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How to invest in property in global 'winning cities'?

  • Investors correctly assume there is something very appealing about some of the world’s most prominent cities, often referred to as ‘gateway’ cities. These cities are experiencing rapid population growth and increasing affluence, attracting both capital and highly skilled employees on an increasingly international basis.
  • However, we are concerned about the approach typically taken by property investors. Such investors often specify that they have low risk tolerance and that they are long-term investors. However, they appear to take a much higher level of risk by focusing on the office sector exclusively, encouraged by the ease and familiarity of investing in this sector. The office sector has significantly underperformed over the longer term, suffering from high levels of speculative development, high capex requirements and depreciation rates, a particularly volatile rental cycle and yields often forced down to unjustifiably low levels by huge inflows of international capital.
  • Rapid population growth and increasing affluence create strong opportunities in the retail, residential and logistics sectors, which have delivered stronger performance and lower volatility than the office sector. We would urge international investors to consider these sectors rather than focusing solely on offices.