Los Angeles has been named as the top global city for the second time in the fourth publication of the Schroders Global Cities 30 index, narrowly beating Hong Kong which took second place knocking London into third place.
The index looks at scale and growth of 780 cities around the world, using factors such as population, household income, university ranking, retail sales and GDP to determine the most economically vibrant cities.
Both Johannesburg and Cape Town have gone down in rankings from last year. Johannesburg dropped from 267 to 358 and Cape Town from 414 to 460.
Hugo Machin, co-Head of Global Real Estate Securities at Schroders, says that these rankings highlight the lack of scale and growth within these two cities versus its global peers. He explains that the rankings are not influenced by levels of crime, pollution or political corruption.
US cities
US cities continued to dominate the index taking 17 of the top 30 places, including five of the top ten spots. New York, the most populous city in the United States jumped one place from fifth to fourth, however, Boston and Chicago both fell from third place to sixth and fourth place to seventh respectively.
US cities have been in the spotlight recently as Amazon looks to find the best city to host HQ2, its second headquarters in North America. Twenty cities have been shortlisted by Amazon and of those 20, eleven feature in the Schroders Global Cities 30 index.
Chinese cities
Chinese cities saw the most improvement taking four of the top 30 places including two in the top ten. Shanghai jumped from the tenth spot to fifth, Beijing climbed from 11th place to fourth and Shenzen increased its place in the index from 24th to 20th.
Australian cities
Australian cities struggled to maintain their positions in the index and were among some of the biggest fallers. Negative revision to population growth and GDP impacted Brisbane and Perth in particular. Perth dropped 15 places from 36th to 51st whilst Brisbane fell from 22nd to 30th. Melbourne also saw a drop in ranking and lost its spot in the top ten, falling from 8th place to 16th. Sydney was the only Australian city to improve its ranking, climbing from 14th place to take the tenth spot in the index.
European cities
London was once again the top-ranked European city, despite falling by one place to third place in the overall index. Paris, the only other European city to feature in the top 30, climbed one place from 16th to 15th.
The Schroders Global Cities 30 index is compiled on a range of factors, including the projected growth of the economy, university rankings, disposable incomes over the next decade and the size of the population.
Hugo Machin, co-Head of Global Real Estate Securities said:
“The Schroders Global Cities 30 Index looks at scale and growth of a city. We believe that cities with scale have a structural advantage. However, the model also captures fast-growing cities. This means the ideal city would be medium sized with identifiable economic growth.
“It’s no surprise that Los Angeles has reclaimed its place at the top. This is due to a combination of large-scale and excellent economic growth. The scale and economic depth of LA make it a compelling location to work and live.
“Chinese cities continue to do well in the index with Shanghai and Beijing taking top ten spots. It remains clear that the increasing wealth being generated in leading Chinese cities is being reflected in the index. The scale and growth of Chinese cities is supportive of their high ranking. Shanghai, Beijing and Shenzen all moved up the index on the basis of small improvements in the income factor. This improvement shows that the population within the major Chinese cities are becoming wealthier, as the Chinese economy transitions from manufacturing to consumer.
“Australian cities generally fared quite poorly. On the positive side, Sydney continues to do well. This further supports our view that employers focus on locations with the best-educated workforce and transport infrastructure to compete in the knowledge economy.
“London has slipped from second place to third. This is due to a slightly lower score on the university section of the ranking. We have made no negative revisions for London due to a perceived loss of growth from the vote to leave the EU. London remains one of our favoured places to invest.”
Machin co-manages the Schroder ISF Global Cities fund with Tom Walker. The fund allows investors global access to key commercial property markets in multiple countries – where it may be otherwise tricky to pinpoint where to invest or to buy property directly. Their aim is to invest in stocks that should benefit from strong demand for commercial property in the world’s most highly-ranked global cities. They seek to invest in cities with restrictions to sprawl, be it geographical limits or planning rules, such as London’s green-belt.
The global cities team has launched the Global Cities blog which acts as a resource on the longer term trends impacting global real estate. For further reading please visit
http://www.schroders.com/en/schrodersglobalcities/.