNtINaIsraelbrazIlsaudIa arabIa79%53%48%48%45%43%43%40%40%39%37%36%31%28%33%32%30%19%16%28%78%14%17%13%14%23%15%17%23%26%29%81%PRIME RESIDENTIAL 3
271、9home to at least 10,000 households with incomes of$250,000 or more.Our top 16 is striking in its geographic diversity.Luxembourg will have the largest share of over-50-year-olds in 2033(79 per cent),with South Korea(53 per cent)in second place.But the fastest growth in this age group over the next
272、decade will be in Saudi Arabia and Kuwait.European nations already have high proportions of people over 50.A large number of Asian and Middle Eastern countries will see their mature populations explode,as more people become richer.And while some cities will attract more newcomers,many will rely on d
273、omestic trends to drive growth.The result for real estate is the same.Prime residential hotspots around the world should prepare for influxes of affluent over-50s,with different sets of expectations around what a home should be.Note:Analysis focuses on countries with a population greater than half a
274、 million people,more than 10,000 households with an income of$250,000 per annum or higher,and forecast to see more than 10%growth in their over-50s populations between 2023 and 2033.When it comes to property,their top priorities are quality and space for example enough space to comfortably work from
275、 home.They may also be looking for ease of ownership.The US branded residence trend,now gaining popularity in Europe and Asia,provides a hassle-free turnkey experience that appeals to many in this age group especially those who own multiple properties around the world.Those seeking the city lifestyl
276、e but larger living spaces increasingly opt for smaller cities,which offer the advantages of urban centres but often at lower costs.the country pictureUsing Oxford Economics data,Savills quantified the trends by country over time.First,we focused on countries whose 50-plus populations are forecast t
277、o grow by more than 10 per cent in the next 10 years.They also had to be gETTY IMAgESturn to see the savills prime of life indeXSAvILLS.coM/IMPAcTS ImpacTs ThE fuTuRE of gLobAL REAL ESTATEpercentage of population over 5040 PRIME RESIDENTIAL1.north port,florida,usaNorth Port,Florida,heads our city in
278、dex,with over-50-year-olds expected to make up nearly two-thirds(57 per cent)of the population by 2033.The citys share of households with an income above$250,000 per annum isexpected to rise from 9 per cent in 2023 to 11 per cent in2033.“North Port is part of a larger area on the west coast of Flori
279、da that is popular with retirees from the northern US,alongside more well-known cities like Fort Myers,Sarasota and Naples,”says Ryan Schleis,Senior Vice President of Research at Corcoran.2.shanghai,chinaBy 2033,slightly more than half(53 per cent)of Shanghais population will be over 50,up from 47 p
280、er cent today.Strikingly,by 2033,four times as many households will be earning$250,000 or more than in 2023.Older people are drawn to Shanghai by amenities and opportunity.“The city offers a store of wealth,”says James Macdonald,Senior Director and Head of Research at Savills China.“The city authori
281、ties are also among the richest in the country and have the ability to invest more in city beautification,healthcare services and education.”3.singaporeNearly half(48 per cent)of Singapores population will beover 50 in 2033.Its already a thriving prime residential market,recording capital value grow
282、th of 6.8 per cent lastyear.A maturing and affluent population presents challenges alongside opportunities.A growing number of fifty-somethings in the city are single.Future development will have to include a large number of apartments and smaller homes that meet their needs,forcing residential deve
283、lopers to be creative with space.57%53%48%47%45%5 kuwaIT cITy,kuwait 2 shaNghaI,China1 NorTh porT,united states4 maDrID,spain3 sINgapore the savills prime of life indeX ImpacTs ThE fuTuRE of gLobAL REAL ESTATEPRIME RESIDENTIAL 41Note:Analysis focuses on cities with a population greater than half a m
284、illion people,more than 10,000 households with an income of$250,000 per annum or higher,and forecast to see more than 10%growth in their over 50s populations between 2023 and 2033.4.madrid,spainMadrids attractions are no secret.“It has an incredible offer when it comes to entertainment,gastronomy an
285、d luxury shopping,”says Pelayo Barroso,Research Director at Savills Spain.“Madrid has become one of the most sought-after European capital cities over the past fewyears.”Around 47 per cent of the population will be 50 or over in 2033,with affluent households(incomes of$250,000 or more)set to double
286、in that time.That will be a challenge for the prime residential market in particular,given that demand already outstrips supply in central areas.“In the centre,buyers are looking for renovated apartments in classical buildings with historic faades,but these are often protected and dont have parking,
287、”says Barroso.“The farther you move outof the centre,the more opportunities there are forprojects.”6.Zurich,switzerlandThe Swiss city already boasts one of the highest figures for GDP per capita in the world and its wealth is only likely to increase over the next decade.Thats especially true if the
288、Swiss retirement age is raised to counter perceived labour shortages.A national debate is currently underway.Increasing wealth,driven by longer careers,will shape the citys prime residential market.Zurichs economy is largely service-based and,during the Covid-19 pandemic,many service-sector employee
289、s became accustomed to the flexibility of working from home.5.Kuwait city,KuwaitKuwait is a microcosm of the modern Middle East,with a rapidly expanding middle class.At the same time,the city has become a thriving location for second homes.The share of its population aged 50 and above will rise dram
290、atically over the next 10 years,from 27 per cent to 45 per cent,alongside a 39 per cent growth in households with annual incomes of$250,000 and more.Many of these affluent and mature homebuyers nearly one-third(32 per cent)of the population as a whole will still be of working age.Their demands for s
291、pace,entertainment and lifestyle factors will shape the prime residential market in Kuwait over the next decade.source:Savills Research using Oxford Economics8 aDeLaIDe,australia37%7 so pauLo,brazil38%6 ZurIch,switzerland 40%9 vaNcouver,Canada37%10 osLo,Norway36%SAvILLS.coM/IMPAcTS illustration:jake
292、 read42 PHYsiCal retail Impacts tHe future of global real estatePhysical retail is regaining its PurPoseWORDS Eri MitsostErgiou,MariE HickEy anD toM WHittingtonOptimism is back on the agenda for bricks-and-mortar retailers,but the places where retail happens are changingPHYsiCal retail 43Funan in Si
293、ngapore is a city centre neighbourhood under LED lighting.This former technology mall is now a bustling mixed-use development with six floors of office space,serviced residences and retail.Visitors can enjoy a cycle path on the ground floor,or make their way to the top floor to take a stroll in the
294、urban garden and sample some of its produce at the attached restaurant.nuveens redevelopment of Edinburghs St James Quarter takes a different tack.Its about repositioning,not replacing,the citys retail offer making the shopping environment more relevant and engaging.The mixed-use space,which incorpo
295、rates hotel,residential,leisure and offices,also boasts a large number of sustainability/ESG initiatives.While Funan and St James Quarter may seem different,they send similar messages about the future of city centre retail spaces.Theyre savills.Com/imPaCts breathing new life into areas and structure
296、s once largely abandoned,repositioning them as vibrant centres of their communities.In both places,retail and leisure,while still being front and centre,are part of a much broader offer.Physical retail is changing with the timesFunan and St James Quarter demonstrate that bricks-and-mortar retail can
297、 evolve beyond its traditional limits.The pandemic-fuelled rise of e-commerce threw down a clear challenge to bricks-and-mortar retail and it is responding.In fact,there are signs that physical retail is regaining its purpose.It isnt happening everywhere,but in many markets,brands are moving back in
298、to core retail locations and vacancy rates are falling.at the luxury end,some are even pushing their physical retail presences into new and novel areas.Sam Foyle,Director and Co-Head of Prime Global Retail at Savills,says many brands are expanding their physical retail presence.“Globally,brands neve
299、r left their prime locations and some have used recent rent reductions as opportunities to expand into other high-end or tourist-rich areas,or move from great shopping streets to iconic ones.Others have expanded into affluent suburbs.”It is impossible to overstate the catalysing effect of the pandem
300、ic on all of this.During lockdowns,people who already shopped online did more of it.People who had never shopped online started doing it.E-commerce penetration soared,raising fears that bricks-and-mortar shopping would never truly recover.But recently,that acceleration has eased.Worldwide e-commerce
301、 penetration increased by 29%in 2020 but by just 5%in 2022.Electronic marketplaces are farther ahead than they might have been without the pandemic,but they are far from all-conquering.People are returning to shops.Pure-play e-commerce operations,facing an array of operational cost increases on top
302、of expensive returns policies,are seeing their already squeezed margins hit.Genuine omnichannel retailers with both online and in-store presences are faring significantly better.after Covid-19 lockdowns,consumers are looking for connection and community,feeling the lure of communal spaces.at the sam
303、e time,the ease of e-commerce has given customers expectations of convenience and an“on demand”mindset.Retail locations that meet all of these disparate requirements are likely to prove most resilient in the long run.going localIts been widely reported that the local suburban high street was given a
304、 much-needed shot in the arm by the pandemics forced mass experiment in home working.This was partly down to convenience and amenity people working from home were unable or unlikely to travel into the city centre for a quick errand.at the same time,the pandemic amplified the celebration of local and
305、 independent retailers that had been emerging for some time.Covid-19 highlighted the importance of a great local coffee shop and bookstore.Local pride became a driving force behind suburban renewal.People re-examined where they lived and what their area offered,and found places to meet,socialise and
306、 shop.This attitude hasnt gone away.Many office workers have now added one or two work-from-home days to their-pre pandemic schedules.The money they spent in city centres hasnt been lost.Its most likely been deflected to local shops and cafs.The caveat is that this hasnt happened everywhere.The tren
307、d is much more evident in affluent areas that house better-paid office-based professionals and boast independent retail presences.nevertheless,it has happened,and it is helping to shape the urban landscape.the case for citiesSo what of those city centres?Its true that many central business districts
308、 have become quieter at certain times of theweek and hybrid working regimes have had impacts on the stores that once serviced busy commuters and lunch-break browsers.If 25 per cent of pre-pandemic spending in city centres came from workers who now spend one or two weekdays at home,its likely that be
309、tween 5 and 10 per cent of that expenditure has been redirected to local high streets.44 PHYsiCal retailthe Pandemic-fuelled rise of e-commerce threw down a clear challenge to bricks-and-mortar retail and it is resPonding Impacts tHe future of global real estatePHYsiCal retail 45and Hong Kong.In the
310、 past two years,however,prime luxury retail rents have grown by an average of 7%(Q1 2023 data).Cost is certainly a factor,but it isnt the only one.These retailers obviously still see huge value in city centre locations,even with reduced weekday footfall and,in many cases,their own thriving e-commerc
311、e offers.Why might that be?changing city centresThere are a number of drivers.Consumers want novelty and amenity in one place.By being home to independent operators source:Savills Research1.munIch7.DuBLIn5.shanghaI9.hong Kong6.amsterDam8.maDrID3.mILan4.FranKFurt8%8%0%0%8%6%13%40%30%20%10%44%25%2.new
312、 YorK29%11%-2%-2%-10%13%-4%-4%-1%-8%10.sYDneY6%-11%-17%11.LonDon-21%-21%12.toronto0%The picture is complex and the green shoots of retail recovery are apparent in city centres,too.Vacancies in core retail streets are falling.Brands have taken advantage of rent corrections during the pandemic to move
313、 back into high-footfall locations.affordability is allowing retailers to move up the footfall ladder,from secondary into primary pitches and from tertiary into secondary.There is a flight to prime.Prime luxury retail rents are still below pre-pandemic levels in a number of premier high streets acro
314、ss the world down at least 10%or more on 2019 levels in Toronto,London,Sydney Prime luxury retail rents:current v Pre-and mid-PandemicQ1 2023 v lockdown(Q3 2021)Q1 2023 v pre-pandemic(Q4 2019)Cities are ranked according to their performance against Q4 2019savills.Com/imPaCts 46 PHYsiCal retailand bi
315、g name brands,city centres provide exactly that.Consumers can visit a global fashion retailer and an independent local restaurant in the same trip.at the same time,some are willing to travel much further afield for unique experiences.Tourist spend is a key driver of prime physical retail and may dri
316、ve expansion as the world continues to open up after Covid-19.“One of the key features of regional retail markets like Hong Kong is tourism,especially visitors from the Chinese mainland,”says Simon Smith,Regional Head of Research at Savills asia Pacific.“In some markets tourists can account for a si
317、gnificant share of physical retail spend almost 80 per cent in the case of pre-pandemic Hong Kong.”Perhaps somewhat counter-intuitively,online retailers are increasingly taking up prime retail pitches in major cities.This is the lure of community in action.E-commerce brands have been using social me
318、dia to build online communities for years.now,theyre bringing brand engagement and a sense of togetherness to the real world by opening stores.amazon,the king of electronic shopping,now operates nearly 100 retail locations and has plans to expand.alibaba,its Chinese equivalent,also runs hundreds of
319、physical stores.German online fashion and beauty brand Zalando sells discounted and overstocked items through a network of bricks-and-mortar retail outlets.In 2021,it opened a flagship location in Berlin,which offers a personalised shopping experience with in-store stylists and digital features.In s
320、ome cases,these spaces may be showrooms and community hubs,complete with cafs and event halls,as much as profit centres.Theyre places for people to meet,mingle and engage with the brand as much as to shop.Its all about extending brand visibility.This is especially true of“athleisure”brands like Fabl
321、etics,Under armour and LuluLemon athletica.LuluLemons experiential store in Chicago features fitness studios and a“fuel bar”.High-end retailers are using physical locations to reinforce their appeal to a community that may actually buy the merchandise online.finding new purposeThese are examples of
322、retail reinventing itself to suit changing consumer trends.While many of us are spending less time in city centres,we may be spending more money when we do travel in.Trips into the city centre are becoming diverse and multifaceted experiences.Consumers might go to shop,eat and catch a film.They migh
323、t go for a doctors appointment followed by an hour at the gym,or combine click-and-collect shopping with an art gallery visit.all of this demands the repositioning or repurposing of retail.away from the most prime locations,there is often an oversupply of space.Some retailers are rationalising their
324、 store networks,focusing on locations with higher footfall and visibility that can boost both online and offline sales.Secondary shopping malls and traditional department stores are suffering as a result.at the same time,consumers value convenience and mixed-use spaces,which give them multiple reaso
325、ns to make a single trip into town.The mixed-use concept offers an obvious future for physical retail.Its why Funan has been retrofitted as a mall that responds to a range of requirements.Its why the St James Quarter has been designed as a place to stay,dine and play as well as shop.a captive audien
326、ce Mixed-use is an increasingly popular template,whether places are repurposed or built from scratch.California,where malls proliferated in car-centric suburbs,is ahead of the curve.Huntington Beach,an ageing 1960s-vintage indoor mall,has been reenvisioned as Bella Terra,an open-air town centre with
327、 retail sPace as Part of mixed-use environments is increasingly PoPular,whether Places are rePurPosed or built from scratch.cities are gradually figuring out what works best for them Impacts tHe future of global real estatePHYsiCal retail 47Physical and digital retail are like complementary instrume
328、nts in an orchestra that must play together:both are essential,otherwise the customer will only hear half a song,but they must be in synergy,so the song is harmonious.While an online presence showcases products and conveys our principles and values,even the best digital experience is very transactio
329、nal and price-led.The store,meanwhile,delivers intangible value,particularly at the luxury end of the market,fully displaying our craftsmanship and maximising the personal experience to build one-to-one relationships between clients and the Canali brand.For an independent name,the boutique is essent
330、ial in raising our profile and placing us quite literally alongside bigger luxury brands in the minds of consumers.Competition for prime retail space in the traditional premier shopping malls and streets remains extremely fierce,as they continue to be destinations for discerning customers.We focus o
331、n the store providing a bespoke experience in an oasis of private space,beyond the busy outside world.VIncenzo carrIerI ASiA PACiFiC RegionAl DiReCToR AT CAnAli,The luxuRy iTAliAn menSWeAR bRAnDTuscan-inspired architecture and tenants such as upscale grocer Whole Foods.a 300-unit residential complex
332、 is part of the plan.Elsewhere,retail has been combined with hotels,university campuses and hospitals.In fact,healthcare is a major driver of the mixed-use trend.Clinics,holistic wellness centres and gyms attract visitors to nearby health food stores and athleisure brands.This is happening in old ou
333、t-of-town malls and in city centres,where away from the prime shopping streets(where retail is actually outbidding other uses)traditional shopping,leisure and cultural zones are merging into mixed-use neighbourhoods,offering convenience,community and experience in a post-Covid-19 world.challenges remainWhile many of the larger schemes have been master-planned with great care,there are also smaller