Global Market Perspective
Where are the best global cities for real estate investing?
The latest release of the Schroders Global Cities Index is out, and Los Angeles takes the top spot.
Los Angeles has been named as the top global city for real estate investing in the third publication of the Schroders Global Cities 30 index. London followed closely in second place.
The US comes out on top
US mega-cities dominated the latest index taking 18 of the top 30 places, including four of the top five spots.
Los Angeles jumped from sixth place to first. Boston saw one of the biggest leaps in the index going from 24th place to third place. Chicago jumped from 10th place to fourth, whilst New York, the most populous city in the United States, held onto fifth position.
The scale and economic depth of LA makes it a compelling location to work and live. One of its key economic strengths is that it doesn't have to rely on only one industry: it's diversified across financial services, media, trade and technology.
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.
What's behind the moves?
We continue to evolve the index and bring in new data and insight. This time, university rankings had a big impact on results, especially around the West Coast of the US.
Alongside universities, we look at the health of the wider economy and it's potential for growth in real estate demand. It's just one of the factors we consider –alongside the growth of an economy, the number of people and their earnings.
We see universities as being critical in powering city economies. Their focus innovation and education help contribute to better earning power for graduates, which better for the economy and for real estate. Knowledge-based hubs are growing in economic strength with a positive knock-on to real estate markets in those locations.
London was the top ranked European city climbing six places to claim second place in the latest index. Paris, which was the only other European city to feature in the index, fell from 12th place to 16th.
London has moved up to second place. We think it holds a competitive advantage given its location, scale, infrastructure and cultural diversity. If we add the global strength of its universities, London remains a favoured place to invest.
China slips, but fundamentals look good
Having previously dominated the index, the Chinese mega cities saw some of the biggest falls. Shanghai was the only city to have made the top 10 and Beijing, which was previously the number one spot, fell all the way to 11th place.
Chinese cities still rank extremely well overall though, with a number of cities in the top 30 index. They come in strong on a number of factors.
What makes a global city?
The Schroders Global Cities 30 index is the result of our research into what makes a city most attractive for listed real estate companies, playing on the idea that winning cities share common factors. The 'ideal' global city will have:
- Growth potential
- A high population
- Excellent infrastructure
- Skilled workers with high disposable incomes
- Top universities
These factors combine to make cities attractive places to live with diverse cultural and leisure activities.