Augsburg / London, 22 December 2022. Paris is the most attractive city for residential investors in Europe, according to PATRIZIA’S European Living Cities Index 2022.
The European Living Cities Index, published by PATRIZIA, a leading partner for global real assets, provides an analysis of 142 capitals and larger cities throughout Europe to determine which are most attractive and most liquid, helping investors develop a diversified European residential portfolio.
While London ranks highest in terms of market fundamentals, Paris is top overall, with the highest score in innovation, and Berlin makes up the top three.
PATRIZIA EUROPEAN LIVING CITIES INDEX 2022: TOP 10 CITIES
Within the sub-groups in the Index, London ranked first for market fundamentals, Luxembourg for location quality, Zurich for connectivity and Paris for innovation. Swiss cities dominated in location quality and connectivity, taking five and four of the top 10 places, respectively.
The Index is an update on the 2020 version though this version does not provide a fair comparison due to an increase in the data parameters the cities are judged against.
Explaining the rationale behind the Index, Dr Marcus Cieleback, Chief Urban Economist at PATRIZIA, says: “The PATRIZIA Living Cities Index augments the attractiveness ranking with a liquidity indicator based on recorded institutional transaction activity, reflecting how active the institutional residential market in each city has been over the past four years. Combining these two dimensions – ranking and liquidity - results in a matrix, enabling a segmentation of the more than 100 cities according to their long-term attractiveness and liquidity, to identify target cities that would suit specific strategies or risk-return requirements.
“While Paris has come out on top, it is important to note that all the top 10 cities in the overall ranking are strong because they have the best market fundamentals and their attractiveness is balanced with excellent liquidity. These top 10 cities also all have a great location and connectivity, and tend to be very innovative, strengthening their proposition to investors.”
Sebastian Dietert, Fund Manager, PATRIZIA, adds: “The investment decisions we take for our EUR 1.8 billion AUM Living Cities residential strategy, now targeting the next milestone of EUR 3 billion, uses the same data intelligence analytics as the Living Cities Index. Leveraging this data plus the local expert knowledge on the ground is what makes our assets futureproof. Currently, our fund strategy is invested in half of the top 10 cities in the Living Cities Index (Berlin, Copenhagen, Munich, Stockholm, Helsinki) and we are actively looking for further attractive opportunities in the other top cities where we are currently not present.
“Additionally, the Index provides detailed data in its subcategories which guides our Living Cities strategy to cities further down the list overall which excel in a particular area, or areas, enabling us to have a well-balanced portfolio. For example, the stable income return and long-term capital growth seen in Barcelona, allied to its high-performing connectivity and innovation data in the Index, persuaded us to invest on behalf of our clients one of Spain’s largest-ever residential transactions in the city.”
The value of the Index lies in the depth of the data, as Marcus Cieleback explains: “While a city may rate well in terms of its attractiveness, having an attractive city you can’t invest in is pointless, which is why the Index has a second dimension focusing on liquidity. That provides investors with a matrix to help them develop a European residential real estate investment strategy, enabling them to diversify their portfolios by location and risk profile and identify target cities according to risk-return requirements.”
Commenting on the changes, or lack of, observed between the 2020 Index and the updated version in 2022, comprising a deeper analysis, Marcus adds: “The attractiveness of cities, based on the increased data set, has not fundamentally changed the overall results, confirming the validity of the original approach, while indicating that the additional indicators used add value to the overall ranking.
“Secondly, in line with the generally increasing transaction activity in the residential markets, liquidity in many of the cities in the low liquidity categories has increased. This second point has important strategic implications. The number of cities in which investors can benefit from a general repricing due to professionalisation and increasing liquidity is shrinking. At the same time, the importance of asset management in the delivery of the business plan of an investment is increasing, requiring a thorough understanding of the rules of the game in each market.”
The Index, which will be updated by the end of 2023, determines its ultimate ranking by analysing 48 indicators, with data obtained from the Eurostat Urban Audit, the Eurostat database, the United Nations, Oxford Economics and various other sources. The data also aligns with smart city fundamentals, as developed by PATRIZIA as a key enabler of smart cities.
It analyses a range of demographic and economic aspects of cities, including economic strength, location, connectivity, and innovative capacity, as well as metrics around liveability, quality of life, ESG and sustainability. These metrics feed into ratings for market fundamentals and attractiveness. The Index then augments this analysis with a liquidity indicator based on recorded institutional transaction activity, reflecting how active the institutional residential market in each city has been over the past four years.
In terms of a city’s attractiveness, several quality-of-life indicators relating to ESG, like green space per inhabitant (sq m), the annual average concentration of nitrogen dioxide (resulting from the burning of coal, oil, diesel, gas and other fossil fuels), as well as the number of apartments divided by the number of households living in apartments, are included. In addition, a score rating the amount and quality of amenities provided within each city is also included, using PATRIZIA’s Amenities Magnet - a digital tool that measures the attractiveness of a location.
PATRIZIA: CITY PULSE
The European Living Cities Index is reflected in the PATRIZIA City Pulse, an innovative and interactive digital tool that contains a wide range of data, city insights and local experts’ commentary enabling investors to compare and analyse cities across a range of metrics. For more information on PATRIZIA City Pulse and the PATRIZIA European Living Cities Index, visit citypulse.PATRIZIA.ag
PATRIZIA: A leading partner for global real assets
With operations around the world, PATRIZIA has been offering investment opportunities in real estate and infrastructure assets for institutional, semi-professional and private investors for 38 years. PATRIZIA manages more than EUR 57 billion in assets and employs over 1,000 professionals at 28 locations worldwide. Through its PATRIZIA Foundation, PATRIZIA is committed to social responsibility. The Foundation has helped around 250,000 children in need worldwide gain access to education and thus, has given them the chance of a better life over the last 22 years. You can find further information at www.patrizia.ag
This is a marketing communication. Please refer to the relevant sales documents of the investment funds described herein before making any final investment decisions. Insofar this marketing communication refers to sustainability-related aspects of the investment funds described herein, please do not only consider these aspects when investing in these investment funds, but the decision to invest in the investment funds should take into account all the characteristics or objectives of the investment funds as described in the relevant sales documents.
The information contained herein is directed only at professional, eligible or well-informed investors or clients and intended solely for use by the recipient – distribution to retail clients or well-informed investors is prohibited. No part of this document or the information herein may be distributed, copied or reproduced in any manner, in whole or in part, without our prior written consent. This document is for information and illustrative purposes only. It does not constitute advice, a recommendation or a solicitation of an offer to buy or sell shares or other interests, financial instruments or the underlying assets, nor does this document contain any commitment by PATRIZIA SE or any of its affiliates. Whilst prepared in good faith, the information contained in this document does not purport to be comprehensive and has generally not been verified (in particular if third party information has been used).
The document has not been filed or approved by any local financial authority.
PATRIZIA SE and its affiliates provide no warranty or guarantee in relation to the information provided herein and accept no liability for any loss or damage of any kind whatsoever relating to this material. The information herein is subject to change without notice. All information is qualified entirely by the relevant sales documents relating to any financial product or services. The sales documents for investment funds (including mandatory information documents for professional clients, annual – and as the case may be – semi-annual accounts and where available and applicable the key information document) are available free of charge from us and the manager of the investment fund.
Visit https://www.patrizia.ag/en/country-disclaimers/ for further information.
PATRIZIA Institutional Clients & Advisory GmbH
Phone: +44 7442 965485