Los Angeles has been ranked the top real estate investment market in the world. According to Schroders’ Global Cities Index, Los Angeles is the top investment market for the fourth year in a row, based on economic, environmental and education platforms. London and Hong Kong also retained their ranking as the second and third top cities for real estate investment.
Los Angeles simply has the scale, growth and skill base that makes it a global hub and the center of one of the most important industries—entertainment,” Hugo Machin, Co-head of the Global Cities at Schroders, tells GlobeSt.com. “The data bears this out. The index is a relative assessment of where, in terms of city locations, we think capital would be best deployed.”
This year, the index included an assessment of environmental impact, which was new from years past. The inclusion of the environmental score caused L.A.’s ranking to drop from 8.6 last year to 8.1 in 2020. “L.A.’s Environmental score did cause its overall score to slip, but not enough to see it drop down the rankings,” says Machin. “L.A. scores poorly on areas of physical risk in the EIS such as seismic hazard, carbon policy and air quality, but that is balanced out by a decent environmental policy score—again, we stress that this is a relative assessment. We use a composite data source for policy risk within the EIS score.”
While the city’s ranking dropped this year, Machin doesn’t expect the inclusion of environmental impact to have a significant impact on the market’s future score. “We don’t see the market being immediately impacted by this evolution of the index,” he says. We do think it points to a critical and important point—the de-carbonization of markets.”
This is the fourth year that L.A. has secured the top position, showing its strength over other global markets, like New York, which ranks ninth on the list for 2020. “L.A. was already ahead of these other cities but its score dropped back a bit,” says Machin. “Simply put, the data provides the rank. Typically people focus on immediate issues: traffic, cleanliness, divergent incomes and their impact on housing. The index cannot capture more subjective assessments, as it is a demand-led model. Whilst LA has many challenges, on a global scale the data simply tells us that it is a highly productive location.”