Over half of global office investment over the last five years occurred in just 25 cities. We are used to seeing remarkable statistics on cities: over one million people are likely to be added to the world’s cities each week to 2050; over one third of global GDP comes from the top 100 cities. Even so, the concentration of office investment is staggering.
The drivers leading investors to focus on cities are straightforward. Urbanisation combines with higher wages in cities, acting as a multiplier effect on economic output. In addition, increases in land value thanks to denser, high-rise development benefit real estate values directly. Infrastructure improvements, as cities grow, can also have a positive effect on real estate values.
However, are investors correct to focus on such a small part of the investable market? Has that focus resulted in outperformance? These questions are not straightforward to answer.
Source : AXA Real Estate