On 14th November we published our Prepped Cities Index report, an in-depth look at how ready the biggest cities in Asia Pacific are to meet the challenges of an uncertain future. Leading the creation of the report was James Shepherd, Managing Director, Research for Cushman & Wakefield in Greater China, and Dominic Brown, the Head of Research for Cushman & Wakefield across Asia Pacific. We sat down with James and Dominic to discuss the details of the report, and how business leaders can turn the findings into critical real estate decisions.
Why is a city’s level of preparedness critical for investors and occupiers alike to consider?
Preparedness at a city level is an essential consideration for investors and occupiers alike when assembling and managing a real estate portfolio. In simple terms if you are aware of risks and prepared for uncertainty a competitive advantage can be secured by actively managing exposure. In financial terms it’s about managing risk adjusted returns – the Prepped Cities index offers insights into some potential risks. For occupiers this also extends to “duty of care” for their staff.
In the report you highlight eight key factors that define how prepared a city is. Why did you select these indicators?
In the report we focus on two broad categories. The Governance and Environment category covers 5 key indicators such as Cybersecurity, Environmental Susceptibility and Governance. In the Built Environment indicators we look at factors directly related to commercial real estate. We believe the categories selected have the greatest relevance to the commercial real estate sector when considering preparedness. Further indicators could be included if desired, however we have focussed on the core issues.
Are there specific categories that real estate professionals should pay close attention to over others?
The flexibility of the analysis allows us to identify the greatest areas of risk at the city level. Identifying each city’s areas of weakness allows stakeholders to construct targeted programs of asset management in each city. Of course, real estate professionals have most control over factors at the building level, though they need to be cognizant of city and national level factors in order to manage their exposure.
Preparedness is not just the reserve of rich, well-established cities. Which emerging market urban centre surprised you with how well it performed in the rankings?
In general, emerging cities performed well across the built environment as they have a healthy pipeline of new, high-quality stock coming to the market. This reflects their rapid growth over the recent years. Bangkok in particular performed particularly well in this area, ranking amongst the top cities. Overall Kuala Lumpur performed particularly well, coming in at 8th with robust performance on Governance and Environment indicators supporting a good showing in the built environment.
Singapore topped the rankings this year. What can other APAC regional cities learn from the way the city state goes about establishing its preparedness?
Whilst Singapore topped the overall rankings, there are many aspects across all cities where lessons can be learned. To do well in the Prepped City Index all round performance is essential as evidenced by Singapore’s top ranking. In particular the city states strong and stable government helps enact policy such as the recent focus on tackling cyber security. Some cities also have some natural advantages, such as Singapore’s comparatively low environmental susceptibility.
How can public and private sector work together to improve the preparedness of the city in which they are based?
Collaboration between the private and public sector is essential for a city to improve preparedness. Our index examines indicators at the national, city and building level – central and local governments therefore need to collaborate as do private real estate stakeholders. Looking at the real estate market more widely, a well-prepared city is likely to attract proportionately more investment and occupier activity (other factors being equal), thereby lifting the profile of the city and boost its economic performance.
How can the insights in the report help CRE professionals design an “intelligent portfolio”?
Intelligent Portfolios are those that go beyond just traditional real estate indicators such as rents or vacancy. The results of the Prepped cities index can be used as an additional level of insight. Other factors could relate to the labour market, tax regime, market size and the level of competitor activity.
Finally, looking forward, are there specific cities that you expect to see climb the rankings in the coming years?
As emerging markets continue to mature, they are likely to have a stronger showing in Governance and Environmental factors and offer a greater challenge to the higher ranked cities. Mainland Chinese cities may improve in the future with increased institutional ownership and in the event Cyber Security can be improved. If Seoul and Hong Kong can address some issues in sustainability and obsolescence they too should be able to improve their position.
Click here to download The Prepped Cities Index report and find out how your city ranked.
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