Real estate owners get rich while they sleep

John Stuart Mill

New York. London. Hong Kong. Singapore. Large global cities are facing a crisis like no other in their history due to the COVID 19 pandemic. And it is because the same characteristics that for a long time had been competitive advantages for these large cities are now becoming heavy disadvantages.

Large global cities are characterized by having a high population density, which under current conditions seems to become a risk factor for the transmission of the virus. In normal times, this high population density was one of the reasons why these cities became attractive places to concentrate large amounts of talent from other regions, which in turn generated a virtuous circle of growth in economic activity due to demand of products and services, as well as better opportunities for cultural and recreational activities (restaurants, theaters, gyms, supermarkets, museums, concerts, etc.). Today, for reasons of perception rather than reality, the preference is to escape away from densely populated urban centers. An interesting piece of information that we found in the preparation of this article: There is not yet an analysis that shows a firm correlation between population density and mortality from COVID-19. In fact, as can be seen in this study, the correlation between both factors is quite weak.

The other factor that works against large cities today is the improvement of technology for videoconferencing. Unlike just a few years ago, today any employee or executive can participate in virtual meetings from anywhere with low-cost, highly efficient technology. The trend towards remote work may be a determining factor for the future of office space, and therefore, of the cities where these offices are mostly concentrated. This also creates opportunities for companies to achieve interesting savings, transferring at least part of those costs (depreciation, electricity, water, maintenance) to the employee. Nobody knows if the trend of remote work will be something that will hold in the long term, but at least for some types of work (especially those related to information management), the potential is very attractive.

Throughout their history, cities like New York, London or Singapore have evolved from being centers of maritime trade to manufacturing centers and recently to financial centers. COVID-19 will be an accelerator of that evolution. The question is how long it will take us to return to normal. Real estate prices in many of the big cities are falling rapidly. According to, apartment rental prices in cities like New York or San Francisco have fallen between 20 and 25% in the last three months. With an unemployment rate of around 8% in the United States, many families will not be able to pay their rent on time.

One thing is for sure: Big global cities will overcome this crisis. Obviously, neither New York nor London nor Tokyo disappeared after the Spanish influenza pandemic of 1918. Nor will they disappear after the COVID 19 pandemic. I am sure that these large cities will reinvent themselves and regain their dynamism and great appeal, albeit in a different shape. In that process, countless businesses such as restaurants, shops or theaters will disappear. Many companies will leave their offices in Manhattan, Roppongi or Canary Wharf to move to smaller cities, with more decentralized teams but highly connected by technology. Even the financial sector could go through a radical transformation. Perhaps in twenty years, Wall Street will no longer be home to the world’s largest financial firms, but will host another industry such as artificial intelligence or cybersecurity. A great recession is approaching in the real estate sector at a global level, a recession that will cause important changes in the face of large global cities, and we will have to be vigilant to take advantage of the opportunities that this situation generates.

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