Is Geography History?

Key takeaways:

• Urbanization has accelerated over the last two hundred years and is expected to continue. Around 90% of the world’s population is expected to be urban by 2050, up from 16% in 1900 and around 55% today
• The agglomeration effects associated with the clustering of business and services, together with the economies of scale from urbanization, have generated increased wealth per capita. Real estate investments have generally benefited from these trends
• But cities face three challenges, which could negatively impact property values:
  • demographic trends (particularly ageing and declining populations);
  • the impact of technological advancements, such as remote working and ecommerce; and
  • the need to live sustainably in the face of the human-induced climate change
• We believe these challenges neither weaken the long-established trend towards urbanization, nor undermine the potential to secure attractive returns from real estate. But we envisage increasing polarity between those sectors and geographies that perform well, and those that are at risk and are likely to underperform
• Importantly, real estate in urban areas – a major source of greenhouse gas emissions – has the potential to offer solutions through more sustainable building practices and lower emissions per capita that are associated with well-planned urban areas
• The gap between real estate winners and losers is expected to widen. Investment strategies and asset selection should incorporate the expected impact of these changes within a robust pricing model