THE VISITOR VIRTUOUS-CYCLE
Cities that are economically, environmentally and socially successful not only attract the best workers to live and play there, they also attract a large number of visitors. Visitors to a city experience a wide range of human activities and, in doing so, create demand for different types of accommodation. This boosts the provision of amenities for workers and residents, which makes the city more attractive to newcomers and visitors, thus encouraging a virtuous cycle of growth. As well as feeding the city economy by spending money on accommodation, shopping, food and drink, culture, entertainment, education and a host of other experiences, visitors can have a big impact on real estate markets too by creating increased demand for space and competition for scarce land. Every night, the 12 world cities in this report have to accommodate another city of visitors. On average, this adds 3.4% to the size of the resident population.
THE SIZE OF THE VISITOR CITY
New York has a visitor population every night equivalent to an extra 640,000 people (when factoring in hotel vacancy rates). This is a ‘Visitor City’ nearly the size of Washington DC. London has a ‘Visitor City’ size equivalent to an extra population of 515,000 people. This is bigger than the size of Manchester. These visitor cities are important to the city economy. A total of $123 billion a year is spent in the 12 cities by international overnight visitors alone. In addition, there is evidence that a high visitor profile is not only the result of business travel but that it can result in higher levels of inward investment. First-hand knowledge of a city can help to reduce perceived investment risk so the fame of our world cities helps to enable investment in them. Those cities most open to visitors tend to be the most economically successful too.
A NEW CITY AGE
Global gateway cities have seen strong rental growth, as well as capital growth, due to high demand from occupiers and a limited supply of both living space and workspace. New York is now the most expensive city for a worker to pay accommodation costs for both their home and office. The second most expensive is Hong Kong. As a consequence, city occupiers are looking for alternative locations, both for living and working, either in their own city or, increasingly, in alternative connected towns and cities – some of which are quite small. Savills calls this ‘urban dispersal’, a characteristic of the fifth age of cities which goes hand in hand with the dawning of the digital age, new working practices and looser ties to corporations and workplaces. In the fifth age, it is proximity to people and access to human capital that matters more than access to markets or access to capital. It means cities will increasingly operate as clusters within a connected region rather than single, stand-alone dominant cities.
PAYING ATTENTION TO WHAT OCCUPIERS WANT
In building the cities of the fifth age, the complex needs and wants of all occupiers will increasingly have to be considered. At the same time, the digital age brings unprecedented change and uncertainty as to who these occupiers will be or what they will want in future. This is likely to result in a need for fine-grain, mixed-use and flexible accommodation for a great variety of uses, some as yet unknown. The distinctions between different uses may become increasingly blurred with single buildings fulfilling a range of functions – like student accommodation, hotel use and co-working space all over the course of a single year, for example. Complex streetscapes and flexible buildings will need a new approach to investment. Capital will need to be deployed with an eye on whole place incomes rather than single use, stand-alone buildings.