Resilient Cities - A Grosvenor Research Report (Part 1)

This report by Grosvenor International Research gives one a lot of food for thought.   Grosvenor is an international real estate company, owned by the family of the Duke of Westminster whom I blogged about earlier here (Super Prime Property Sell Off).

Singapore does not fare well. To understand why, we first need to understand what this report is about.

This Report Is About Resilience
The foreword by CEO Mark Preston is worth quoting.

"At Grosvenor, we realise that a city’s long term success cannot be measured on annual volatility and returns alone. We need to evolve our approach and analyse the risks and opportunities of cities holistically, taking into account their geographical location, governance, predicted population growth and resources, amongst other things. We need to know how vulnerable they are, but also understand their ability to adapt and improve. We need to establish their resilience.

"This research enables us to do exactly that and is a powerful resource for advising our clients and partners. It advances our way of thinking about long term investment and gives us a robust risk management tool to help us ensure that our business continues to be profitable and can play an active role in the evolution of cities, complementing our ‘Living cities’ approach."

How resilient are you? 

How To Quantify Resilience? 
The report uses the following definitions.

1) Resilience - the ability of a city to avoid or bounce back from an adverse event - comes from the interplay of vulnerability and adaptive capacity.

2) Vulnerability is a city’s exposure to shocks in terms of both magnitude and frequency. Shocks may be due to changes in the climate, environmental degradation, shortage of resources, failed infrastructure or community strife due to inequality.

Most Cities Have Survived For The Last Several Centuries
That most cities have survived for the last several centuries or, in some cases, millennia, indicates a long period of stability in the pattern of urban growth. Recent population growth and industrialisation, despite many benefits, are destabilising planetary systems and making previously safe places more vulnerable than they ever were before.

Adaptability
Yet cities, like societies, are adaptable. Just like societies, they vary enormously in their adaptive capacity due to governance, institutions, technology, wealth and the propensity to plan. So resilience increases when cities have more adaptive capacity and decreases when they are more vulnerable.

What Is New In This Report?  
Traditional real estate industry and analyses looks at limited definitions of property risk - projected vacancy rate, forecast rental growth, economic growth etc.  However, these have relatively little meaning in the long term, and are particularly unhelpful in a world where the basic patterns of the last millennium are shifting. Successful real estate projects depend on the long term stability and prosperity of cities.

Future success is tied to sustainable growth of the cities in which we invest.

Many Cities Are Not Resilient 
A large proportion of the world’s rapidly growing population is located in cities and other kinds of settlements that are not resilient, either due to high vulnerability, low adaptive capacity or both.

By ranking cities we hope that our work contributes to the development of policies, supra-national, national and local, that make places more resilient, particularly those at the bottom of the hierarchy. In our view, pursuing real estate business without an eye to the stability of the underlying communities has little meaning.

How Resilience is Measured
This is a graphic of the data hierarchy used. Grosvenor has decided on the key components of vulnerability and adaptive capacity.  Then they seek accurate independent data, from as many sources as possible, on each component.  The process then goes on to weight and rank. (Read report for full details)

Grosvenor's Broad Based Definition of Resilience 

These were the dimensions of vulnerability that Grosvenor looked at:

1) Climate
2) Environment
3) Resource
4) Infrastructure
5) Community

These were the adaptive capacity key themes that Grosvenor looked at:

1) Governance
2) Institutions
3) Technical and learning
4) Planning systems
5) Funding structures

Grosvenor goes on to come up with a Vulnerability World City Ranking, an Adaptive World City Ranking plus a combined Resilience World City Ranking.

These results are discussed in my next post.

Happy investing!