YouSaid · the spoken record

James S. McCarthy

lines on the record: 36
first: 2019-04-01
most recent: 2019-04-01
sittings or episodes: 1
sources: podcast

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“Yeah, I do actually. I was up at Cambridge last week and I do something every year which I enjoy, which is I go into a guest lecture for the land economy. It's actually called the real estate finance department now. And we talk about a lot of the things we've been talking about today. And then I spend a day with the Cambridge Rowing Crew. I was a row myself this year as the thirtieth anniversary of one of my years I raced in the Oxford Cambridge boat race and I was watching this year's crew prepare for that and it's always a great time they want to hear from the older generations what it was like and I tell them it was as hard back then as it is today so”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“as from a young age my dad was an architect, so I grew up in a house where real estate was talked about I studied a degree called land economy at Cambridge University, which is a real estate oriented degree, and when I left I joined a charters vain firm and soon after joining Goldman Sachs and I've been here ever since.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“In Europe, I'd say it's Berlin. I think Berlin is an incredible place. I've done business there, I've been there on holiday, and it is an incredibly vibrant city. It's gone through an incredible transformation obviously given its post war period where it was a divided city, a single city that split in two and two very different political regimes. With the war coming down in 1989, thirty years ago, it's gone through a couple of boom and bust cycles as it's tried to recover, but it's now being the capital city, it's finally converging with the rest of Germany and becoming an established. proper capital city, its developing its own industry, it's got a big tech industry there, big art scene, big social scene, and it's got some very interesting modern history behind it which sort of dictates its culture.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“We'll see whether it's still in Europe or not, but I think London is undergoing the most dramatic transformation at the moment. There have been a number of major infrastructure events which have transformed London. We had the Olympics here in twenty twelve, which really regenerated large parts of East London. We've had the crossrail project, which was building a new West East rail line, which is a major infrastructure project. Those are changing the nature of the city. And then there's been a massive building boom all along the south of the river bank of the Thames, all the way from sort of west London through to East London, and so a skyline down the river which twenty years ago was built on the north side but not so built up on the south side is becoming really built up on the south side. Now a lot of those projects are still underway. Not all of the apartments and office buildings are being used yet, but eventually when they're all lit up at night, it's going to be a totally different panorama from west to east down the Thames.”
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“Useful for bigger enterprises who might want some flexible space if particularly companies who are very project based if they're working on a project in a particular market they may not want to sign a lease on a new building for a couple of years because they're only going to be there for six months but they can take space in a WeWork type of operation. It's just a much more flexible way of working. What they've done is incredible. They're now, I think, the biggest occupier in New York or one of the biggest in London.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“It's similar to what we just talked about within the way people use office buildings because people don't need the physical infrastructure they used to need in an office building. They're much more mobile with their technology and so on. That's fostered this whole idea of co-working where small companies or growing companies or even individuals can go and work in a building that is operated by a co-working operator like a Wework where they're in an environment they get really good quality space, they get to interact with other people who are doing similar things and most importantly it's for very flexible arrangements. One of the problems with real estate generally for growing companies is you have to sign at least and commit to a building if you want to occupy it, depending on which market you're in that lease can be anywhere from one year to ten or twenty years. What we work allows and this whole co working idea allows companies to do is have a lot of flexibility they can breathe in and out depending on the size of the company.”
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“without being able to deflate their own currency. One trend that gets a lot of attention in the US, but they have a big presence here, is the new entrance into the real estate market like WeWork and others.”
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“GDP growth and once you start to get positive GDP growth you start to get a real estate recovery particularly if as I talked about earth there's been an undersupply of new product so we've seen a dramatic recovery in Ireland prices having fallen fifty percent they're backed within sort of ten to fifteen percent of their previous peak and the same in spain it's recovering quite well back then I remember that one of the big questions was could countries like Ireland and Spain who are part of the European Union and part of the euro and therefore in a fixed currency regime unlike the UK they couldn't devalue the currency so they had to restructure within a fixed currency regime which is very difficult to do and I think looking back I think most people have been pretty amazed at how they've been able to do that”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Ireland and what's been Again, if you go back to the financial crisis, Spain and Ireland wore probably two of the most dramatically hit markets in terms of the collapse in real estate prices. In Ireland, property prices were down about 50% in the years following the crisis. Spain was down about, I think, about 40%. There were other markets too, Portugal, Italy, the UK all. Most markets had problems, but those markets were probably the most acute. And then we saw a phase from sort of 2010 to 2012, 13, 14, where these economies started to recover. You remember that many of these markets had support from the European Union. A lot of the banks were reconstituted and resolved. There were various political actions to make these economies more competitive, make them labor market more productive and freer. And so gradually over time these economies started to reset themselves and started to grow again and real estate always lagged.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Can't live there. And I saw some numbers recently that said that if all people above sixty five moved into more appropriate accommodation would release one hundred seventy five thousand family homes in London and a huge amount of wealth, and at the moment People can't move, it's not because they don't want to move, but it's because the appropriate accommodation is not available. So I think this is a growing sector, it's been growing in markets like Australia, New Zealand, it's growing in the US, it's growing in Japan, and I think it'll grow here.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“true in all the major cities around the world. People who have grown up in these cities, they want to stay in the cities, but there isn't the appropriate accommodation for them. And the other problem you get, which is more a social problem, is that you get a log jam where people, because they don't have an appropriate facility to go to, they stay living in their large townhouse, which may not be appropriate for them.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“But a lot of people, as they're retarded and they're getting older, they stay living in their, what was their family home, the children have now left, and so they're now in a home that may be too big and may not be sort of fit for purpose given their needs as they age. And so what people want is a facility that is easier to get around if they have mobility issues. It has good amenities, good sort of hospitality services, and good care services, particularly if they have medical issues. Those things don't really exist. There are only one or two a couple of years ago. In London, it's a new industry that is developing. There are a number of groups, operators and developers are starting to build this type of facility. But the recent draft London plan, which is reorganizing the planning regime and planning ideas for London, has prescribed that there need to be about four thousand of these units built every year for the next ten years. We're nowhere near that, so there's a chronic undersupply of this type of facility, and it's not just true in London.”
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“It's similar to the student thing in that there's not enough housing that is appropriate for the aging population. And what I mean by that is, again, if you take London as example, the demand for that type of accommodation is going up. I think there are one million people above retirement age in London at the moment. The forecasts show that's going to double in the next, I think, twenty years.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Sounds like a good time to be a student. I should go back to school. Another trend you mentioned as long as we're on demographics is aging population, obviously true all over developed economies, Japan, the US”
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“And these are buildings which are anywhere from, let's say, fifty to five hundred units for students. They're designed specifically for the student population, so they have different types of units. They have smaller ensuite units. Some students want a bigger unit. Some students want to live together in what we call a cluster flat, which is where there'll be five or six rooms all clustering around a kitchen and a living area. So the accommodation itself is designed for students. The amenities are designed for students. There is study space, social space, fitness and sports areas and so on. These are safe, they're secure, they're located near the universities, and they're at an affordable price point, and so that type of accommodation has become a more attractive opportunity or place to live for many of these students. And what we're seeing the emergence of is what was fifteen years ago a fairly fragmented industry has really become a very high quality institutionally led marketplace whereas the big companies.”
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“Can't live at home, traditional forms of accommodation if you take the UK. Traditionally it would be either the university's own halls of residence or it would be students gang together and renting up a house together. Those still are important sources of accommodation for students, but there isn't enough, and so what we've seen the emergence of in many markets, including the UK, is what we call PBSA or purpose built student accommodation.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“The overall demand for university education is going up, so the penetration rate, the number of young people going to university is going up. In the UK it's gone up from thirty percent to forty percent in the last ten years. So more younger people are going to university. The total aggregate number of students going to university is an all-time high. And the other big trend is the number of students choosing to go to university outside of the country of origin is going up. So for example, Chinese or Indian students go into the UK or to the US for education. That's an all-time high. So you've got this very big demand driver of students going to these high quality universities.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“You talked about the importance of university and good education. Obviously, students need places to live. Student housing's been a theme for. Some investors, how is student housing changing? How are the demands changing there? And what are the demographics beyond that?”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“These are all places where companies are moving to because they have these types of features, big universities, good ploy base, rubbish with lower cost, and even in the UK, Manchester, Birmingham, Leeds, Glasgow, they all have these similar traits.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Think about the markets That's a big thing. We've seen that in the US, and we're seeing it in Europe as well. The traditional big gateway cities are becoming more congested and more expensive. We're seeing corporations and enterprises move to other cities which are smaller, have a lower cost base, and are some cases easier to live in, and so in the US, if you look at the growth in cities like Austin or Denver or Nashville, Charlotte's another one. There are big major corporations moving to these areas because they have certain features. They have for a good quality universities, so a very large young, well educated workforce. The cost of housing is lower, the cost of office spaces lower, and because they're smaller cities, they have more walkability, as they like to call it, so it's easier to get around and it's a nicer place to be. And we're seeing a similar pattern in Europe if you take Berlin, you take Amsterdam, you take Milan, you take Barcelona, Lisbon, Portugal.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“So when we talk about real estate investing, we often focus on the big cities, London, Paris, New York. What about smaller and less expensive cities or those becoming hubs for some companies? How do you think about the markets in some of the second tier cities?”
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“a big desk with a big desktop computer and a big phone and big storage space for all of your files, that's all going. People are using smaller workstations. There's much more mobility within offices people can move around. What that means is that companies can dedicate more of their office space to more community areas where people can get together, talk about ideas, talk about problem solving. So it's a much more collaborative, more mobile type office environment than we've previously had.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Offices still exist, people still want to work in corporate communities, corporate culture is very important, so I think the idea that everybody's going to work from home, I'm not a buyer of that kind of idea. I think companies will still want office space. And some things have not changed. Companies still want office space that is well located near good transportation hubs so their staff can get to the building. They wandered in a vibrant part of the city therein, so the surrounding amenities are good for their boys. They want buildings that are energy efficient and sustainable. That's not really new. That's been going for some time. What is new is that the way that people can operate within these buildings again because the access to technologies meant people can use high-speed Wi-Fi, laptops, and the cloud, they don't need all the paraphernalia that used to go with being in an office. So one change I think is happening is that the need for physical infrastructure in an office for somebody's workstation is diminishing, so you don't need”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“You talked a little bit about stores, and briefly about offices, but let's talk a little bit more about the office building and trends there. How has technology and the ability of employees to work remotely change the way people think about their offices and think about offices particularly in expensive center cities like London?”
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“Physically the logistics hub that set on the big transportation nose are not close enough to deliver with that same day type delivery, and so what we're seeing a trend in is in urban area logistics facilities being created. They're either conversions of existing assets or new assets. And the difficult part of this for investors is this is changing so quickly, the way in which consumer demands are changing, the way in which the speed and sort of technology around delivery is evolving. It's very hard today, I think, to look at a logistics facility and be sure that that is the right type of facility that a logistics operator will want five or ten years from now. So I think you have to be very careful to make sure your asset is future-proof and can be adjusted as the needs change.”
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“is a slow death. Where is the boom happening? This is the complex part of all this. Traditionally, you would say that a big, modern logistics facility in the UK again as an example would sit in what we call the Golden Triangle, which is the area between the M1 and the M six in the middle of the country where distributing around the country is easiest. One of the trends we're seeing now in a buzzword in real estate is last mile logistic, and I think what's happening is because of the success of firms like Amazon, consumer expectations around delivery are going up and up all the time, so a few years ago if you wanted to order a book or a pair of running shoes on Amazon, you'd be satisfied if it came three or four days later. Nowadays people want it the same day or the following morning the same hour.”
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“It's almost a mirror image of what we're seeing in the retail space, so in the logistics, and this is true in North America and all around Europe, but again I use the UK as an example, we've seen the demand for good quality logistics properties for the past three to four years has been up about thirty percent on what it was previously. What that is doing is making logistics companies compete more for logistics properties that are being built. There is not enough logistics facilities around the UK, the vacancy rate in logistics is now about five percent, which is quite low. And as a result, as these different companies compete for that space, we're seeing rents start to go up. And what that has meant is that logistics has become a very in favor asset class for investors because if they can see cash flows that they think are going to grow, then they like that, whereas retail has become a very out of favor asset class at the moment.”
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“The retailers would argue those are too high, and so it's making the traditional retailing model unprofitable. There have been whole series of quite high profile administrations of retailers in the UK over the past ten years, I think about thirty four or thirty five major names in the retail space in the UK have gone into administration. That has meant about thirteen thousand stores have closed. It's meant about one hundred eighty thousand job losses. And one of the most staggering parts of that analysis is that of those 30 or so administrations, about ten happened right after the financial crisis when the UK was in recession, but about ten happened in twenty eighteen, when the UK is meant to be doing reasonably well. So you can really see the impact of the technology on that. What's timely about this is only last week the UK Parliament put out a report talking about how they see the high street of twenty thirty, so ten years from now, and they made the comment that they really feel like the UK retail high street is at a tipping point where if nothing's done, we really are going to get into a”
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“It's a timely conversation. If you look at online shopping in the UK this year it reached almost twenty percent of all online sales. It's the highest in the world. In Europe it's a bit less though in France and Germany it's more like ten to eleven percent Spain and Italy a little bit lower sort of high single digits but it's growing everywhere. Even in the UK it's about 20% today five years ago it was only ten percent so we've seen this massive rapid change in the way people shop. That's having real impact on retailers because what's happening obviously is that less people are going to the physical stores, footfall on the high street in the UK is down about ten percent and so it's impacting the revenues that the traditional retailers can generate. In the UK there's a particular issue that the fixed costs of these retailers, the leases they have to sign for their retail properties. Retailers would say the rents are too high the business taxes they're called business rates that retailers have to pay.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Let's go back and talk a little bit more about retail cities typically still have lots of storefronts and lots of shopping areas. How's tech changing the need for stores or just stores look a little different? Talk a little bit about the impact of what's been called the death of High Street.”
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“We've seen it in the residential space companies like Zillow in the US or right move or Zoopla in the UK, and I think we'll see more of that in commercial property over time. And then I think we'll see disruption to the way that properties get transacted. Transacting properties today is still quite a laborious, time-consuming and expensive process, and as technologies evolve, things like smart contracts and so on, that will make transacting property quicker, more accurate, and cheaper. And I think it's just inevitable that those changes will come.”
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“There are three broad impacts. One is how people use buildings, so how people for example use office buildings, the fact that people are working office buildings, that they're much more mobile and agile today. You need a smartphone or a tablet or a laptop, good Wi-Fi access, a bit of power, and access to the cloud, and you can really work anywhere. So it's made the workforce who are in the service industry much more mobile, and that's changing the way people are using office space. The second thing is what type of properties are needed and the big example of this is in the retail versus logistics theme, where because of the impact of online shopping, there's less demand for bricks and mortar, high street shops, and much greater demand for logistics assets. There's been a shift there. And then I think the third thing, which is really just beginning is the way that property assets are intermediated and transacted. We're seeing the development of online marketplaces for real estate”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“You mentioned this briefly, but let's focus on how tech is reshaping cities in real estate. As technology reshapes really every industry, what kinds of buildings are needed and when do you really start to observe the connection between the tech revolution and its impact on real estate”
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“Yes, so I would say right after the Brexit referendum there was a lot of talkin' activity about cities like Frankfurt, Paris, Amsterdam, Berlin trying to attract companies from London who would need to move as a result of Brexit. Some of that is happening. There are companies who will need to move, our own firm will be moving some jobs. I think the beneficiaries of that are really Frankfurt, Paris, and I also should have mentioned Dublin. But I think the amount of people that are going to move is perhaps less than was originally thought. And so although it's helpful for those markets, I don't think it's going to be a major impact in terms of changing the nature of their real estate markets.”
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“and sell them onto more natural long term owners of those properties. That situation still persists even now ten years after the crisis there are still plenty of opportunities to invest in those types of impaired assets. But the big shift we've seen in the past, say three to four years is that in many of the major cities in Europe one of the impacts of the financial crisis was that credit was less available for developers to build new product. And as a result, we've seen in many cities in Europe an undersupply of appropriate, modern, good quality accommodation that companies and people want to office in or live in. And so now we see an opportunity for investors to team up with those types of developers and create that new product. So we've moved from a post-crisis value-investing opportunity to more of a growth-oriented opportunity.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT
“Not business we invest across both the US and in Europe. And in Europe it's a lower growth, more fragmented, more dislocated market, higher barriers to entry to build new product. That environment continues to serve a quite interesting investing opportunities for us. If I think about the day versus after the financial crisis, when we came out of the financial crisis in Europe, an awful lot of real estate assets ended up in the hands of people for whom those assets were non core. If you think of banks who had a lot of non-performing loans, there were funds were at the end of the investment period, so these assets now had to be liquidated, and even governments, particularly in Ireland and Spain, had to form organizations to resolve some of these problem assets. So back then the investing opportunity was really to provide capital to those types of organizations so they could release those assets, people like us and others would take them on, try and reposition them, improve the operations, sometimes make some strategic interventions to improve the assets.”
2019-04-01 · Goldman Sachs Exchanges · How is Tech Reshaping the City Skyline? · IDENTIFIED FROM THE TRANSCRIPT