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Great cities after the pandemic

The model of concentrating money and talent, business and culture in a few great cities has just hit the brick wall of the pandemic policies. What will the future hold for mega-cities?

The model of concentrating money and talent, business and culture in a few great cities has just hit the brick wall of the pandemic policies. What will the future hold for mega-cities?

by
Charles Stanley

in Features Fiduciary news

20.07.2020

There are three great cities in Europe that combine large populations with important financial markets, big business districts, central government institutions and important cultural assets. Paris and London are much larger than other western European cities. The third is Moscow in the east, where prosperity was damaged in the second half of the twentieth century by the communist rule.

New York is the economic powerhouse of east coast USA, with a large population and important cultural centre. Los Angeles in the west offers living space for the digital revolutionaries and for many modern media. Both these popular US cities lack the institutions of central government but make up for it as tourist meccas and business centres.

Tourist magnets

All these five cities have iconic buildings and places that attract many visitors, from the heart pulling evocations of the Statue of Liberty and the excitement of the Hollywood sign on the hillside, to the Tower of London and the Louvre Gallery in Paris, as well as the Kremlin in Moscow. In Asia, there are the two very successful city-states of the last half-century, Singapore and Hong Kong, that have made a great living out of trading and attracting investment and talent. Japan sports the colossus of greater Tokyo with large markets and an imperial palace at its heart. Shanghai offers a Chinese vision of a fast-growing commercial capital to rival New York in a very different legal and political framework.

Most of the huge cities of the world are in the emerging market and middle-income countries – including Delhi and Mumbai, Rio and Lagos, Istanbul and Cairo. Today I want to concentrate on the great advanced cities of the world, that have so far proved to be centres of higher income, higher value added and of faster and wider development of new business than the countries and areas that surround them.

So successful have London, New York, Los Angeles, Hong Kong and Paris proved that they act as a blueprint or guide to many developing countries, who see the way to greater prosperity lies with fast rates of urbanisation. People, talent, business ideas and money pour into these vibrant centres. It forces property values up and property is built ever higher. It forces the government to spend fortunes on services and mass transit systems to sustain such a density of population. They have much greater populations at day than night, drawing in commuters and shoppers from miles around. They stage many of the world's big events from climate conferences to the Olympic games, from the Paris opera to Wimbledon tennis. Things happen which generate more demand for high-class hotels and restaurants. Large airports are needed to transfer the visitors.

Times are changing

This model of concentrating money and talent, business and culture in a few great cities has just hit the brick wall of the pandemic policies. Suddenly these most profitable and highest-earning parts of the world have taken some of the biggest hits to prosperity. The rich and famous cannot jet in or out or travel less from choice. Office workers stay away from centres. Some residents flee the pandemic cities to the countryside beyond to use their second homes or rejoin their wider families in greater suburban or rural safety. The restaurants are suddenly empty or underused, the hotels have many empty rooms and the jets are largely silent.

Maybe this will be a temporary halt to the ever-upwards progress of the great cities. Once more controls are relaxed there may well be more people who want to venture to see the sights, hear the music, enjoy the restaurants and clubs. Yet there is a doubt about what a new great city in an advanced country will look like after the pandemic ends. Maybe there will be fewer commuters and less lunchtime and early-evening trade as a result. Maybe more people will shop online and not pay the money to travel into the large city. Maybe the seemingly ceaseless demand for new office space will wane.

The past offers different guides. Had Charles Stanley been in business in 1665 plague-torn London the Strategist might have warned in that class-ridden world that most of the people of wealth and quality were leaving. It would mean reduced turnover and more bankruptcies. The death of between 15% and one-fifth of the inhabitants was a cruel blow. When in 1666 news reached him of the great fire demolishing the very properties the businesses struggling to recover from the plague, he might have been tempted to send a bearish commentary to the local printer. Had he been wise, he would have forecast an amazing rebuilding and resurgence in a plague free city.

In 1989 Tokyo was the leading city of a thrusting Japan pushing to topple the US as the most dynamic world economy. Property values were sky-high. Tokyo mania had outrun reality. A long collapse in property and share prices set in.

What now?

So, which is closer to the situation today in great cities? It looks like a bit of both. There could well be a period of lower asset prices and reduced activity, which are costly and turbulent sort out. Taking a longer-term view, people will likely return to the architectural and cultural glories of these iconic cities. It is difficult to see a fully recovered world economy without great cities playing an important part in income and wealth generation again.

What is easier to predict is Shanghai will seek to gradually reduce the importance of Hong Kong taking over more and more of the market business that Hong Kong had made its own. Hong Kong has structural and political problems that will do damage unrelated to the virus. It seems likely there will be some adjustment of relative values of property, as many cities have got overextended in the run-up to the pandemic. Big cities are not finished, but they are in for some big changes.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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