Universal basic income decimates big cities

Universal basic income decimates big cities

Kay Van-Petersen
Global Macro Strategist

Summary:  Commercial real estate is crushed as workers say "bye-bye" to big city life.

See previous 2021 prediction

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 has 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. 

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 toward 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 neighborhoods 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. 

See next 2021 prediction:
Disruption dividend creates Citizens Technology Fund 

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Due to coronavirus controls, we are not able to meet with clients in our reception at present, unless by appointment in exceptional circumstances. We remain at your service on the phone and email details below. Thank you for your understanding.

Please expect very long waiting times on the line when calling us, we advise you to send us an email instead.

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.