City rents in a global context
||Richard Barkham and Maurizio Grilli
||City rents in a global context
||19th Annual European Real Estate Society Conference in Edinburgh, Scotland
||There is a great deal of variation in the ‘prime’ or ‘Grade A’ rents achieved in different cities across the world. The level of economic development, as proxied by GDP or GDP per capita is an important explanator, but it is by no means the only one. Many cities in advanced nations have relatively low rents given their size and economic output because of poor infrastructure and low standards of liveability. The data now collected and published by international real estate consultants on prime rents at the city level has begun to make it possible to describe and analyse the main reasons why rents vary between cities. This study looks at rents in the retail, office and residential sectors and assesses the relative importance of factors such as GDP, population, population density, liveability and connectivity in determining city rents. Liveability is defined in terms of the availability of educational and medical facilities, good policing, good governance and other public goods. Connectivity is measured by the presence of multinational service sector HQs. The key drivers of global rents are identified. They are not the same for offices, retail and residential property. On the presumption that high rents are somewhat related to economic and social success, which is admittedly controversial, this paper is able to make some suggestions as to how cities can improve themselves.
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