Global Resiliency: Latest Buzz Word or a Phrase to Pay Attention To?

 

Grosvenor Group released their three year study on “Resilient Cities” across the Globe. REIN weighs in on this report with comments from , Senior Analyst, and Melanie Reuter, Director of Research.

 

Melanie Reuter: Grosvenor spent three years examining cities across the globe to determine which cities are the best and worst when it comes to adapting to global change in all of its forms. This includes Acts of God such as tsunamis and tornados, as well as demographic changes, and social, economic and environmental factors that may impact on the way cities operate. Canada took three top spots across the globe with Toronto, Vancouver and Calgary ranking as number 1, 2 & 3 most resilient cities. This was followed by Chicago in number 4 and Pittsburgh in number 5 spot.

 

: When you look at the metrics, Grosvenor was measuring ‘Resiliency”. The report does NOT say it is the best place in the world to invest for highest Return on Investment, it is saying that these three Canadian markets are the most resilient in the world. So when bad things happen (such as the Great Recession that hit the world in 2008) these three Canadian cities are poised to weather the storm better than any other cities in their survey. I am seeing that many media reports on are misinterpreting these data as saying ‘Best place in the world” vs ‘Most Resilient.’

 

MR: According to the study, “Canada, as a whole, is doing exceptionally well in developing resiliency. The top three most-resilient cities in Grosvenor’s Resiliency index are Toronto, Vancouver and Calgary. For investors in property and real estate, it makes Canada a very sound long-term investment.” This is absolutely great news but something real estate investors should take with a grain of salt. As Don said, it is not a measure of the best cities in which to invest. For local investors with their eye on the prize, most units in Vancouver and Toronto don’t cashflow, but for a foreigner investor looking to park cash in a safe vehicle, Canadian real estate is attractive. Essentially what I glean from this report is that if you invest in Vancouver and there is an earthquake, the City has done a great job in mitigating potential impact on your investment.

 

DC: Reports such as these will continue to drive capital our way, in spite of the change in the immigration rules regarding investors. World capital is always looking for a safe and secure haven that can weather storms, and this proves, once again, that Canada is that place. This includes both private funds as well as sovereign wealth funds.

 

MR: The study looked at 50 cities. It is important for investors to know that these top cities have adapted to and continue to address important areas such as: environmental degradation, resource security, social change, infrastructure resilience, and climate change. This means that as more people move into the area, the cities can manage the growth and address sewer upgrades, road creation and maintenance, public transit improvements, build more hospitals and schools and provide more emergency service. It also means for coastal cities such as Vancouver, City government is focusing on rising sea levels and earthquake target hardening through new building code and other policy.

 

DC: Toronto earned its spot at number one on the list. It is located in an economically stable country and is the largest city in that country. Therefore with a country as economically resilient as Canada, it leads that the largest cities will be the most resilient. Remember, this is for LONG term.

 

MR: The least resilient cities tended to be in the emerging markets. As the global trends are indicating a shift of population growth to the east, I think we will see those countries in the E7 moving up the list as they create more wealth as a result of GDP growth. For more info on these global trends and their effect on real estate investing see: Global Megatrends.

 

DC: We should not misinterpret this report, but we MUST pay very close attention to it and its source. This is a company that took three years to study and analyze markets across the world. This is a company that has been in the property business for more than 100years. They know their metrics, they know the market landscape, and they know what is most important for long term and that is resiliency.

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