The future of European real estate is all about the cities.
It looks increasingly likely that overarching mega-trends such as urbanisation, technology, a growing middle class, and an aging population will dominate the long-term development of European property rather than shorter term economic cycles. And the impact of these mega-trends will be much more notable at city level than nationally.
This is a good thing for investors to take on board as it is more consistent with the way occupiers think about where they want to be located – decisions often based on a city by city rather than country by country analysis.
Using these structural mega-trends we can better identify Europe’s top, future-proofed cities to watch.
The research below highlights the two options for investors looking at European cities. The stronger, established markets and the riskier growth cities.
You can either opt for markets that have high GDP per capita now – and which will probably still be good options in the future – or, for the braver investor, look at those which are likely to see the most growth up ahead – in this case up to 2030.
The trick is to identify those in the latter category that have the fundamentals in place for growth. Because it is key to remember that while the growth figures are very attractive, many start from a low base and are still finding their feet.
You need to look at those with strong retail growth and increasing tourism numbers, such as Istanbul – a good example of a strong, seemingly stable future city. Growth projections look strong and it has been predicted to become one of the biggest consumer markets in the world.
Alice Breheny is head of research at TIAA Henderson
