
Two people take a selfie on Waterloo Bridge infront of the skyline of the City financial district of London, as people enjoy the continuing spell of hot weather, June 30, 2018. (Photo: Dominic Lipinski/PA Images via Getty Images).
One might think it is the end of the world for Britain with Brexit D-Day looming, but a ray of good news comes with news that five of the top twenty European cities ranked in an annual study looking at “Dynamic Cities” are in Britain, the highest number of any country in the analysis. Germany and Switzerland tied for second place, which each had three cities represented.
The index for 2018 from Savills Investment Management (Savills IM), an international real estate investment manager that managed total assets of around €16.6 billion (c.$19.3 billion) as at December 30, 2017, ranked London and Cambridge first and second, respectively, with Oxford (8th), Edinburgh (12th) and Bristol (16th) making up the UK’s top 20 European cities.
A further six cities in Britain rank inside the top 40 European cities – Manchester (29th), Newcastle upon Tyne (31st), Belfast (33rd), Cardiff (34th) and Birmingham (39th). It brings the total to eleven and underlines the “continued resilience” of the country’s metropolitan areas in the face of a slowing economy, high street store closures and the challenges posed by Brexit.
It might also show that when the chips are down and the Brits have their backs to the wall they show real grit and determination to get things done in adversity. And, that is a line I’ve heard uttered at a few events this summer in London – and particularly from Brexiteers.
Ranking & Index Categories
The investment manager’s Dynamic Cities study analyses and ranks 130 European cities across six categories: (1) Innovation; (2) Inspiration; (3) Inclusion; (4) Interconnection; (5) Investment; and, (6) Infrastructure. And, the index highlights those cities able to attract and retain talent, spur innovation and increase productivity, which are seen as encouraging the wealth and population growth that drives successful commercial real estate markets.
The index works on the basis that top cities for real estate investors demonstrate what is described as “balanced performance” across all of these categories.
Investment as a category for these purposes is defined by a series of wealth indicators, current and future real estate investment activity and presence of “green-rated” buildings, including sustainable buildings that can mitigate energy and water price increases as well as legislative risk.
For Innovation, which is defined in the study by the creation of new ideas, methods or products, including factors such as number of patents; start-ups; top-tier universities; interest groups related to science, business and innovation; and funding indicators for new ideas. “Innovation can support commercial real estate by helping reduce the market cyclicality and structural obsolescence of a city,” the study pointed out.
The United Kingdom has proven particularly strong in the “Inclusion” category, which measures a city’s diversity in terms of its culture, ethnicity, religion, age and gender as well as public transport links and affordable living. The nation’s cities occupied 4 of the top 5 rankings in this latest analysis for the category, with Cambridge (1st), London (3rd), Oxford (4th) and Edinburgh (5th).
And, overall seven cities from Britain are represented in the European top 20, with London heading the rankings achieving having a score of 97 and Cambridge on 84.
In continental Europe, Paris was ranked third overall with a score of 84, Amsterdam in fourth place with 77), Berlin in fifth on 76, Munich in seventh just ahead of Oxford, Basel in ninth on 75 and Stockholm coming in tenth with 74. (See table on rankings below).
The factors under the Savills IM’s inclusion measures are said to benefit economic growth by attracting a “diverse and broadly skilled” population, which in turn is proven to have a positive effect on the surrounding region’s income and real estate values.
Irfan Younus, Head of Research, Europe, at Savills IM in London, commenting in the wake the findings said: “While the continued dominance of London as Europe’s leading ‘supercity’ will reassure those investors concerned by the threat of Brexit, what is particularly encouraging for the U.K. is that its cities have performed more strongly than any other country [in Europe] in responding to the threats and opportunities caused by urbanization.”
The former sell-side analyst at NCB (now part of Investec Group) covering FTSE listed real estate securities who also worked at the Barclays investment bank, Younus added: “Cities such as Cambridge, Oxford and Edinburgh are punching above their weight compared to their European counterparts and have what it takes to attract investors – namely, infrastructure investment projects, fast-growing knowledge networks, high quality universities, innovative businesses drawing from a global talent pool and strong cultural amenities to help retain that talent.”
The majority of Europe’s top forty cities consolidated their places in this year’s index by increasing their scores, underlining their continued progress.
Evidencing the importance of long-term urban planning, analysis in this year’s report reveals that over the last twenty years the top 10 dynamic cities have collectively outperformed the “EU-28” overall in terms of GDP and employment growth, providing a backdrop for stronger real estate investment performance.
Top British Cities: London, Cambridge & Oxford
London’s position at the top of the index reflects its number one slot in five of the six categories. As a major global player in the arts, commerce, education, entertainment, fashion, research and tourism, its position as a leading global city is likely set to continue.
This will be supported by initiatives like the ambitious London Infrastructure Plan 2050, which involves more than £1 trillion (c.$1.3 trillion) of investment covering housing, transport, digital infrastructure and basic services.
Major transport projects are already underway. For example, the new Elizabeth line, also known as Crossrail, is scheduled to begin operating in central London by the end of 2018 and the Northern line is being extended southwest to Battersea Power Station, which will be Apple’s new London headquarters.
The study nevertheless noted that there are “potential risks” due to Brexit, especially in relation to financial services. However, the Greater London Authority points out that two-thirds of the city’s exports in this sector are already to non-EU countries.
“Even accounting for Brexit, London’s workforce is sufficiently diversified, and its wealth indicators and population growth are strong enough to provide a solid platform for long-term performance,” the author’s of Savills IM’s study posited.
A perhaps surprising second overall ranking for what is the smallest city in the top five, Cambridge houses the largest technology cluster in Europe and is supported by world-renowned Cambridge University. It is the top ranked city for Inclusion and second for both Innovation and Inspiration categories.
Furthermore, it is home to more than 4,700 “knowledge-intensive” firms, employing over 60,000 people and generates more than £12 billion (£15.6 billion) in revenue. Intense pressures on housing are also easing, with a forecast average of more than 2,000 completing each year.
This year’s study shows Oxford as being one of the biggest risers, which is benefitting from new investment schemes announced in 2018. The leading university city rose six places this year and into the top 10 in Europe.
The city of Oxford has been earmarked by the U.K. government for around 100,000 new homes and represents the western point of the ‘golden triangle’ of leading research universities in Britain. It ranked fifth for Innovation, with strong grassroots participation and a high density of start-ups relative to population.
Methodology
The Dynamic Cities index was created using statistical analysis and the Organisation for Economic Co-operation and Development (OECD) handbook on constructing composite indicators. With the data was gathered during the first quarter of 2018, the crunching of numbers would seem fairly extensive by any measure.
For example, over 250 in-house, publicly available and externally purchased factors were collected for 130 cities, which include all European capitals as well as cities with a minimum metropolitan area of 250,000 inhabitants and positive forecast population growth. The final index includes sixty inputs across six categories, with the inputs ranging from conventional commercial real estate factors to wider urban economics indicators.
The data behind Dynamic Cities is derived from a combination of proprietary in-house calculations as well as publicly available and commercially provided sources. Key data providers included 2thinknow, City Benchmarking Data, Timetric and Oxford Economics.
Top 20 European Dynamic Cities
Overall | Inspiration | Inclusion | Innovation | Interconnection | Infrastructure | Investment | |
1 | London | London | Cambridge | London | London | London | London |
2 | Cambridge | Cambridge | Dublin | Cambridge | Paris | Paris | Paris |
3 | Paris | Prague | London | Paris | Berlin | Cambridge | Stockholm |
4 | Amsterdam | Amsterdam | Oxford | Munich | Munich | Oslo | The Hague |
5 | Berlin | Reykjavik | Edinburgh | Oxford | Copenhagen | Prague | Milan |
6 | Dublin | Oxford | Basel | Amsterdam | Frankfurt am Main | Brescia | Zurich |
7 | Munich | Edinburgh | Luxembourg | Eindhoven | Barcelona | Copenhagen | Munich |
8 | Oxford | Berlin | Bristol | Basel | Amsterdam | Stockholm | Amsterdam |
9 | Basel | Florence | Zurich | Stockholm | Innsbruck | Dublin | Lausanne |
10 | Stockholm | Basel | Lausanne | Berlin | Gothenburg | Vienna | Rotterdam |
11 | Zurich | Dublin | Amsterdam | Lausanne | Vienna | Bern | Nottingham |
12 | Edinburgh | Vienna | Brussels | Dublin | Bonn | Zurich | Bristol |
13 | Lausanne | Madrid | Barcelona | Zurich | Stockholm | Berlin | Madrid |
14 | Copenhagen | Rome | Manchester | Luxembourg | Leipzig | Lausanne | Geneva |
15 | Luxembourg | Paris | Newcastle upon Tyne | Barcelona | Brussels | Istanbul | Manchester |
16 | Bristol | Copenhagen | Berlin | Copenhagen | Madrid | Basel | Dublin |
17 | Frankfurt am Main | Lausanne | Munich | Ljubljana | Milan | Bergen | Oslo |
18 | Vienna | Munich | Geneva | Brussels | Geneva | Amsterdam | Frankfurt am Main |
19 | Oslo | Ljubljana | Frankfurt am Main | Frankfurt am Main | Brescia | Helsinki | Reading |
20 | Madrid | Seville | Madrid | Bristol | Oslo | Brussels | Berlin |
Sources: Savills Investment Management, OECD, City Benchmarking Data, Oxford Economics, Timetric and 2thinknow.
The full Dynamic Cities research paper for 2018 from Savills IM, which runs to 21 pages, can be accessed and viewed via the company’s website.