London slips to second in the 2016 E-REGI Index
E-REGI reveals that Human Capital and political decisions are key factors for this year’s Index LONDON (October 17, 2016) – Recent political events are beginning to affect the attractiveness of Europe’s major cities as investment destinations, according to the 17th edition of LaSalle’s E-REGI (“European Regional Growth Index”) annual report, which ranks Europe’s top 100 cities based on their medium-term growth potential.
Political decisions have had varying effects on countries across Europe. Post-EU Referendum growth revisions in the UK have led to London losing its top spot to Paris, a place it held for four consecutive years, and falling to second position. The French capital is gaining momentum in E-REGI. Paris, along with a number of other French cities, are among the biggest risers this year as the policy decisions are starting to pay off, making the French labour force more competitive and leading to improved employment prospects. Furthermore the German cities of Munich, Berlin and Hamburg are also part of the 20 most improved cities in the 2016 index.
For the first time, E-REGI explicitly includes a component for Human Capital that LaSalle’s Research & Strategy team has developed. In a knowledge-based economy, Human Capital plays a key role in fostering productivity growth and creating economic value. LaSalle has designed an indicator which encapsulates all criteria that make up Human Capital: Skilled Population, Creativity, Venture Capital and R&D. The analysis confirms the high levels of Human Capital available in many major cities. In the UK, the inclusion of this component has helped not only London, but also Bristol, Edinburgh and Manchester to maintain strong positions.
Mahdi Mokrane, LaSalle Investment Management’s European Head of Research & Strategy said: “This year, the key drivers behind the index rankings are human capital and political decision-making. In a knowledge-based economy Human Capital, more than physical capital, plays a key role in creating economic value for investors and businesses alike. Strong human capital creates a virtuous circle, leading to greater productivity growth and stronger overall economic performance, which leads to higher rents and prices, which in turn creates greater human capital.
“However political decisions - rather than just the macro economy – have also changed the outlook for many cities this year. Investors are questioning the economic future of markets where economic uncertainty prevails. On the other hand, we are also seeing that politicians do not always receive the credit for policy-decisions which strengthen their economic base. In highlighting these potential prospects, E-REGI once more proves its usefulness for investors in the twelve months ahead. ”
The main findings of the E-REGI are:
The uncertainty surrounding the UK’s future trade relationship with the EU is dampening economic prospects in the UK, even though London and the rest of the South East remain strong in a European context thanks to a diverse economy and high human capital. Manchester and Birmingham fell the most in the rankings as the economic uncertainty created by a looming Brexit will be hampering corporate hiring decisions in these cities relatively more.
In France, the economy is now in better shape than a year ago. Policy decisions such as fiscal incentives for companies to hire more low to medium-paid workers are lifting the employment outlook of all French cities. In 2015 alone, it has been estimated that these incentives alone have saved or created 45,000 jobs. A stronger job market alongside the country’s human capital outlook are the reasons why French cities are performing better this year. The strongest benefits are seen in the scores of Paris, Lyon, Nantes and Lille.
Munich, Berlin and Hamburg are amongst the strongest improvers in this year’s E-REGI. German cities have surprised economists on the upside as employment growth has increased despite the low unemployment rate. An increasing labour participation rate, among women, seniors, and immigrants has improved the employment outlook of all German cities as there is more spare capacity in the economy than previously thought.
About LaSalle Investment Management
LaSalle Investment Management is one of the world's leading real estate investment managers. On a global basis, LaSalle manages more than $69 billion of assets in private and public real estate property and debt investments as of Q3 2020. LaSalle's diverse client base includes public and private pension funds, insurance companies, governments, corporations, endowments and private individuals from across the globe. LaSalle sponsors a complete range of investment vehicles including separate accounts, open- and closed-end funds, public securities and entity-level investments. For more information please visit http://www.lasalle.com, and LinkedIn.
NOTE: This information discussed above is based on the market analysis and expectations of LaSalle and should not be relied upon by the reader as research or investment advice regarding LaSalle funds or any issuer or security in particular. The information presented herein is for illustrative and educational purposes and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy in any jurisdiction where prohibited by law or where contrary to local law or regulation. Any such offer to invest, if made, will only be made to certain qualified investors by means of a private placement memorandum or applicable offering document and in accordance with applicable laws and regulations. Past performance is not indicative of future results, nor should any statements herein be construed as a prediction or guarantee of future results.