The research department behind this piece is run by Steen Jacobsen. A million years ago I worked with Steen Jacobsen on the trading floor of a large US investment bank. Steen was then, and still is, a brilliant, polemic mind. For 30+ years he has turned intellectual strikes into successful trades. His MO is to shake thinking up and suggest trades that appear ridiculous but then, one day, don’t. Sometimes this is genius, sometimes very expensive. Either way I think you will enjoy his thinking, which we will start to publish regularly – first up, why universal basic income means it is all over for cities.
– Stephen Yorke, Proprietor of the Property Chronicle.
The covid-19 pandemic has only accelerated the K-shaped recovery that was driving inequality and tearing at the social fabric before the outbreak. For years, the younger generation have come to realise that even a solid education and the right attitude are not enough to get moving up the socio-economic ladder in a way that was possible for most of the 20th century. Even if younger professionals do get a job, financialisation of the economy has meant that a single income is not nearly enough to support a family, once insurance, education, and rent or mortgage payments are taken into account.
And technology is another driver, with the growing, wage-deflationary forces of software, AI and automation eroding a widening swath of jobs across industries. The risk that societies are entirely torn apart results in the realisation that the covid-19 measures weren’t a mere panic response, but the start of a permanent new universal basic income (UBI) reality.
Universal basic income leads to a seismic rebalancing of the forces and structures within society
UBI leads to a seismic rebalancing of the forces and structures within society, and how they apply geographically. Big cities have been the chief drivers of job growth for generations. But in the new era of UBI, tech-driven job redundancies, and frequent work from home jaunts made more normal by covid-19, city office real estate is suddenly faced with 100% or worse overcapacity. Commercial office property values are crushed, together with the commercial real estate containing restaurants and shops aimed at servicing commuting worker drones.
The new UBI also drives changes in the attitude towards work and life balance, allowing many young people to stay in the communities where they grew up. Meanwhile, the professionals and the marginal workers in big cities also begin to leave, as job opportunities dry up and the quality of life in small, over-priced apartments in higher-crime neighbourhoods loses its appeal.
Trade: Short big-city REITs, for example SL Realty Trust (SLG), which exclusively invests in Manhattan, NY office buildings, or Vornado Realty Trust (VNO), which invests in Chicago, San Francisco and NYC.
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This article was originally published by Saxo and is republished here with permission.
