Report reveals best cities for global real estate investment
The Schroders Global Cities 30 Index has been published revealing where the world's investors should trust their funds in the next 12 months, and this year Los Angeles has come out on top.
As usual, the annual report based its rankings on a range of factors include age demographics, median income, university ranking, retail sales and gross domestic product. Using these key areas as a guide, the report revealed that Los Angeles was the top investment hotspot of the 160 global cities ranked, with five US cities making the top 10 including Boston in third place, Chicago in fourth place, New York in fifth place and Houston in seventh place.
According to Tom Walker, co-head of global real estate at Schroders, Los Angeles was a clear winner based on its scale and economic depth. He said: "The technology sector, in particular, has grown substantially over the past few years, and this has not only boosted demand for office space but also for residential property, much of it due to the increased hiring of Millennials."
On the other end of the spectrum, many Chinese cities saw the biggest fall in rankings, with Beijing falling from top position to 11th place, while Shanghai fell from second to 10th and Shezhen dropped from third to 24th.
Europe also suffered, with only two cities making it into the index this year. London took the top position in the region, climbing six places to take the runner up prize in the latest rankings, while Paris dropped from 12th place to 16th.
The Schroder Global Cities Real Estate fund aims to invest in stocks that will potentially benefit from strong demand for commercial property in the best ranked cities in the world. The index is co-managed by Mr Walker and Hugo Machin, co-Head of Global Real Estate Securities, who suggested that the index will continue to evolve as new factors become important in the international real estate market.
He continued: "This is critical to ensure the best City economies are identified. It is these strong City economies that have the potential to provide superior investment returns."
Mr Machin went on to say that the new addition of universities in the rankings could explain why the US has done so well in this year's index, particularly on the West Coast of the country.
"Universities are critical in powering city economies. Innovation and education provide a better trained, more productive workforce," he said. "Knowledge based hubs are growing in economic strength with a positive knock-on to real estate markets in those locations."
According to Machin, this factor also explains why London has remained within the top two, particularly as it already boasts a competitive advantage in location, language and cultural diversity. He said: "If we add the global strength of its universities, London remains a favoured place to invest."
Meanwhile, China is failing to provide the same level of tertiary education as its competitors, Mr Machin added, particularly in the case of its lowest ranking city, Shenzhen.