Speaking at a presentation in Sydney, TIAA Henderson Real Estate head of Australia Nick Evans said urbanisation is currently the most significant mega-trend for the global real estate market.
“2.2 billion people will move to cities by 2050; that’s a 75 per cent increase in the world’s urban population,” said Mr Evans.
Economies where more than 50 per cent of the population is urbanised, he said, are also four times more productive.
Mr Evans said cities that can cope with the rapid urbanisation and have the necessary infrastructure in place are where TIAA Henderson recommends its institutional clients invest their money.
According to a report by TIAA Henderson Real Estate global co-head of research Alice Breheny there will be opportunities for investors to satisfy the strong demand from businesses seeking representation in the world’s largest cities.
“Demand for modern office and retail space in the fastest growing cities is likely to be fierce,” said Ms Breheny.
“Pressure on the residential sector could be greater; residential units may be smaller and more expensive, putting pressure on governments to provide affordable housing.”
The report said Asia’s urban population will grow by 771 million people in the 20 years to 2030, more than twice the population of the US.
Africa, the report said, will see the highest growth, however, with a growth rate of 88 per cent from 2010 to 2030.
TIAA Henderson Real Estate head of capital transactions Australia Stephen Philp said Australian institutional investors are also going to face increasing pressure to invest in real estate offshore given the limited domestic supply.
Mr Philp said while the $1.5 trillion Australian super market is likely to almost triple in size in the next 15 years, the Australian commercial real estate market won’t.
“Domestically at some point in time over cycles, there’s going to be an inability or a low probability that you’ll be able to invest funds locally,” said Mr Philp.
“That hasn’t emerged yet but it is an emerging trend.”
