London tops NYC has the center for world’s priciest real estate, according to a recent study by CB Richard Ellis Hamptons International. The highest-end London properties, according to the study, go for as much as $5,860 per square foot compared to $5,276
per square foot for similar NYC properties. On average, central London properties cost around $2,300 a square foot, compared with $1,900 in NYC, the study reports.
Driving this, the report finds, is demand for space and the appreciating pound. According to a related story in the San Jose Mercury News, as British sterling approaches “the $2 mark for the first time since
1992, such exorbitant property prices have kept many an American
expatriate at bay. “If we were to buy in London, we would lose half our down payment
money with the current exchange rate,” said Erin Maury, an American
who rents a home in London. “Unfortunately, at this rate — and with
prices so high — there is no way we can afford to purchase a home
here.”
But I suspect there may be more fundamental forces at play. In Flight, I argued that America’s creeping anti-immigration posture and general retreat from openness was nearing a tipping point. The argument was not that Americans would leave the US, but rather that, at the margin, foreign talent might redirect toward other countries and city-regions – yes, like Britain and London – that were investing in creativity and developing a more open and welcoming posture. I pointed to several American scientists as well cultural figures who had relocated to England. And I further suggested that when such tipping points are reached the shift can and does occur very quickly. Consider, for example, the mass migration of European scientific, artistic and entrepreneurial talent which propelled NYC ahead of its once dominant European counterparts including London during the early-mid 20th century.
Could it be that London’s rise reflects such a tipping point in the location preferences of top global talent? NYC retains many assets and continues to attract a huge number of immigrants. But London is clearly gaining ground. Has the playing field shifted in ways that grant London significant competitive advantage?
Add to this the effects of rampant globalization which changes the equation in potentially powerful ways.
World-city experts typically name four global mega-cities – London,
Paris, NYC, Tokyo. But what if globalization and especially open talent
flows change the terms of this competition? We can already see results
of growing competition in how regional centers like Chicago or
Washington DC are luring economic activity and talent away from other
smaller cities. And there is the increasing specialization of economic
activity in cities – innovation in Silicon Valley, film in Hollywood,
music in Nashville. Could it be that globalization will eradicate
national and regional urban-systems leaving in their place a single
global system with a single dominant global city? Far-fetched? Perhaps. But the computer models we’ve built with Robert Axtell suggest that is
exactly the case. Gradually, they suggest, an evolution to a single
global city-system with one dominant mega-city.
Could it be that it’s precisely this growing competition that is motivating Mayor Michael Bloomberg’s
bold moves to remake NYC’s education system and dramatically improve
its quality of place? Hmmmmm…. what ever happened with that bid for the
Olympics…?
Your thoughts?
December 30th, 2006 at 5:36 pm
So, when did London and New York surpass Tokyo? I know real estate in Japan went through a long decline, but that bottomed out last year, and particularly in Tokyo has been rising again. Is this more an artifact of the Japanese yen being held down while the British pound is surging? Although Tokyo real estate came down a long way, it is still very expensive, and it should be remembered that around 1991 the emperor’s palace grounds were reputedly worth more than the entire state of California, and the metro area of Tokyo was worth more than the UK, France, and Germany put together.
December 30th, 2006 at 5:42 pm
Maybe London simply has more constraints on residential construction (esp. vertically) than NYC? The London Tube is also notoriously overloaded, and the commuter train network has had much-publicized problems, further driving people into the core – as opposed to NYC’s still functioning far flung rail network, making it still reasonable to live in Connecticut or NJ or Long Island and commute to Manhattan. Both of these features help ease NYC’s housing costs at least somewhat.
December 31st, 2006 at 7:04 pm
Barkley – Good point about Tokyo. It is unclear from the report if Tokyo (and other mega-cities) were included or if the comparison was just NY and London.
Tory – Your point about development constraints is right on, and echoes work by Ed Glaeser and Joseph Gyourko. It always amazes me how much space there is left to develop and “densify” in and around NYC. My wife and I were driving recently back from NYC to DC and I was again amazed at all the nearly vacant, undeveloped land along the NJ Turnpike right across the river from Manhattan.
January 3rd, 2007 at 5:08 pm
Florida has a good sense of the direction of talent flow, but the price of real estate is not a reliable indicator since so many economic factors, like appreciating currency and speculation, may drive it up in a short time.
Florida’s concern of the flight of foreign-born talent can be justified, but as a foreign-born myself, I would say the outflow trend is more or less exaggerated. In fact, Britain does a worse job than the US in global talent competition. A recent report suggests that around 5.5 million British nationals live overseas permanently (equivalent to 9.2 per cent of the UK’s population). it is likely that only the Indian and Chinese diasporas rival Britons living abroad. Australia, Spain, US and Canada are the top 4 destinations for Britons. The problem is, they don’t not only go for retirement, but also for jobs and quality of life. During the second half of the twentieth century, British emigrants became increasingly skilled. Two thirds of all Britons who leave the UK do so to seek employment abroad. However, Britain can still attract foreign talent from new members of EU and the common wealth countries like India and Pakistan.
The US is indeed losing some talent, but it still enjoys the “net talent surplus” (inflow minus outflow of talent). The huge intake of European talent in the early-mid 20th century was probably an unprecedented fortune for the US, because there were two world wars and the terrible prosecution of Jewish scientists. I don’t think any country can accept a large number of smart refugees today. As the American government relaxed its immigration policy in the past two years, both foreign students and H-1B workers come back. So I would say it’s too early to see the tipping point.
According to my personal experience, the best Chinese students in my generation go for the US and the second best ones go for Britain and other developed countries. The best Chinese students in Britain, two of them are my friends, work in HK and Singapore now after their graduation. I guess the trend in the coming 20 years will be that the best talent will still study in the US, but half of them will work elsewhere.