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Thursday 01 February 2018 10:23 am

Los Angeles claims top spot in Schroders Global Cities 30 index for the second time

By: Hugo Machin

Hugo Machin is the Co-Head of Global Real Estate Securities at Schroders.

Los Angeles has been named as the top global city for the second time in the Schroders Global Cities 30 index.

California’s largest city narrowly beat Asia’s Hong Kong, which took second place. London slipped from second to third place.

The Schroders Global Cities 30 index is based on a range of factors. The measures include:

• the projected growth of the economy
• university rankings
• disposable incomes over the next decade
• demographic measures.

US cities continued to dominate the index taking 17 of the top 30 places, including five of the top ten spots. New York 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, eleven feature in the Schroders Global Cities 30 index.

Chinese cities saw the most improvement, taking four of the top 30 places, including two in the top ten. Shanghai jumped from 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 struggled to maintain their positions in the index and were among some of the biggest fallers. Negative revision to population growth and GDP affected Brisbane and Perth in particular. Perth dropped 15 places from 36th to 51st whilst Brisbane fell from 22nd to 30th.

Melbourne lost its spot in the top ten, falling from 8th to 16th. Sydney was the only Australian city to improve its ranking, climbing from 14th place to take 10th spot in the index.

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.

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Why the rankings have changed

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 makes 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 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 Shenzhen all moved up the index on the basis of small improvements in the income factor. This improvement shows that the populations of the major Chinese cities are growing wealthier, as the Chinese economy transitions from manufacturing to consumption.

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.

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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.

Our aim in devising the index is to identify the cities in which to invest – those with restrictions to sprawl, be it geographical limits or planning rules, such as London’s green-belt, represent the most compelling opportunities.

Our global cities team launched the Global Cities blog in 2016, which acts as a resource to track the longer term trends impacting global real estate.

• For more on urban trends, go to the Global Cities website.

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Source: Schroders. Global Cities Index as at 25 January 2018.

Important Information: The views and opinions contained herein are those of Hugo Machin, Co-Head of Global Real Estate Securities, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The sectors and securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. This communication is marketing material.

This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. The opinions in this document include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registration No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.