60 seconds on the outlook for global cities in 2017
Hugo Machin explains the attraction of global cities in what is likely to be a volatile year ahead.
The outlook for 2017 is one of continued volatility in North America. As far as we’re concerned though, we look for individual companies that are located in global cities.
What we mean by this is fortress real estate markets. These are markets where the barriers to entry are extremely high; cities where economic growth is stronger. This is primarily due to infrastructure that is in place, the free movement of people, data and goods due to strong fibre networks, and due to fantastic ports and rail.
We also looks for cities where tertiary education is very strong because you tend to have a very well-educated workforce. Real estate companies with assets in these markets have pricing power and pricing power for us is absolutely key despite what is happening in the global economy. The reason for this is that pricing power leads to cashflow growth, which is good for real estate returns. That’s what we look for as investors.