London and US win in Global Cities Index as China loses ground

Los Angeles has been named as the top global city in the third publication of the Schroders Global Cities 30 index, narrowly beating London which took second place.

US mega-cities dominated the latest index taking 18 of the top 30 places, including four of the top five spots. Los Angeles jumped from sixth place to first, whilst Boston saw one of the biggest leaps in the index going from 24th place to third place. Chicago jumped from 10th place to fourth, whilst New York, the most populous city in the United States, held onto its fifth place ranking.

The Schroders Global Cities 30 index is compiled on a range of factors, including the projected growth of the economy, disposable incomes over the next decade and the size of the population. The latest version of the index includes an additional new factor which looks at university ranks, which was the main driver of whether a city moved up or down in its ranking.

Having previously dominated the index, the Chinese mega cities saw some of the biggest falls. Beijing, which took the top spot in December fell to 11th place, whilst Shanghai fell from second to 10th and Shenzhen dropped from third to 24th place.

London was the top ranked European city climbing six places to claim second place in the latest index. Paris, which was the only other European city to feature in the index, fell from 12th place to 16th.

Hugo Machin, co-Head of Global Real Estate Securities, said:

“The Schroders Global Cities index continues to evolve, as new factors and their weightings are assessed. This is critical to ensure the best City economies are identified. It is these strong City economies that have the potential to provide superior investment returns.

It is no surprise that the cities that have benefitted from the inclusion of the university rank are on the West Coast of the US. Universities are critical in powering city economies. Innovation and education provide a better trained, more productive workforce. Knowledge based hubs are growing in economic strength with a positive knock-on to real estate markets in those locations.

Los Angeles has moved up the rankings to take the top spot . The scale and economic depth of LA makes it a compelling location to work and live. One of the key strengths of LA’s economy is that it is well diversified across multiple industries including financial services, media, trade and technology. The technology sector, in particular, has grown substantially over the past few years, and this has not only boosted demand for office space but also for residential property, much of it due to the increased hiring of millennials.

Chinese cities still rank extremely well with Shanghai and Beijing in the top 10. Shenzen, despite emerging as a knowledge base economy, does not have the tertiary education that ranks as highly as the two more established Chinese cities.

London has moved up to second place. We maintain that London has a competitive advantage in location, language, scale, infrastructure and cultural diversity. If we add the global strength of its universities, London remains a favoured place to invest.”

Machin co-manages the Schroder Global Cities Real Estate fund with Tom Walker. 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.

Top 30 Global Cities

Location Country Ranking
Los Angeles United States 1
London United Kingdom 2
Boston United States 3
Chicago United States 4
New York United States 5
Hong Kong Hong Kong 6
Houston United States 7
Melbourne Australia 8
Singapore Singapore 9
Shanghai China 10
Beijing China 11
San Francisco United States 12
Seattle United States 13
Sydney Australia 14
San Jose United States 15
Paris Europe 16
Atlanta United States 17
Toronto Canada 18
Washington United States 19
Dallas United States 20
Tokyo Japan 21
Brisbane Australia 22
San Diego United States 23
Shenzhen China 24
Philadelphia United States 25
Baltimore United States 26
Miami United States 27
Mexico City Mexico 28
Minneapolis United States 29
São Paulo Brazil 30

 

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