Be afraid: Big foreign corporations are buying up our cities and stamping out our individuality. Or so warns Saskia Sassen in a piece ominously entitled, “Who owns our cities—and why this urban takeover should concern us all,” published in the Guardian Cities.
The harbinger of our doom, according to Sassen: large corporations are buying up our cities. Worldwide, such businesses bought something like a trillion dollars of real estate in the past year, up from about $600 billion the year before. Based on this single factoid, Sassen argues that that large corporations from countries all over the world own too much urban real estate, and that this ownership threatens the democratic rights and economic opportunities of ordinary city residents.
…large-scale corporate buying of urban space in its diverse instantiations introduces a de-urbanising dynamic. It is not adding to mixity and diversity. Instead it implants a whole new formation in our cities—in the shape of a tedious multiplication of high-rise luxury buildings.
Case in point: Brooklyn. Ground zero for global capital’s dispossession of the locally owned city is the Forest City Ratner Pacific Place (née Atlantic Yards) development, a mixed-use residential and office project built atop an old rail switching yard, and adjacent to the new Barclay Center (home of the Brooklyn Nets and New York Islanders). This $5 billion, 22 acre project includes 14 towers with more than 6,000 new homes, including 2,000 promised affordable apartments. Originally developed by New York-based Forest City, the firm recently sold a large stake in the project to Shanghai-based Greenland Holding Group Co.
There are plenty of aesthetic and public policy reasons to dislike Pacific Place/Atlantic Yards. It is yet another public subsidy for private sports franchises, and one can argue that the city should have gotten a better deal for the sizable tax breaks it offered the developer. But as big as this project is—and it is the biggest in the borough—it’s hardly indicative of what’s driving development here.
The implication is that large scale corporate ownership is somehow stifling the diversity and dynamism of the city. Far from being crowded out by big projects like Pacific Place, small scale businesses and entrepreneurs are thriving, and responsible for the real dynamism of the borough’s economy. Earlier this year, the Brooklyn Chamber of Commerce released its first economic report card. It found that between 2009 and 2014, some 9,600 net new businesses opened in Brooklyn, twice the rate of new business formation for the prior decade.In the past three years, the borough has added 5,500 net additional incorporated self-employed individuals, an increase of 19 percent and more than in the rest of New York City combined.
A big part of this story is how creative entrepreneurs have flocked to Brooklyn. According to the Center for an Urban Future, between 2003 and 2013, the number of creative businesses in the borough more than doubled. Brooklyn has also become a hotbed for small tech firms and startup activity as well. Most famously, Etsy.com, perhaps the perfect techno-corporate reflection of all things Brooklyn and hipsterish, links 1.5 million sellers of handmade crafts with more than 20 million registered buyers).
We’ve heard Sassen’s lament before: back in the late 1980s, it was the influx of Japanese capital that was turning American city real estate into global corporate colonies. Mitsubishi, flush with cash from Japan’s bubble economy, famously bought New York’s iconic Rockefeller Center, and Japanese investors at one point owned 40 percent of the prime office space in downtown Los Angeles. Michael Crichton’s novel Rising Sun, made into a 1993 movie starring Sean Connery depicted the Japanese investment as part of a dark cabal undermining both American business and government. Despite the concerns of a Japanese takeover of the US economy, nothing of the sort happened. As it turned out, Japanese real estate investors were no more savvy than American ones: Mitsubishi walked away from its Rockefeller deal writing off much of its $2 billion investment.
But the biggest problem with Sassen’s premise is that most corporate real estate purchases are bought from other corporations—meaning there’s no net increase in the amount of corporately-owned property. It’s just being transferred from one corporation to another, and sometimes from bigger global corporations to smaller, more local ones. For example, mega-investor Blackstone just sold $1 billion worth of Los Angeles office buildings to local investors. According to Cushman Wakefield, most of the sales (and purchases) are by US based pension funds, life insurers, real-estate investment trusts and the like. It’s hard to see how exchanging one set of absentee corporate owners for another ought to matter to anyone. Every transaction has a seller, as well as a buyer, son one could just as easily describe the data Sassen cites as revealing a giant sell-off of corporate owned real estate. Effectively, the ownership of real estate is commoditized—pretty much like the money used to finance home mortgages.
Despite the impressive-sounding sums involved, this sort of churn tells us nothing about whether corporate ownership is increasing or decreasing. Despite the article’s central premise that absentee corporate ownership is large and growing, Sassen presents no data on what fraction of all urban real estate is corporate-owned, or whether it’s higher or lower than it was a decade or two decades ago.
There’s actually precious little comparable, national data on the ownership characteristics of real estate, especially commercial and multi-family. Studies of housing ownership patterns in New York and Baltimore by the Urban Institute concluded “we know surprisingly little” about ownership patterns. But from the data they were able to cobble together from local administrative records, they found no consistent relationship between type of owner and maintenance and affordability. In New York, mom-and-pop owned apartments tended be affordable and better maintained (in part, the authors speculate because local owners are more careful in choosing tenants), while in Baltimore, large-scale owners provided better-maintained buildings.
As much as Sassen and other may dislike the profile (and symbolism) of high-rise residential towers, it’s clear that the portfolio managers buying real estate actually value functioning urbanity. The Cushman Wakefield report from which Sassen draws her numbers is pretty adamant about the need for human-friendly cities with more public investment and better public spaces:
There are many strands to creating healthy cities but a sensible starting point is allowing—and where possible promoting—walking and cycling through both the infrastructure and public spaces but also via more mixed use facilities. A second must be in providing common space where the city’s residents can meet and relax to provide a lower stress environment, be that on the grand scale of an urban park or High Line.
It could even be the case that Sassen has it backwards: multi-national investors are a lot less interested in controlling or re-shaping the city than figuring out in what direction it’s going, and then investing there. It’s pretty clear that the market is increasingly turning its back on the traditional suburban model of development; investing in big city real estate is the most obvious way the financial types can figure to follow the market for urban living that’s been created not by the machinations of investors, but by the surging demand for urban living, and the kind of diverse, interesting neighborhoods found in big cities. Sassen worries that “large scale corporate buying of urban space…introduces de-urbanizing dynamic.” But far from looking to squelch urbanity, these investors are actually looking to invest in it, and make more of it.
Finally, it’s worth considering the missing counterfactual: What would happen if global capital weren’t flowing into major projects in large cities? It’s certainly acceptable to have objections to any project, and Sassen and others may reasonably decide that the scale of Pacific Place is out of place with its surroundings. The large new residential towers will no doubt provide housing to many upper income families. But would Brooklyn—and Brooklynites in surrounding neighborhoods—be better off if it weren’t built? Given the overwhelming demand for housing in New York, if those high income units aren’t built at Pacific Place, their would-be occupants won’t simply evaporate: instead, they’ll likely further bid up the price of all other housing in the borough, worsening affordability for everyone.
As we have pointed out before, the growing relative value of real estate in close-in is a sign of the growing economic strength of, and demand for urban living. We should hardly be surprised that capital is flowing to these areas, but it signals the growing power of urbanism, not its demise.