Our leading article points to how the rise of the digital economy is changing geographies and property markets. The locations favoured by occupiers within cities are changing and new, small cities are increasing in importance to compete with the global giants. We explain some of the trends that we think should start changing global real estate investing criteria.
Cities On The Move
This edition of 12 Cities goes to press at a time when political, economic and social stability cannot be taken for granted in many corners of the globe. The turmoil of the 2008 financial crisis and subsequent geopolitical conflicts have given real estate investment a new role and significance. Many cash-rich investors have been putting money into real assets rather than paper ones, in safe jurisdictions with good title and political stability.
They appear to have been vindicated, judging by the daily increase of geopolitical and economic threats in vulnerable regions. We anticipate that core real estate markets will continue to be favoured for as long as this lasts.
The resulting focus of real estate money on globally recognised cities threatens to leave them fully valued and low-yielding. Which locations will perform next and what alternative real estate asset classes can be successfully invested?
"Many cash-rich investors have been putting money into real assets rather than paper ones"Yolande Barnes, Savills World Research
We also look at the world of income returns, recognising that some investors, fully stocked with safe-haven assets, may want to concentrate rather more on the fundamental value of income streams. Our measure of ‘net of bonds effective yield’ (NOBEY) makes a valid comparison between cities and countries and begins to point at markets that have become fully valued and those that may have capacity for further growth.
Meanwhile, international occupiers of offices and residential space can see which global cities look to be best value from their point of view. Our live-work index should prove a useful guide.
Our ‘new and improved’ World Cities Index is a response to readers’ requests to include key indicators: rents, capital values, yields and basic statistics on each of our 12 cities. They show how each city has performed over time and enable direct comparisons to be made between cities. Lastly, in our regular feature ‘Compass Points’, we have summed up four key themes for the future of world cities. I hope you enjoy this edition and find it useful in your global real estate decision-making.