Los Angeles is the top city on the planet for real estate investment. The Schroders Global Cities 30 index awarded Los Angeles the prestigious title, with London—the usual top placeholder—coming in at a close second. In fact, US cities dominated the list of top global markets to invest in. After London's second place crownings, Boston, Chicago and New York filled out the top five slots. To find out more about the index and the rankings, we sat down with Tom Walker, co-head of Global Real Estate Securitie at Schroders. Here is what he has to say about the L.A. markets, why you should invest now and why investors are coming to L.A..
GlobeSt.com: What happened in the last year that drove Los Angeles to from sixth place to the top ranking for real estate investment?
Tom Walker: The Global Cities database consistently evolves as we find better data that supports the correlation of certain factors with rental growth. The latest Global Cities ranking has seen the addition of one new factor and one small change to an existing factor. Firstly, the latter minor change has seen us replace average household disposable income with median household disposable income. This is due to our research that shows this factor has a stronger correlation with rental growth. Secondly, the larger change was the addition of a university ranking which analyzes how many world class universities are in a city. We believe there is a strong link between vibrant and growing economies and world class universities. It will be the addition of this university factor that has seen LA move to the top.
GlobeSt.com: Was the result surprising to you?
Walker: The key to our Global Cities database is that it is quant based. We try to remove any individual of team bias. The numbers inform us which cities will have vibrant and growing economies over the long term. Having said that, we have long discussed that the leading global cities are potentially a battle between the east and west (Asian and US cities).
GlobeSt.com: What does this mean for real estate investors?
Walker: These are the locations to where investors should be looking to allocate capital. These cities have long term pricing power, which is crucial for real estate investment, especially if we are moving in a rising rate environment.
GlobeSt.com: In your opinion, why do US cities dominate this list?
Walker: It is the strong combination of scale, economic growth and academic excellence.
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