Hot property: 7 global cities ripe for investment
While investment decisions will always depend on the individual — their appetite for risk, their level of experience and expertise and the level of return they’re looking for — away from the main global gateway cities such as London, New York, Tokyo and Paris, a growing number of exciting locations is emerging, with all the ingredients needed to make them attractive long-term commercial real estate investment choices for the private investor.
Here we highlight seven cities that are leading the way in developing a compelling mix of education, lifestyle, infrastructure, technology and real estate and, in the process, becoming the kind of vibrant, attractive locations where people want to work, shop, play and live.
While each of the cities featured here is unique, they do have certain characteristics in common. In particular, the rapid growth of technology companies is driving a wave of regeneration and development that echoes through all real estate sectors. Cities that can provide a favourable environment for this type of business are seeing significant investor interest.
A large part of the attraction for these in-moving tech firms is the prospect of becoming part of an ecosystem that has been designed to attract the best talent. Education is a critical component, ensuring a regular flow of the type of highly skilled employees so sought after by fast-growing companies in the global ‘war for talent’. And hand-in-hand with this comes demand not only for office space, but for housing, retail, logistics, hotels and other types of income-producing real estate.
MELBOURNE: AUSTRALIA
With a population forecast to surpass Sydney’s by 2036, Melbourne is a thriving city that has undergone significant transformation over the last decade. In particular, there is strong growth in city centre living; unsurprising, given that the Economist Intelligence Unit rates it as the "world’s most liveable city". In addition, the city is now the second-largest office market in Australia (behind Sydney), with the number of employees based in the central business district (CBD) increasing by more than 24 per cent over the past 10 years.
This has led to a wave of development activity with several large mixed-use schemes already delivered and a number in the pipeline, including the 30-year renewal project at the Fisherman’s Bend precinct, which will cover 450 hectares in Port Melbourne, south-west of the CBD.
The scheme will include new high- and medium-density commercial and residential development for up to 80,000 residents and a working population of 60,000 by 2046. The continued emergence of these major projects provides investment opportunities of a scale and diversity to appeal to large investors, helping to maintain Melbourne’s position as a primary destination for global and domestic capital.
AMSTERDAM: THE NETHERLANDS
Amsterdam is working its way up the ranking of European tech locations and was rated one of the five most innovative cities in the world in the 2015 CITIE survey. There is a thriving start-up scene; a host of co-working spaces including B.Amsterdam, WeWork and Spaces, and Uber, Netflix and Tesla are among the major players opting to make Amsterdam their mainland Europe headquarters.
There’s no shortage of home-grown talent, either: Ayden, for example, handles online payments for clients including Facebook, Netflix, Spotify, Uber and Airbnb, and is valued at over US$1bn — the Netherlands’ first ‘unicorn’.
Add to this its consistently high score as one of the world’s most liveable cities, plus the quality of its transport links, both via Schiphol airport and overland to the rest of continental Europe, and you have a compelling case for the continued success of Amsterdam as a home for both business and leisure.
BERLIN: GERMANY
As a model for successful regeneration, Berlin is currently riding high. The two central districts of Mitte and Kreuzberg have led the regeneration wave, with Friedrichshain the most recent to take on the creative mantle. Even Berlin’s coolest districts are not immune: Pankow, with its buzzing cultural scene, boutiques and vibrant nightlife, is also now becoming increasingly gentrified.
Recent years have seen an explosion of start-ups with more than 40,000 new companies incorporated each year. Crucially, the cost of living in Berlin is one of the lowest in Germany and compares favourably with the rest of Europe — it is around a third less than London — encouraging a young and vibrant culture. More than 174,000 people moved to the city in 2014, over half of them from overseas. The city’s economy is now one of the best performing in the country, driven by both tourism and services.
AUSTIN: USA
Austin is fast becoming a global model for forward-thinking cities and has gained the title of Silicon Hills, the Silicon Valley of the south. It’s not hard to see why: its innovative mindset, enterprise-friendly environment, entrepreneurial focus and unique culture have transformed it from a government-dominated economy into a technology leader. Companies with bases in Austin range from tech titans such as Apple, Google, Facebook, Oracle, Cisco Systems, Dell and Hewlett-Packard through to seed-stage and start-up ventures.
This environment, along with the steady flow of graduates from the University of Texas and other nearby schools, plus in-migration that is increasing the population by 150 people a day, is attracting further corporates looking for a young and educated workforce. A wave of construction is attempting to keep pace with demand, with a focus on both workspaces and co-working environments, and high-density multi-family housing.
BENGALURU: INDIA
Touted as the IT and start-up capital of India, Bengaluru has emerged as an attractive destination for multinational enterprises looking to set up innovation centres and tap
into a fresh pool of technology talent. In-movers including Uber, Airbus and Visa now sit alongside a healthy start-up scene, with home-grown tech success stories such as Flipkart, InMobi and Mu Sigma all now part of the billion-dollar ‘unicorn’ club.
Importantly, the city has a number of top-class global research institutes such as the Indian Institute of Science, as well as many state-owned research organisations that are turning out the innovative culture and workforce so vital to today’s growing cities. As global enterprises look beyond the established hubs to find new talent pools and centres of innovation, Bengaluru has built a strong eco-system and the momentum to emerge as a leading option for both domestic and international businesses.
MIAMI: USA
Often thought of as a tourist destination and home for wealthy residents, drawn by healthy tax incentives and an abundance of sunshine, rather than as a commercial property hotspot, Florida’s most famous city is reinventing itself as a creative and technology hub. In-movers such as Microsoft’s Innovation Centre, the company’s first in the US, in 2014 and the emergence of a lively art scene around Art Basel have led to new districts, restaurants and galleries and attracted a new generation of residents.
The retail sector in particular is thriving with the recently opened Brickell City Centre supermall, part of a wider US$1.05bn mixed-use development, adding new names to the roster of global and boutique retailers already located in the expanding Miami Design District and Wynwood Arts District, plus the new Miami Worldcenter development, scheduled to open in 2017. In addition, the city’s education offer continues to improve with the University of Miami’s business and law schools rising up the rankings.
MEXICO CITY: MEXICO
Supported by a broad base of corporate industries such as automotive, telecommunications, logistics and retail, Mexico City continues to attract significant foreign direct investment as the gateway to emerging markets in the rest of Latin America. The city’s growing middle class is spurring significant redevelopment and regeneration.
Large mixed-use projects are transforming neighbourhoods including Paseo de la Reforma, Polanco and Insurgentes and include modern housing and offices as well as shopping centres.
Indeed, the office market has grown by 200 per cent since 2000, with 170 new buildings. And with a new international airport under construction, Mexico City is investing in the future. The first phase of development, scheduled to be completed in the early 2020s, is expected to provide capacity for up to 50 million passengers and 550,000 flights a year. This has the potential to rise to 120 million passengers and one million flights by 2015.
Anthony Duggan is Head of Capital Markets Research at residential and property consultancy Knight Frank.