The rapid increase of the world’s urban
population coupled with the slowing growth of the rural population has led to a major redistribution of the population. The world’s urban population will double in 38 years. Virtually all the population growth expected during 2000-2030 will be concentrated in the urban areas of the world . During that period the urban population is expected to increase by 2 billion persons, the same number that will be added to the whole population of the world. The number of cities with 5 million inhabitants or more will pass to 59 in 2015. Among those cities, the number of "mega-cities" (those with 10 million inhabitants or more) will increase to 23 in 2015.
The population increase in these cities means that they will need more of everything. Residents will need more services, more power and utilities, more mall space to shop in and more office space to work in.
There is plenty investable ideas in this trend especially in today's markets.
The migrating population to these cities will need space to work in and space to shop in; office space, community shopping centres and mall space will be in demand to serve the expanding population. Currently with the stress of the credit markets on all aspects of the economy and in particular real estate, it makes for an opportune time to buy strategic properties in large urban cities. Commercial real estate prices are declining due to lack of financing. Owners can't refinance due to lack of credit and will start selling at depressed prices. That makes for an excellent time to buy into some of these properties. Real estate in those locations have a huge barrier to entry; there is not any more land to build on. If you can sustain the short term volatility and begin to accumulate positions in some good companies the pay offs can be large.
Power and Utilities
Again a similar theme continues with power and utilities requirements. It is expected that demand will accelerate with the increased immigration to large cities. Companies that operate and generate power to markets that include mega cities will do well. A host of utilities services like gas storage and distribution, power transmission and generation and water supply and treatment will be in high demand.
TransCanada pipeline recently has bought a Power Plant new new your City for $2 Billion, which wall streeters did not like and send the stock down sharply. I think it was short sided of them. Such power plants are a valuable assets especially near markets like New York City where demand is expected to grow.
The ability to build, maintain, and finance infrastructure is more important today than ever. With cities are getting bigger more services are needed to expand the infrastructure and maintain it. Government are not going to be the gate keeper any more as their budget deficits balloon; government are outsourcing this function to private entities. North America has been slow on using this business model but I expect it to be the normal mode of operation in the future. Private entities will build toll roads and bridges, ports, transportation systems...etc. Companies that service those mega cities will do well.
All these ideas are long term in nature and have horizons that stretch 10-20 years. Due to the long term nature of these ideas they are more suitable for institutional investors rather than individuals investors but there will be some opportunities to take advantage of, particularly in the commercial real estate. I will be exploring some ideas in the weeks to come along the lines of this theme maybe I can find some value ideas.