London ranks first for the third consecutive year in the 2019 Savills Investment Management (Savills IM) Dynamic Cities index, followed by Paris, Cambridge, Berlin and Amsterdam.
The index ranks those European cities with the best long-term commercial real estate (CRE) investment potential. Analysis accompanying the index highlights the economic strength of the top 10 cities, which delivered GDP growth of 70% between 1998 and 2018, versus 39% for the 28 countries in the EU (EU-28). Employment levels in the top 10 over this period also rose by 31%, versus 15% in the EU-28, according to Oxford Economics.
Compared with the other major investible European markets elsewhere in Europe, the top 10 dynamic cities delivered the strongest prime total returns growth across all three CRE sectors – office, logistics and high street retail – followed by the next-best-30 dynamic cities.
Savills IM’s Dynamic Cities Index analyses and ranks 130 European cities across the six categories and highlights those able to attract and retain talent, spur innovation and increase productivity, which encourages the wealth and population growth that drives successful CRE markets.
The index predicts that all CRE sectors will benefit from these characteristics over the long run: rising employment will help support the office sector, wealth creation will benefit the retail sector and the explosive growth in e-commerce will drive demand for urban logistics and warehouse facilities.
London retains lead despite Brexit
London also tops five of the six category rankings this year, including Inspiration, Innovation, Investment, Infrastructure and Interconnection. It came second in terms of Inclusion, for which Cambridge came first.
Although Brexit-related uncertainty has been a cloud over London’s future, the city’s continued attractiveness to business and residents is evident in its tech sector. Since the referendum vote in 2016, tech heavyweights Apple, Facebook and Google have approved plans for new offices in London. Also, in 2018 London attracted more international tech workers than any other city in Europe, according to London & Partners research. Its rich cultural offerings and numerous cafes and parks – plus some major redevelopments – all create an environment that is highly supportive of CRE.
Spanish cities post-GFC recovery
Spain’s two largest cities climbed the ranks this year, highlighting the country’s recovery following the sharply negative economic impact of the global financial crisis (GFC). Barcelona is one of the strongest 2018-19 movers among the top 40, climbing seven places to 14th. A key driver of this was its performance in the Inclusion category, with the city scoring 3rd compared with 13th last year. Madrid kept the 20th rank, helped by its ranking as a top 10 city for Inclusion.
Nordic capitals make top 30
The Nordic region continues to perform well. All the Nordic capitals – Stockholm (10), Copenhagen (15), Oslo (19) and Helsinki (27) – are in the top 30 this year. They all achieve high scores on livability, a subcategory of Inspiration that relates to overall perceived contentment with city life. Together with high safety scores and low pollution, the high quality of life in Nordic cities attracts and retains workers, residents, visitors and companies, all of which is positive for CRE performance.
Andreas Trumpp, Head of Research, Europe, Savills IM, commented:
“Dynamic Cities focuses on factors that are essential considerations for CRE investors. These factors underpin cities’ abilities to attract and retain talent, spur innovation and increase productivity, all of which encourages the wealth and population growth that drive successful CRE markets over the long term.
“A city’s attractiveness for long-term real estate investment is fundamentally linked to whether people are inspired to live, work and play there. But modern-day factors such as disruptive technology, ageing populations, urbanisation and environmental challenges mean it is also vital to identify locations that will be resilient to change.”
