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REALX.Global: Sustainable, smart cities will thrive in Europe

Mark Holz, Group Head of Research, Corestate Capital Group

Cities have emptied during the pandemic but they will regain their dominant place soon, delegates heard at Real Asset Media’s Past, Present & Future of Urban Investment presentation, which took place online yesterday on the REALX.Global platform.

“Cities are the dominant way of living in Europe and they will continue to thrive in future, provided they become sustainable and smart,” said Mark Holz, group head of research, Corestate Capital Group.

In 1900 28% of the European population lived in cities, but in 2020 that percentage had ballooned to 77% because large urban centres have proved they are efficient and economically successful, promote commerce and innovation, arts and culture and knowledge and communication.

Cities’ economic relevance is huge and they outclass their respective countries in productivity and growth. To give the two most notable examples, Paris accounts for 18.3% of the French population but 31.2% of its economic output, while the inhabitants of London are 13.5% of the UK total but the capital’s share of national GDP is 23.9%.

“Given their economic dominance, cities naturally attract investors’ attention and account for most investment activity,” said Holz.

Paris accounts for an astounding 78% of French transaction volumes, London for 53% of UK activity, Amsterdam and Rotterdam combined represent 53% of the Dutch total and in Germany the top four cities (Berlin, Frankfurt, Munich and Hamburg) account for 56% of transactions.

“There are three main reasons for this,” said Holz. “Investors find the products they seek, property values are higher and cities are also very liquid and international. Big city transactions tend to be done by institutions and cross-border players, while secondary cities attract more local and private investors.”  

 Tier 1 cities outperform over the long term, but they are volatile and tend to be more cyclical, so timing is crucial.

Looking ahead, the winning cities of the future will be smart, sustainable, integrated, mixed and dense.

Green cities more attractive to residents

“They will be green, run by public transport, with mixed-use neighbourhoods  and clusters that will make them more efficient economically but also more attractive for residents,” said Holz.

Good examples are Vienna, a leading smart city, Copenhagen which will be carbon neutral by 2025 and Paris and Barcelona that aim to become 15-minute cities where everything is within reach, making them more liveable and more sustainable at the same time.