Real estate, alternative real assets and other diversions

Smart cities: Smart Real Estate Strategies Understanding the evolution of global cities

The Economist

With real estate prices at cyclical highs, investors must look to the long term for outperformance. Understanding the evolution of global cities provides the best framework for alpha-generating real estate strategies in the current economic climate.

We have discussed the opportunities created by smart technology such as blockchain before, but it is worth discussing the practices and measurable benefits in the light of McKinsey Global Institute (MGI)’s excellent recent report: Smart Cities: Digital Solutions for a More Livable Future.

MGI evaluates the potential impact on city life of a range of technologies which are: 1) digital; 2) commercially available or already deployed, and; 3) solving a public problem. Global cities are on the cusp of delivering major improvements in the quality of life, but some are moving faster than others. MGI avoids a definitive overall ranking of cities, but with apologies, we have reworked their data and generated a list of top 10 smartest cities for real estate investment (see Figure 1). This said, investors need to get up close and look in detail at where a city’s smart strengths lie, because it opens the door to a variety of real estate strategies. 

 

Fundamentally, smartness is not merely a perception but about tangible benefits such as economic development and cost savings that achieve better quality of life. Therefore, infrastructure, application and broad-based adoption are all critical pieces for a city to become smart. Megacities like Beijing, New York and London with large population that need massive public transportation, digital solutions and flexible workplaces around the clock simply must get creative at solving problems.

Working with the major areas of gain identified by MGI, here we offer more insights considering the optimal real estate strategy.

The Economist

About Richard Barkham

Richard Barkham

Richard is a specialist in macro and real estate economics. He joined CBRE in 2014 as Executive Director and Global Chief Economist. Prior to taking up his position with CBRE Richard was a Director of Research for the Grosvenor Group an international business with circa $10bn of capital under management in real estate. He was also a non-Executive Director of Grosvenor Fund Management where he was involved in fund strategy, risk analysis and capital raising. Richard is the author of two books and numerous academic and industry papers. In 2012 he published Real Estate and Globalisation (Wiley Blackwell, Oxford), which explains the impact on real estate markets of the rise of emerging markets such as China and Brazil. He has extensive consulting experience and is a Visiting Professor in the Department of Construction and Project Management at the Bartlett School, University College London. He holds a PhD in economics from the University of Reading where he taught, in the Departments of Economics and Land Management, between the years of 1987 and 1998.​​​

Articles by Richard Barkham

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