The Sydney Morning Herald recently reported that an oversupply of apartments has started to put downward pressure on rents and upward pressure on vacancy rates in the city. Here are a few excerpts from the article:
Sydney is in the grip of an apartment building boom, with 30,880 multi-unit dwellings built last year, a record for any Australian city. There were 16 multi-unit projects finished in the first three months of 2019, adding another 1948 units.
These numbers are flowing through Domain.com.au, where 17,500 units were listed for rent in June 2017, and ballooned to 32,680 listings in June 2019. The result has been landlords asking for $25 a week less median rent than last year.
Sydney-wide rental vacancy rates have almost doubled from 1.7 per cent 2017 to 3.2 per cent this year. But on the upper and lower north shore, in the hills district and Sydney CBD, apartments are sitting vacant at more than twice this rate, SQM data shows.
The narrative here is that you can build your way to lower rents. Make supply exceed demand, and this is what will happen. But in this case, something else has also impacted the demand curve: China. Beijing has made it harder to get money out of the country in recent years and their overall economy has slowed. China's economy is thought to be
The Sydney Morning Herald recently reported that an oversupply of apartments has started to put downward pressure on rents and upward pressure on vacancy rates in the city. Here are a few excerpts from the article:
Sydney is in the grip of an apartment building boom, with 30,880 multi-unit dwellings built last year, a record for any Australian city. There were 16 multi-unit projects finished in the first three months of 2019, adding another 1948 units.
These numbers are flowing through Domain.com.au, where 17,500 units were listed for rent in June 2017, and ballooned to 32,680 listings in June 2019. The result has been landlords asking for $25 a week less median rent than last year.
Sydney-wide rental vacancy rates have almost doubled from 1.7 per cent 2017 to 3.2 per cent this year. But on the upper and lower north shore, in the hills district and Sydney CBD, apartments are sitting vacant at more than twice this rate, SQM data shows.
The narrative here is that you can build your way to lower rents. Make supply exceed demand, and this is what will happen. But in this case, something else has also impacted the demand curve: China. Beijing has made it harder to get money out of the country in recent years and their overall economy has slowed. China's economy is thought to be
(which is when the country started official record keeping). The above article suggests that about 80% of new construction apartments in Sydney were sold to investors over the last few years. More than a few were probably Chinese. Though I have no idea if that is an accurate number. What is unclear, to me, is whether this doubling of rental listings over the last two years is a result of previously bought supply simply making its way through the system, or if
have encouraged more owners to put their units up for rent. Whatever the case may be, supply is up and apartment rents appear to be coming off slightly in Sydney.
Earlier in the week, my friend Rodney Wilts of Theia Partners sent me a JLL report called, World Cities: Mapping the Pathways to Success. I am admittedly only getting around to it now.
The report proposes a new typology of world cities that looks like this:
In Edward Glaeser’s book, Triumph of the City, he argues that the average temperature in January is the single best variable to predict which U.S. cities have grown the most over the last century. Indeed, from July 2015 to July 2016, 10 of the 15 fastest growing large metro areas in the U.S. were in the south. Follow the sun and sprawl.
Given this phenomenon, I thought it would be interesting to look at the world’s most influential cities (i.e. global cities) through this lens. Because let’s face it, New York and London aren’t all that warm in January.
Below are the top 25 global cities (taken from A.T. Kearney’s 2018 Global Cities Report), along with their average January temperature (taken from here). Note, there are two rankings. On the left is their global cities index. And on the right is their global cities outlook, which evaluates current potential. Cities that improved their economics & governance made the biggest leap on the right.
(which is when the country started official record keeping). The above article suggests that about 80% of new construction apartments in Sydney were sold to investors over the last few years. More than a few were probably Chinese. Though I have no idea if that is an accurate number. What is unclear, to me, is whether this doubling of rental listings over the last two years is a result of previously bought supply simply making its way through the system, or if
have encouraged more owners to put their units up for rent. Whatever the case may be, supply is up and apartment rents appear to be coming off slightly in Sydney.
Earlier in the week, my friend Rodney Wilts of Theia Partners sent me a JLL report called, World Cities: Mapping the Pathways to Success. I am admittedly only getting around to it now.
The report proposes a new typology of world cities that looks like this:
In Edward Glaeser’s book, Triumph of the City, he argues that the average temperature in January is the single best variable to predict which U.S. cities have grown the most over the last century. Indeed, from July 2015 to July 2016, 10 of the 15 fastest growing large metro areas in the U.S. were in the south. Follow the sun and sprawl.
Given this phenomenon, I thought it would be interesting to look at the world’s most influential cities (i.e. global cities) through this lens. Because let’s face it, New York and London aren’t all that warm in January.
Below are the top 25 global cities (taken from A.T. Kearney’s 2018 Global Cities Report), along with their average January temperature (taken from here). Note, there are two rankings. On the left is their global cities index. And on the right is their global cities outlook, which evaluates current potential. Cities that improved their economics & governance made the biggest leap on the right.
It is based on 10 overall categories of cities, grouped into 4 main buckets. The first bucket is “Established World Cities”, within which there is the “Big Seven”, and then the “Contenders.”
The Real Estate Highlights that accompany each category of city is a good place to start if you’re looking to do a quick scan of the report.
Here’s a taste:
One-quarter of all capital invested in commercial real estate globally currently lands in one of the “Big Seven” cities. And London and New York are easily at the top.
Cities that recently graduated from “New World City” status – namely Toronto, San Francisco, Sydney, and Amsterdam – are all struggling to address housing and infrastructure deficits.
“Lifestyle” cities – such as Vancouver, Auckland, and Oslo – are some of the most active investment markets. Biggest rental growth for prime offices (since 2000) in the “New World Cities” category.
First of all, it’s interesting to see San Francisco jump so significantly in their outlook ranking. This has everything to do with tech and innovation. It’s also important to note that a handful of the above cities are located in the southern hemisphere, so “average January temperature” doesn’t mean the same thing (probably should have normalized to their winter).
Montreal wins the award for the coldest city in this ranking. And there’s really only one city, Singapore, with a tropical climate. Though there are others, such as Hong Kong and Sydney, that would fall under subtropical. All of this isn’t enough for us to start inferring anything, but perhaps colder and more temperate climates aren’t such a bad thing for economic growth.
It is based on 10 overall categories of cities, grouped into 4 main buckets. The first bucket is “Established World Cities”, within which there is the “Big Seven”, and then the “Contenders.”
The Real Estate Highlights that accompany each category of city is a good place to start if you’re looking to do a quick scan of the report.
Here’s a taste:
One-quarter of all capital invested in commercial real estate globally currently lands in one of the “Big Seven” cities. And London and New York are easily at the top.
Cities that recently graduated from “New World City” status – namely Toronto, San Francisco, Sydney, and Amsterdam – are all struggling to address housing and infrastructure deficits.
“Lifestyle” cities – such as Vancouver, Auckland, and Oslo – are some of the most active investment markets. Biggest rental growth for prime offices (since 2000) in the “New World Cities” category.
First of all, it’s interesting to see San Francisco jump so significantly in their outlook ranking. This has everything to do with tech and innovation. It’s also important to note that a handful of the above cities are located in the southern hemisphere, so “average January temperature” doesn’t mean the same thing (probably should have normalized to their winter).
Montreal wins the award for the coldest city in this ranking. And there’s really only one city, Singapore, with a tropical climate. Though there are others, such as Hong Kong and Sydney, that would fall under subtropical. All of this isn’t enough for us to start inferring anything, but perhaps colder and more temperate climates aren’t such a bad thing for economic growth.
