Urbanization: Challenge or Opportunity for Retail Industry?

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Urbanization is one of the most powerful  forces, presenting some the biggest challenges but also opportunities for real estate globally. The rate of urbanization is creating a tier of true global cities, with huge opportunities for local and international retailers alike.

Pace of urbanization…

UCitiesrbanization is not a new phenomenon, but what is striking about urbanization today is the sheer scope and pace at which it is occurring. More than 1 million people move to cities globally every week and according to the UN, 6.3 billion will be living in cities by 2050, 67% of the World’s population.

Today’s urbanization is a truly global phenomenon, albeit with regional nuances. Half of the world’s fastest-growing large cities are in Asia and the top 10 are all in China. More than half of the Chinese population is now urban, but barely one generation ago, only one-fifth lived in cities. Parts of Eastern Europe and the Middle East are also witnessing astounding urbanization. In Africa, roughly a third of the one billion population is urbanized, but by 2030 it will increase to half. Perhaps most surprisingly, Latin America is now the world’s most urban region, surpassing Europe and North America.

Population growth and the growth of middle classes…

Urbanization is partly being driven by the growth in the world’s population, which according to some commentators is forecast to reach 11 billion by 2100, up from 1.6 billion in 1900. And, as medicine advances, people will live longer; the world’s population of over-65s alone will increase by over 200 million in the next decade and reach 2 billion by 2050. Also closely linked to the urbanization trend is the growth of the middle class, which is now the dominant class globally. The middle class is predicted to grow from 1.8 billion in 2008 to 3.2 billion by 2020, and to 4.9 billion (out of a projected global population of 8.3 billion) by 2030. This will present huge opportunities for retailers and developers of the relevant retail real estate.

Integrated urban retail; sustainable place making…

Across the world, the urbanization effect is having a huge impact on real estate and on retailer, developer and investor strategies. International retailers are likely to increasingly focus on the major city markets with the greatest opportunity; developers will create new future-proofed space in markets with favorable demographics and economic prospects. Successful place making will sit at the heart of the leading Retail cities of the World.

Favorable market conditions will not necessarily translate into a wave of new traditional retail property development in the same way witnessed during previous periods of economic recovery. Retail development will continue, but certainly in the more developed economies, how retail places are developed and integrated into urban environments is changing.

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