LaSalle’s latest edition of the European Cities Growth Index (ECGI), its annual ranking of projected real estate occupier demand, has seen some 57 cities decline in potential. According to Petra Blazkova, head of research and strategy for core & core-plus capital, Europe at LaSalle Investment Management, the findings are very much a sign of the times.

‘While locations including London, Paris and Munich continue to look strong, we are seeing a big decline for several secondary cities,’ Blazkova told PropertyEU at Expo Real. ‘Nowhere is this better illustrated than in the UK. While London retains first place in the ranking, all the other UK cities have fallen quite sharply, including Bristol, Manchester, Edinburgh, and the UK average.’

Blazkova added: ‘It’s a similar story in Italy where Milan has displayed some gains, while other cities are moving further out.’

While London and Paris predictably took the top two spots once again in the ECGI classification, one of the winners of this year’s ranking is Amsterdam, which has moved up into the top 10 for the first time in 20 years.

‘That move is partly testament to Amsterdam’s reputation for creativity, and also reflects I think the ways it has benefitted from Brexit in the movement of businesses and talent,’ added Blazkova. ‘It has also overtaken several German cities. From a LaSalle point of view, we are also focusing on the Netherlands for several bed-related strategies where we see significant undersupply.’

Looking forward, does Blazkova think that the ranking’s negative trajectory marks a new direction of travel for the foreseeable future? ‘Not necessarily,’ she said. ‘Real estate itself can be the “light at the end of the tunnel” for cities as it is an investment asset class which thinks long term,’ she said.

‘We are all very much aware that the next year is going to be very challenging but real estate never looks at just a 12-month horizon. We do believe that rental growth will return in the next two to three years, so the smart money will be investing now to make the most of that potential.’

She added: ‘In an environment of more costly lending, our debt strategies are also benefitting as they can grow and compete with the banks, many of whom are slowing their lending activities. Our value-add strategies, too, are continuing to develop new schemes, in the markets where we see potential. While construction has faced challenges in recent times, our development strategies are protected by our underwriting as we have been careful to place buffers around project costs and build strong partnerships with development firms.’