Capital City. Forward thinking for a global city

LONDON: CITY OF REINVENTION?PROFESSOR NEIL GIBSON

SPECIAL ADVISOR TO OXFORD ECONOMICS

LONDON MARKETS CUSHMAN & WAKEFIELD 2

UNDERWAY – BUT FAR FROM RAPID

WORLD TRADE % GROWTH (YEAR ON YEAR), 1990 - 2022 UK GDP % GROWTH (YEAR ON YEAR), 1990 - 2022

GDP-0.3% IN Q4 2012

SOURCE: OXFORD ECONOMICS

-10

-5

0

5

10

15

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

(%)

Forecast

-6

-4

-2

0

2

4

6

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

(%)

Forecast


LITTLE IMPETUS HEADING INTO 2013

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1997-2007

2010 2011 2012 2013 2014

Consumer spending InvestmentGovt. consumption InventoriesNet trade

%pts

UK: CONTRIBUTIONS TO GDP GROWTH



BUT LABOUR MARKET RECOVERING WELL

TOTAL EMPLOYMENT, UK, 1998 - 2022 TOTAL GVA, UK, 1998 - 2022

2 MILLION ADDITIONAL JOBS FORECAST BETWEEN 2012 - 2022

£396BN ADDITIONAL GVA FORECAST BETWEEN 2012 - 2022

28000

29000

30000

31000

32000

33000

34000

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(000

s)

Forecast

Loss of 698 000 jobs

900000

1000000

1100000

1200000

1300000

1400000

1500000

1600000

1700000

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(£m

2009

price

s)

Forecast

Loss of £62bn



EXPLAINING THE JOBS NO GROWTH PUZZLE

-1

0

1

2

3

4

5

1975 1980 1985 1990 1995 2000 2005 2010-3.25

-1.25

0.75

2.75

GDP growth, % year

Source : Haver Analytics / Oxford Economics

GDP growth(LHS)

Employment growth(RHS)

Employment growth, % year

75

80

85

90

95

100

105

110

115

120

1995 1997 1999 2001 2003 2005 2007 2009 2011

2009=100

Source : Haver Analytics

Actual

Pre-recession trend

14%

EXPLAINING THE PARADOX• Recession not as severe as recorded?• Cash rich corporates hoarding labour• Greater part time working / temporary contracts• Increased self employment levels

• Possibly financial sector effects• Earnings growth low – making labour ‘cheaper’• Low interest rates have made money cheaper

(though not for all)

UK: GDP & EMPLOYMENT GROWTH (5YR MA) UK: OUTPUT PER WORKER


INFLATION REMAINED STUBBORNLY HIGH IN 2012H2

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010 2011 2012

% year

Transport

Food

Housing costs

Other

`

UK: CONTRIBUTIONS TO CPI INFLATION

SOURCE: OXFORD ECONOMICS / HAVER ANALYTICS NOTE. OTHER IS MADE UP OF: ALCOHOLIC BEVERAGES, TOBACCO & NARCOTICS, CLOTHING AND FOOTWEAR, FURNITURE, HOUSEHOLD EQUIPMENT , HEALTH, COMMUNICATION, RECREATION AND CULTURE, EDUCATION, HOTELS, CAFES & RESTAURANTS, MISCELLANEOUS GOODS AND SERVICES


BUT SET TO MODERATE AND REAL INCOMES SHOULD START TO RISE

-5-4-3-2-101234567

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% year

CPI inflation

Average earnings Forecast

UK: EARNINGS & INFLATION


THE LONDON OUTLOOK


LONDON LEADING THE UK

AVERAGE % GVA GROWTH, UK REGIONS, 2013 - 2018

Source: Oxford Economics

London is expected to account for

21.8% of total UK GDP in 2013

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Grea

ter L

ondo

n

Sout

h Eas

t

Easte

rn UK

Sout

h Wes

t

North

Wes

t

Wes

t Midl

ands

East

Midl

ands

York

shire

&

Humb

er

Scot

land

Wale

s

North

ern I

relan

d

North

East

(%)

GVA

Employment



LONDON JOBS OUTLOOK VERY PROMISING

TOTAL EMPLOYMENT, LONDON, 1998 - 2022

329 000 ADDITIONAL JOBS FORECAST IN LONDON BETWEEN 2013 - 2018

EMPLOYMENT GROWTH, UK REGIONS, 2003 - 2018

LONDON IS EXPECTED TO ACCOUNT FOR 16% OF TOTAL UK EMPLOYMENT IN 2013

4000

4250

4500

4750

5000

5250

5500

5750

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(000

s)

Forecast

Loss of 115 000 jobs

(000s) % (000s) % (000s) %South East 150 3.5 154 3.5 235 5.1Greater London 293 6.3 150 3.0 329 6.5Eastern 162 5.9 -17 -0.6 142 5.0South West 145 5.6 -25 -0.9 95 3.5West Midlands 51 1.9 -34 -1.3 75 2.8East Midlands 128 6.2 27 1.2 68 3.1Yorkshire & Humber 102 4.1 -35 -1.4 70 2.8North West 81 2.4 -74 -2.2 105 3.1North East 63 5.7 -72 -6.1 15 1.4Wales 61 4.6 -11 -0.8 22 1.6Scotland 153 5.9 -104 -3.8 66 2.5Northern Ireland 63 7.8 -65 -7.5 15 1.9UK 1450 4.7 -106 -0.3 1237 3.9

2003 - 2008 2008 - 2013 2013 - 2018

SOURCE: OXFORD ECONOMICS NOTE: TOP 2 REGIONS SHADED IN YELLOW AND BOTTOM 2 REGIONS SHADED IN PINK


BUT UNEMPLOYMENT SET TO FALL VERY SLOWLY

UNEMPLOYMENT, LONDON, 1998 - 2022 UNEMPLOYMENT, UK REGIONS, 2003 - 2018

UNEMPLOYMENT WILL FALL BY 27 800 BETWEEN 2013 -2018

100

120

140

160

180

200

220

240

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(000

s)

Forecast

Unemployed increased by 90 000 people

(000s) pp change (000s) pp change (000s) pp changeSouth East 1 0.0 70 1.4 -19 -0.5Greater London -33 -0.8 87 1.5 -28 -0.7Eastern 6 0.1 55 1.8 -13 -0.6South West -1 -0.1 42 1.5 1 -0.1West Midlands 11 0.3 59 2.0 -14 -0.6East Midlands 3 0.0 49 2.0 -10 -0.5Yorkshire & Humber 4 0.0 77 2.8 -7 -0.4North West 8 0.1 82 2.3 -22 -0.7North East 1 -0.2 40 3.5 -4 -0.4Wales 1 -0.1 35 2.3 -6 -0.5Scotland -21 -0.9 62 2.3 -15 -0.6Northern Ireland -7 -1.0 37 4.4 -2 -0.3UK -27 -0.2 694 2.0 -140 -0.6

2013 - 20182003 - 2008 2008 - 2013

LONDON IS EXPECTED TO ACCOUNT FOR 14% OF TOTAL UK UNEMPLOYMENT IN 2013

SOURCE: OXFORD ECONOMICSNOTE: TOP 2 REGIONS SHADED IN YELLOW AND BOTTOM 2 REGIONS SHADED IN PINK


CLOSE TO A HALF A MILLION MORE RESIDENTS PROJECTED

NATURAL INCREASE AND MIGRATION, LONDON, 1998 - 2022POPULATION, UK REGIONS, 2013 - 2018

000s %South East 298 3.4Greater London 470 5.6Eastern 261 4.4South West 151 2.8West Midlands 148 2.6East Midlands 156 3.4Yorkshire & Humber 163 3.0North West 149 2.1North East 43 1.7Wales 61 2.0Scotland 92 1.7Northern Ireland 55 3.0UK 2047 3.2

2013 - 2018

-20

-10

0

10

20

30

40

50

60

70

80

90

100

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(000

s)

Natural Increase

Migration Forecast

SOURCE: OXFORD ECONOMICSNOTE: TOP 2 REGIONS SHADED IN YELLOW AND BOTTOM 2 REGIONS SHADED IN PINK


JOB GROWTH ACROSS LONDON – BUT PACE VARIES

% AVG. EMPLOYMENT GROWTH, LONDON LAs, 2013 - 2018

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Tower HamletsSouthwark

IslingtonCity of London

HounslowWestminster

Hammersmith and FulhamCamdenMerton

Richmond upon ThamesLondon Total

HackneyWandsworth

HillingdonBarnet

Kingston upon ThamesNewhamLambeth

Kensington and ChelseaGreenwich

EalingBromley

BexleySutton

HaringeyEnfield

HaveringBarking and Dagenham

RedbridgeBrent

HarrowLewisham

Waltham ForestCroydon

% avg growth



RUNNING A SURPLUS (UNLIKE THE REST OF THE UK)

FISCAL BALANCE, LONDON AND REST OF UK, 2000 - 2018

-150

-130

-110

-90

-70

-50

-30

-10

10

30

50

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2017

/18

£bn

London

Rest of UK

Forecast

SOURCE: OXFORD ECONOMICSNOTE: ESTIMATES ARE A MIDPOINT MEASURE OF RESIDENT AND WORKPLACE GVA

WINNERS AND LOSERS – THE SECTORAL PICTURE


SERVICE SECTOR DOMINATING THE JOB MARKET

SECTORAL EMPLOYMENT GROWTH, LONDON, 2003 - 2018

A MARKED SHIFT

A FORECAST RISK?

SCOPE FOR BETTER?

2003 - 2008 2008 - 2013 2013 - 2018Agriculture, forestry and fishing 0 -1 0Mining and quarrying 0 -1 -1Manufacturing -39 -22 -9Electricity, gas, steam 0 0 -1Water supply; sewerage 2 4 -1Construction 53 -4 28Wholesale and retail -12 -41 47Transportation and storage 12 -12 21Accommodation and food 15 35 34Information and comms 29 33 32Financial and insurance activ. 9 4 2Real estate activ. 22 4 13Professional, scientific and technical 105 53 90Admin and support 41 27 71Public admin and defence -12 -13 -26Education 21 34 -12Human health and social work 23 36 -5Arts, entertainment and rec. 19 5 25Other service activ. 4 9 19Total 293 150 329

(000s)

SOURCE: OXFORD ECONOMICSNOTE: INCLUDES SELF EMPLOYMENT, TOP 2 PERFORMING SECTORS SHADED IN YELLOW AND LOWEST PERFORMING SECTORS SHADED IN PINK


LAST TEN YEARS HAS EVIDENCED LONDON’S DYNAMISM

TOP 10 2 DIGIT GROWTH SECTORS, LONDON, 2002 - 2012

SOURCE: OXFORD ECONOMICSNOTE: GREEN SHADING DENOTES THOSE SECTORS IN THE PUBLIC SECTOR

TOP 10 2 DIGIT SIC SPECIALISMS, LONDON, 2012

SOURCE: OXFORD ECONOMICSNOTE: LQ ANALYSIS ONLY ACCOUNTS FOR SECTORS WITH A MINIMUM OF 1000 EMPLOYEES

000s %Food and beverage 57 23.5Human health 55 22.8Head offices 54 55.9Head offices of auxiliary finance services 53 49.0Computer programming 47 44.6Social work 30 29.3Real estate 26 39.3Legal and accounting 25 13.8Security and investigation 19 47.1Advertising and market research 19 29.8

Employment growth LQsProgramming and broadcasting 4.1Motion picture, video and tv 3.7Air transport 3.2Advertising and market research 2.4Publishing 2.4Head offices of auxiliary finance services 2.4Creative, arts and entertainment 2.3Financial services 2.1Information services 2.0Remediation activities 1.8


A KEY DESTINATION FOR A DIVERSE GRADUATE POOL

% OF GRADUATES FOR WHOM ‘FIRST EMPLOYMENT DESTINATION’ IS LONDON, 2007 - 2009

SOURCE: HESANOTE. HESA FIRST DESTINATIONS SHOWING PROPORTION WHO HAVE TAKEN THEIR FIRST JOB IN LONDON WITHIN 6 MONTHS OF GRADUATING. THIS DATA DOES NOT INCLUDE THOSE UNEMPLOYED, TRAVELLING OR EMBARKING ON FURTHER STUDY. TOP 2 KEY SUBJECTS ARE SHADED IN YELLOW AND BOTTOM 2 KEY SUBJECTS ARE SHADED IN PINK

Medicine & dentistry 15.3 11.6Subjects allied to medicine 11.3 11.6Biological sciences 10.3 10.5Agri & related subjects 6.5 3.3Physical sciences 11.1 5.3Mathematical sciences 18.9 14.1Computer science 18.5 14.0Engineering & technology 13.0 8.0Architecture, building & planning 21.4 14.9Social studies 21.1 14.3Law 12.0 11.4Business & admin studies 20.9 16.4Languages 17.2 12.4Historical & philosophical studies 15.1 12.0Education 5.5 13.7Combined 10.7 8.0% total working in London 14.4 12.6

Russell Group Other


TMT SECTOR PROJECTED TO CONTINUE RECENT GROWTH

TMT SECTOR & TOTAL EMPLOYMENT, LONDON, 1998 - 2022The TMT sector has become an important part of the London economy.

The sector accounts for more than 384,000 jobs across London, more people are employed in the sector today than at the height of the dot-com boom.

TMT is a larger employer in the capital than financial services or hotels & catering, and is one of the few sectors to have achieved strong growth since London’s economy emerged from the 2009 recession.

3500

4000

4500

5000

5500

6000

6500

7000

250

300

350

400

450

500

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(000

s)

(000

s)

TMT (LHS)

London total employment (RHS)

Forecast

SOURCE: OXFORD ECONOMICSNOTE. TMT SECTOR: PUBLISHING, MOTION PICTURE, VIDEO / TV, PROGRAMMING, BROADCASTING, TELECOMMS, COMPUTER PROGRAMMING, INFORMATION SERVICES

DRIVERS AND RISKS – IDENTIFYING THE CRITICAL FACTORS


KEY DRIVERS OF SUCCESS

• World trade remains crucial – outlook strong, but not without risks

• Skills and attractiveness – remaining a draw for people (not just the ‘suits’)

• More capacity coming on-stream will be critical as will improved access and travel times

• Dynamism is key – changing what the economy does. People key to this – but regulation / planning all play a part

• Image and reputation – still matters and remains strong

• Security – of place / technology / legal protection


KEY RISKS

• Competition from new global centres

• Connectivity, esp. to new markets (air access)

• Rising cost base creating social disharmony and diverting inward investment of people and capital

• Out-workings of the global financial crisis may yet take a larger toll

• Regulation and uncertainty over European relationship

• Olympic legacy – ensuring the story continues and does not become a story of missed opportunity (no sign as yet of this)


SUMMARY

• The London economy has proven itself time and time again as being dynamic, decisive and successful

• It continues to do so with the labour market back above pre recession peaks andnew specialisms and sectors emerging

• Key to success are the organisations and, crucially, the people

• Its draw as a global city to visit, work in, trade with, have a base in remains strong

• But it is not infallible – complacency is a risk. Policy and legal environment must remain supportive of dynamism. Access and congestion remain important factors and cognisance of competition important to trumpet London's’ key strengths and identify comparative (and potential) weaknesses

LONDON: A MELTING POT FOR GLOBAL CAPITALANDREW THOMAS

PARTNER, LONDON INVESTMENT

CUSHMAN & WAKEFIELD


TOP 10 CITIES FOR TOTAL INVESTMENT IN 2012 (EX. DEV.)

$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00

Seattle

Chicago

Washington

Paris

Hong Kong

San Fransisco

Tokyo

LA

London

NYC

US $ Billion

SOURCE: RCA/CUSHMAN & WAKEFIELD


TOP 10 CITIES FOR FOREIGN INVESMENT IN 2012 (EX. DEV.)

$0.00 $5.00 $10.00 $15.00 $20.00 $25.00

Warsaw

Hong Kong

Frankfurt

Berlin

SF Metro

Sydney

Tokyo

NYC Metro

Paris

London Metro

US $ Billion



CROSS-BORDER INVESTMENT VOLUMES (ALL SECTORS)

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00U

S $

Bill

ion

London

Paris

New York

Tokyo

Sydney



YIELD LEVELS

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Mo

nth

En

d R

ate

Swap - 10 year

3 month interbank

West End Office

City office



REQUIRED RETURNS BY OFFICE MARKET

0%

1%

2%

3%

4%

5%

6%

Hong Kong Munich Singapore London Zurich New York Tokyo Stockholm Toronto Paris

To

tal R

etu

rn R

equ

ired

by

Yea

r

TOP GLOBAL OFFICE MARKETS

Required Return

Net yield



EXCHANGE RATE MOVEMENTS

100

120

140

160

180

200

220

240

1.0

1.2

1.4

1.6

1.8

2.0

Yen

per

GB

P

US

D/E

uro

per

GB

P

CURRENCY - RATES PER POUND

USD

Euro

Yen



PRIME OFFICE RENTAL GROWTH IN LONDON

$0

$20

$40

$60

$80

$100

$120

$140PRIME HEADLINE RENTS - £/SQFT/YR

City

West End



SOVEREIGN WEALTH FUNDSTOP 20 GLOBAL SOVEREIGN WEALTH FUNDS

$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00

Abu Dhabi - Mubadala Development CompanySouth Korea - Korea Investment Corporation

Algeria - Revenue Regulation FundKazakhstan - Kazakhstan National Fund

Libya - Libyan Investment AuthorityAbu Dhabi - International Petroleum Investment …

Dubai - Investment Corporation of DubaiAustralia - Australian Future Fund

Qatar - Qatar Investment AuthorityChina - National Social Security Fund

Russia - National Welfare FundSingapore - Temasek Holdings

Singapore - Government of Singapore Investment …Kuwait - Kuwait Investment Authority

China - Hong Kong Monetary AuthorityChina - China Investment CorporationSaudi Arabia - SAMA Foreign Holdings

China - SAFE Investment CompanyAbu Dhabi - Abu Dhabi Investment Authority

Norway - Government Pension Fund

Total assets US $ Billion, January 2013

SOURCE: SOVEREIGN WEALTH FUND INSTITUTE


THE NEW WORLD PERSPECTIVE


THE ‘NEW’ LONDON

GREENWICH PENINSULA EARLS COURT

NINE ELMS


SOME FINAL THOUGHTS...

London has the trick of making its past, its long indelible past, always a part of its present. And for that reason it will always have meaning for the future.

Anna Quindlen, American Journalist

I want you to know that I have nothing against Orlando, though you are, of course, far more likely to get shot or robbed there than in London.

Boris Johnson, Mayor of London

“ ““ “

Capital City. Forward thinking for a global city

Real Estate

Transcript of Capital City. Forward thinking for a global city