Speakers

Robert Pratt

Robert Pratt

Co-Head of Global Design & Construction
Tishman Speyer
 
Mounib Hammoud

Mounib Hammoud

CEO
Jeddah Economic Company
 
John Jacobsson

John Jacobsson

Executive Vice President
The Related Companies
 
Matthew Richards

Matthew Richards

International Director
JLL
 
Richard Wood

Richard Wood

CEO
China Construction America/Plaza Construction
 

Session Summary

Central to the “global interchanges” theme for the 2015 Conference was the intensification of transnational investment in skyscraper developments. Economic downturns aside, high-rise real estate is generally seen as a sound investment on an international level, particularly in markets like New York City, where prices are almost certain to continue increasing in value. To tackle this topic head-on, a group of real estate, construction, and investment professionals gathered for the Session 3b panel discussion, entitled Global Interchanges: Investments Within and Across Borders.

Starting on the home front, John Jacobsson, Executive Vice President of the Related Companies, led with the example of Hudson Yards, which is not only the largest real estate project in the US, but is also a melting pot of global capital.

“On Hudson Yards’ overall infrastructure, we are partners with the Canadian Pension Fund, and our investment partner Oxford is a subsidiary of the Ontario Public Employees Retirement Fund,” Jacobsson said. “Then, we can match the best investor at the time with the specific (sub)-project, e.g. at the individual building level. We have a sovereign wealth fund from the Middle East, a prop company in Asia, and recently signed a letter of intent with an institutional financial company, also in Asia. There is a truly global mix here, right in one development covering six blocks.”

By comparison, Jacobbson noted that Related’s earlier project at Time Warner Center, completed in 2004, had only two primary investors, including a fund that had 80% domestic investors. At Hudson Yards, 75% of the investment capital comes from outside the US and most comes from outside North America.

Not surprisingly, a significant focus of the panel was on the Asian investment phenomenon. As China’s economy slows and the nation’s “smart money” looks beyond its own borders, people in the tall-building financing supply chain are bracing for a very different picture in the next few years. Across the globe, there is a tremendous level of pent up savings that will reach $37 trillion by 2022, said Matthew Richards, International Director, JLL. China’s saving rate hovers around 16-17% of its GDP, and by 2022 might represent 32% of global savings.

“All of that capital has to go somewhere,” Richards said. “Today real estate looks very attractive, and a lot of the new savers have an affinity for real estate. By 2020, some $15 trillion of savings could be allocated toward alternatives [to financial instruments like stocks and bonds].”

The fast and furious pace of building in Asia seems always to draw interest, but while some of the work has been criticized for emphasizing speed and glamour over construction quality, the new batch is showing more promise, said Richard Wood, CEO of China Construction America / Plaza Construction. He was pleasantly surprised on a recent visit to China World Trade Center in Beijing.

“My thought was that I would not see the best quality, and maybe not a focus on safety. But I was met with just the opposite,” Wood said. “Our parent company has its own fabrication plant, and the whole project was done in BIM. Much of it had prefab components you would never see [in the United States]. The project team had large numbers of young people all managing a discrete component from design, through fab, to build. We can learn a lot from them.”

When the panel raised the subject of luxury high-rise superslims, which are now going up blocks away from the Conference venue, and are criticized for driving up real estate prices while remaining largely unoccupied, one of the more refreshing – and global -- perspectives came from Mounib Hammoud, CTBUH Trustee and CEO of the Jeddah Economic Company in Saudi Arabia.

“New areas will flourish when the prices are excessive in established or historic areas,” Hammoud said. “Look at One Hyde Park in London, with units selling at 10,000 GBP per square foot ($163,720 per square meter)….go a few miles away and those areas are flourishing. The same thing is happening in Brooklyn and Queens.”

Ultimately, cross-border investments are nothing to fear, panelists said. Jacobsson recalled that when Rockefeller Center was bought by Japanese investors in the 1980s, the discourse was needlessly panicky. “It is a huge social benefit to any country to have investors to come from another country,” Jacobsson said. “The best retort to all the jingoistic rhetoric was that they were leaving all that money in New York City!”

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