The golden handshake?


Tokyo needs to address the mistakes of previous host cities if its property market is to benefit from holding the 2020 Olympics

The-golden-handshakeWinning the bid to host the Olympic Games is a major coup for any city. A couple of weeks in the global spotlight, economic advantages and the promise of an infrastructural and social legacy are all part of the package, but do property markets in host cities genuinely benefit from welcoming the world’s athletic elite?

The obvious, and most recent, case is London. Noted for its flawless organisation and the nationwide feel-good factor it instilled, the 2012 Olympics reassured the world that the English capital remains one of the globe’s most important cities. It has also been lauded for its efforts in implementing a legacy, which has stimulated much development in East London and fuelled price growth in nearby districts.

According to a recent report by Lloyds Bank, the average house price in the 14 East London areas closest to the Olympic Park is about GBP334,123—a 60 percent increase since London won the bid in 2005—and has risen by more than GBP60,00 since 2012.

“Since the end of the Olympic and Paralympic Games London can already report some legacy successes,” said Dmitry Sivaev, researcher at Centre for Cities, a London-based urban policy research unit. “However, it is still early days. It took Barcelona a decade to translate the boost from the 1992 Games into economic benefits. London should be ready to keep pursuing its economic legacy targets for just as long.”

Barcelona is often cited as the best example of a host city that has welcomed long-term economic benefits. Citywide urban regeneration schemes transformed Spain’s second city in the years following the 1992 Games and it provided a blueprint for what could be achieved with a sound legacy plan. A reported 83 percent of the total expenditure was invested into urban improvements, including a redesign of the airport, extensions to the metro and the addition of residential and commercial real estate projects.

“There is no doubt that the Games really did help to transform Barcelona, but note the words ‘help to’—there was already a process of urban transformation occurring,” John R Gold, professor of urban historical geography at the department of social sciences at Oxford Brookes University and author, said. “Barcelona barely broke even on the Games but transformed the city and fundamentally changed the areas in which the Olympics were held, including the mixed redevelopment of the Athlete’s Village.”

While Barcelona may have redefined the model for how the Olympics is staged, most host cities, especially larger ones, have failed to use the Games as a springboard for positive urban planning. Ideally, planners would capitalise on scarcely used, unpopulated real estate to construct sustainable developments that benefit the population in the long-term. This, however, has rarely been the case.

Olympic projects tend to take up large stretches of prime, centrally located real estate and cost millions to construct and maintain, but in some cities, such developments remain unused for years after the two-week event. Furthermore, the demand for conveniently located venues and infrastructure often results in the displacement of residential communities.

Brazil is currently in the spotlight for its efforts to “pacify” the favelas, but the majority of host cities from the past decade have been guilty of forced displacement. A report by Centre on Housing Rights and Evictions estimated that the total number of evictions has surpassed 2 million in the last 20 years.

Although the 1988 Seoul Games is probably best remembered for the farcical opening ceremony, which saw a flock of doves barbecued mid-flight in front of a global audience, it was also heavily criticised for the forced displacement of a reported 720,000 residents. Twenty years on, the Chinese capital came under fire for, amongst other things eviction of an estimated 1.5 million people.

“The Olympic movement wants large sites as near to the city centre as possible, said Gold. “It is very rare, as in London, that the city will be able to find land so polluted that there is not a large population that will be displaced. How large an issue it has been usually depends on the nature of the ruling regime, but there is international alarm at the scale of the evictions.”

The Olympics is set to return to Asia in 2020, when Tokyo will host the Games for the second time. But what can the Japanese capital—that bid with a pledge to deliver a compact, environmentally friendly Olympics (although these plans have since been reviewed)—learn from how previous host cities have handled the mammoth sporting event?

“The games must create a positive legacy that continues long after the Games are over,” Keisuke Yanagimachi, head of research (Japan) at Cushman & Wakefield. “An important question to be asked of Tokyo 2020 is whether the event can act as a catalyst for the city’s revitalisation needed for sustainable growth.”

The Games is expected to act a much-needed catalyst in revitalising Tokyo’s infrastructure and, more significantly, its reputation as a global city after almost two decades of economic stagnation. The fires of recovery may already have been stoked by Shinzō Abe’s reforms, but, much like the Tokyo 1964 Games, 2020 presents an opportunity for the city to reassert itself on the global stage.

Indeed, the property market has already welcomed a flurry of activity since the announcement was made in late 2013, and a reported 15,000 units have been earmarked for completion in the Olympic Bay Zone alone. Still, some analysts are concerned that, after a prolonged stasis, it may take time for the market to adapt to a sudden influx of infrastructure and new properties.

“The Olympics plays an important marketing role in the market as a whole, but it should be recognised as something temporary,” said James Harvey, international residential sales manager at Savills Japan. “Whether local services and infrastructure, as well as the local rental market, can support such a sudden acceleration of supply over the coming six years, justifies further scrutiny.”

is the editor-in-chief of Property Report