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Andy Schofield

Future drivers of a changing investment landscape

Andy Schofield, Director of Research, looks at the future drivers of a changing investment landscape and their Eastern promise.

According to Oxford Economics in Q4 2013, 750 of the largest global cities are home to 2.5 billion people and account for more than half of world GDP. Of these, nearly half are in Asia, compared with 150 in Europe. However, Europe’s metro areas account for just 10% by population and around 20% by GDP, while Asia cities account for 60% by population and 37% by GDP. The largest metros by population are found in the emerging markets with London and Paris the only European cities to make the top 25; London is ranked 13th by population and Paris 22nd, yet Paris ranks 4th in terms of GDP (after Tokyo, New York and Osaka) and London 6th.

Europe’s share of the global economy has been declining for decades, falling from 35% in 1980 to around a quarter by 2013. On average, Asian metros are predicted to grow by more than double the rate expected in Europe. In terms of population, Asia will account for a further nine of the fifty largest metro areas by 2030, the majority being in China, while European cities such as Madrid, Milan, Munich, Rome and Stockholm fall shy of the mark. Only London and Istanbul will make the top 25.

Rapid economic growth in Asia will be associated with expansion in the office sector. China’s metro areas are predicted to create 18 million new office jobs by 2030, single-handedly matching the rise in office jobs in the metro areas of all other G20 countries combined. Only London (3rd place), Paris (10th) and Moscow (15th) will appear in the global top 25 office employment centres by 2030.

London and Paris are currently key favourites for investors and are global leaders in attracting cross-border real estate capital. London, in particular, attracts substantial flows from outside Europe. Figures from Real Capital Analytics show that over the last five years Europe’s key office centres have experienced an average annual investment volume of $US 68.7bn, compared with $US 45.0 bn for key Asian cities. Given the predicted expansion in office jobs in Asia, the regional composition of investment is likely to alter significantly by 2030. Paris and London will remain defensive, maintaining their high rankings among global office employment centres. However, the expansion of the sector in Asia, especially China, will present good opportunities, with increased liquidity and – hopefully - transparency.

Andy Schofield

Andy Schofield

Director of Research

Andy's biography