Market Research Presentation
Experts Panel Discussion
Millennials’ demands are changing cities and investors are following, delegates heard at the PropertyEU ‘Investing in European Cities’ briefing, which was held at EXPO REAL in October.
‘Urbanisation is an unstoppable trend driven by the concentration of economic activity in cities and young people wanting to live where they work,’ said said Eri Mitsostergiou, director of European research, Savills. ‘Occupier demand is now linked to soft factors like wellbeing and liveability, which are becoming more important and playing a bigger role in investors’ decisions.’
European cities are now competing with each other to attract mobile young professionals and in order to win the war for talent they must provide amenities, connectivity and good transport links.
‘There is great competition for quality employees and the change in the mindset of millennials is having a fundamental impact on real estate,’ said Douglas Edwards, head of institutional business international, KGAL Capital.
It is important to remember that ‘real estate is not an empty box, but it has users,’ said Mitsostergiou. ‘Millennials are more demanding, but also more productive when they find themselves in a positive environment.’
In the European context of rapidly greying populations, attracting young people to the cities is also a necessity, said Lex Brans, director, real estate marketing, Holland Metropole: ‘As people age, it is crucial to attract the young to make our communities more vibrant. That is why we try to facilitate millennials.’
Cities must also be affordable and sustainable, as the ‘green factor’ is important to millennials. ‘We are now finding that long-term investors think about air quality and sustainable development,’ said Brans.
‘Sustainability has become a more important part of the investment criteria,’ agreed Matthew Cutts, global sector leader, financial solutions, Arcadis. ‘It is also necessary to get the planning permissions needed to reposition assets and get the returns investors want. It is pushing the bar up beyond what the legislation currently requires, which is a positive trend.’
Flexible working is another important part of the offer. ‘The investors are now following the trends,’ said Cutts. ‘One of the asset classes we see high growth in is the flexible working space.’
There are three very good reasons why international investors are increasingly interested in cities rather than countries, said Uwe Rempis, managing director, KVG Munchen, LaSalle Investment Management: ‘The first is economic growth and performance,’ he said. ‘There is a strong correlation between the rankings in our top 100 cities index and occupier demand. Cities like Munich, Amsterdam or London perform better than Germany, the Netherlands or the UK.’
The second reason is liquidity: the most attractive cities are where the majority of real estate transactions take place. To give just a few examples, Paris and Lyon account for 77% of France’s transaction volumes, Madrid and Barcelona for 72% of Spain’s, the Randstad for 72% of the Netherlands’, while Prague alone captures 72% of the Czech Republic’s total. The third reason to favour the top cities is performance, Rempis said: ‘They guarantee higher total returns than other locations in the country’.
Panellists agreed that the urbanisation trend will continue, because cities are centres of economic activity, but their growth must be managed carefully by local authorities working together with developers. ‘We need good governance in cities, if there is no quality of life the risk is that people will leave,’ said Mitsostergiou
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