Rising Global Cities: Schroders' Ones To Watch In 2018

As investors in global cities we compile a quarterly index using a number of factors to identify the most economically vibrant cities.

With the publication of the latest version of the index, we have also taken the opportunity to highlight those cities that we believe have the greatest potential to move up the rankings in 2018.

Shenzhen, China

Old position: 24; new position: 20

Shenzhen has two major strengths. The first is being part of the Greater Bay Area (GBA) of Guandong, Hong Kong and Macau. This is arguably emerging as one of the most powerful economic areas in the world.

The second is developing a specialism within the GBA for technology. Shenzhen is now home to major tech companies such as Huawei and Tencent.

The GBA has a total population of 68 million (5% of China's population) and represents 12% of China’s GDP. It is the fifth largest economy in Asia.

We believe in the clustering impact of cities and the GBA is a good example of this with Shenzhen at the geographic centre. Infrastructure and transport links are key for economic clustering to take effect. The Ggovernment is committed to one-hour transport between cities within the Pearl River Delta.

Shenzhen is a clear example of a city enjoying a virtuous circle. It caters to growth sectors, in a growth region of a country which is still on a path to a consumerist economy.

For those reasons, it would be top of the list for cities to watch for 2018.

Tokyo, Japan

Old position: 21; new position: 27

Situated in the most populous metropolitan area in the world, the outlook for this city continues to look strong.  Japan's ageing demographic is a well-known problem, however. Less well-known is that Tokyo’s population continues to grow. 

The strength, diversity and growth of this city's economy continues to dominate the country and region.

Tel Aviv, Israel 

Old position: 49; new position: 34

Tel Aviv is emerging as an economically vibrant city capable of rising further up the rankings.

A highly educated workforce resulting in higher wages means that this city will become an increasingly important global centre.

Its economy is developing rapidly. The city has a growing financial hub and tech sector. Google recognised this in 2012, setting up Campus Tel Aviv, a space for entrepreneurs to meet and develop ideas. And young Israelis are flocking to work and play in the city.

This was reflected in the performance of Israeli technology stocks in 2017, which was their best year on the Tel Aviv Stock Exchange since the dotcom boom.

As global real estate investors, we are attracted to cities where demand for real estate is far greater than its supply. For us, Tel Aviv, nestled on the Mediterranean coast, is one of these.

Austin, US

Old position: 33; new position: 32

The capital of Texas and has one of the fastest growing populations in the US.

The city is emerging as one of the leading clusters of talent with the technology sector. Companies such as Amazon, Apple, Cisco, eBay, Google, IBM, Intel, Texas Instruments all have headquarters or regional offices in the city. 

The attraction of living in this city is highlighted by its reference to being ‘The live music capital of the world’ and ‘Silicon Hills’.

San Jose, US

Old position: 15; new position: 14

San Jose is at the vanguard of the tech revolution sitting in the centre of Silicon Valley. It is one of the strongest examples, globally, of a knowledge economy. It manufactures ideas where rustbelt cities used to manufacture goods.

The household names of Cisco, eBay and Adobe are all are located in San Jose.

Despite its relatively small population of one million, San Jose has very strong economic metrics and university score in the Schroders Global Cities 30 Index.

It punches above its weight and we think it will continue to attract strong employers and talented people.

The opportunities from businesses located in San Jose means leads to solid population inflow, which in turn creates further economic growth.

Concerns over high house prices persist. Despite this, as with other growth locations, studies show that knowledge workers will sustain high accommodation costs as a career investment.