Reimagining Cities-Disrupting the Urban Doom Loop

The Places Platform, LLC/Cushman & Wakefield Product Diversity Index demonstrated that increased product diversity resulted in better outcomes for real estate PPSF. The PP/CW Product Diversity Index showed that the 25% of WalkUPs that are most diverse had PPSF declines of 11.9% versus 29% PPSF declines for the 25% of WalkUPs that were least diverse. Even when controlling for diversity, we found that above- and below-median exposure yielded mostly intuitive results—even in the most diverse WalkUPs, those with more Work had worse PPSF outcomes. This is also where we found evidence that any property type can be overrepresented, including Live, where in most diverse WalkUPs, more Live resulted in worse outcomes. The PP/ CW Product Diversity Index also was consistent in flagging that more Play is positive for PPSF outcomes. Portfolio theory applies to the real estate product portfolio in WalkUPs; diversity improves PPSF performance. Portfolio theory is another way of saying “do not put all of your eggs in one basket.” At the beginning of this analysis, we hypothesized that product diversity should yield better investor performance. As shown in the portfolio optimization discussion, Downtown WalkUPs have 70% of their product portfolio in the Work category, which recorded larger PPSF declines than other property types. The over-production of office accounts for nearly 70% of the PPSF decline in Downtown WalkUPs. There is an optimal product portfolio for Live, Work and Play for a WalkUP, based upon our 208 WalkUP sample. It’s not just about too much Work. There can be too much or too little of any product type: a balanced portfolio is required. While office is overbuilt currently in Downtowns specifically, it is essential for WalkUPs to maintain a balance within all three broad product categories of Live, Work and Play. In the future, there could be overbuilding of residential, and one would assume for Play also well, so a focus on portfolio balance will be important as investors, place management organizations, and all levels of government navigate the evolution of their cities.

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Reimagining Cities: Disrupting the Urban Doom Loop 85