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THINK Global Cities: Picking winning cities across the globe for growth and diversification

Global cities

In our most recent research report, examining increasingly complex market dynamics and evolving investor requirements for global real estate, Alice Breheny, Head of Global Research, argues that understanding local, long-term structural trends is key to preserving value and unlocking performance growth in cities throughout the US, Europe and Asia-Pacific.

"Too much economic and real estate advice is given at country level, which means interesting locations can get missed due to perceived national level risk, and vice versa," says Alice Breheny, Global Head of Research. "Our global strategic advice is now centred on cities, not countries, meaning we can give investors more clarity on what a portfolio might look like. This approach is consistent with the way occupiers think about their requirements and representation. We have adopted an innovative, two–pronged approach to our top-down analysis, capturing both structural megatrends and tactical real estate fundamentals, to identify 'futureproof' cities."

The report cites 'megatrends' - notably urbanisation, rising middle classes, ageing population, technology, and the shift of economic power from the West - as having a major impact on the built environment, and significant implications for the future demand of real estate. While economic cycles will continue to determine short-term performance of real estate, there is a risk that focusing only on these will conceal the longer-term value as megatrends play out.

The cities poised for the most growth in each region are impacted by varying dynamics, however, a central theme emerges for each: In the US, cities which reflect increasing innovation and job growth potential are likely to thrive; in Europe, cultural centres that attract both talent and tourism to keep economies humming provide investment opportunities; and in Asia, large cities which are likely to continue to grow, increasing their dominance as global economic epicentres, will benefit.

"The US’ recent economic growth has been concentrated in top cities and metropolitan areas which are home to global industry leaders in technology, finance, media, education, and the medical sciences," said Randy Giraldo, Managing Director and Head of Portfolio Management, Americas. "These 'innovation centres' attract the youngest and brightest employees, establishing a self-sustaining base of knowledge-based growth."

"The region’s stellar growth over the past decades has been concentrated on a few key core cities, many of which are already among the world’s biggest, most globally competitive and resilient," said Chris Reilly, Managing Director of Asia-Pacific. "Many more will rise to the fore in the coming decade, providing investors with even greater opportunities to tap into Asia-Pacific’s growing economic dominance."

"Europe has an abundance of cities that boast rich culture and heritage, offering many benefits over rural areas, such as additional employment and leisure opportunities," said Andrew Rich, Lead Fund Manager for the European Cities Fund. "Productivity is higher, innovation abounds and populations are younger, more affluent and with a higher level of discretionary spending, even after living costs. As a result, the best cities in Europe will grow exponentially and have continually increasing demand for real estate as their charm will ensure they continue to attract both talent and tourists.

Taking these factors into account, our research team has identified a significant number of cities within in each region that may not be obvious targets for core institutional investors today, but whose long-term demand story cannot be ignored when constructing a future-focused portfolio."

Read the full report

and

View our cities
analysis

 Global cities

 

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Alice Breheny

Alice Breheny

Global Head of Research

Alice's biography